Governor Gavin Newsom, whose administration is struggling to contain the worsening homelessness crisis despite record spending, is trying something bold: leveraging federal health care funds to cover rent for the homeless and They are at risk of losing their home.
States are barred from using federal Medicaid dollars to directly pay rent, but California’s governor is asking the administration of President Biden, a fellow Democrat, to authorize a new program called “transitional rent,” which would provide up to six months of rent or temporary housing for low-income members who depend on the state’s health care safety net: a new initiative in its arsenal of programs to combat and prevent homelessness.
“I have been speaking with the president. We can’t do this alone,” Newsom told KHN.
The governor is pushing California’s version of Medicaid, called Medi-Cal, to fund experimental housing subsidies for the homeless, betting it’s cheaper for taxpayers to cover rent than allow people to fall into crisis or costly Institutional care in hospitals, nursing homes, and prisons. At the beginning of his term, Newsom proclaimed that “doctors should be able to write prescriptions for housing in the same way they do for insulin or antibiotics.”
But it’s a risky endeavor in a high-cost state where median rent is nearly $3,000 a month, and even higher in coastal regions, where the majority of California’s homeless reside. Experts expect the Biden administration to look into the plan; and also question its potential effectiveness in light of the state’s housing crisis.
“Part of the question is whether this is really Medicaid’s job,” said Vikki Wachino, who served as the national director of Medicaid in the Obama administration. “But there is recognition that social factors like inadequate housing are driving health outcomes, and I think the federal government is open to developing approaches to try to address that.”
Bruce Alexander, a spokesman for the Centers for Medicare and Medicaid Services, declined to say whether the federal government would approve California’s application. Biden’s Medicaid officials have approved similar experimental programs in Oregon and Arizona, and California is modeling its program on them.
California is home to approximately 30% of the homeless in the US, despite accounting for only 12% of the nation’s total population. And Newsom has acknowledged that the numbers are likely much higher than official homeless counts show. Top health officials say that, to contain safety-net spending and help the homeless get back to health, Medi-Cal has no choice but to combine social services with housing.
Statewide, the top 5% of Medi-Cal patients account for a staggering 44% of program spending, according to state data. And many of the most expensive patients lack stable housing: Nearly half of homeless patients visited the emergency room four or more times in 2019 and were more likely than other low-income adults to be admitted to the hospital, and the vast majority of visits were covered by Medi-Cal, according to the California Public Policy Institute.
“What we have today doesn’t work,” said Dr. Mark Ghaly, secretary of the California Health and Human Services Agency, explaining his argument that housing is a critical component of health care. “Why do we have to wait so long for people to be so sick?”
The federal government has already approved a massive social experiment in California, known as CalAIM, that is transforming Medi-Cal. Over five years, the initiative is expected to invest $12 billion in new Medi-Cal services delivered outside of traditional medical care. In communities across the state, it is already funding services for some low-income patients, including paying rental security deposits for the homeless and those facing eviction; delivery of healthy meals prepared for people with diabetes; and help formerly incarcerated people find jobs.
The transitional rental program would add another service to those already available, even though only a small fraction of the 15.4 million Medi-Cal enrollees actually receive those expensive new social services.
Rental payments could begin as early as 2025 and cost approximately $117 million per year once fully implemented. And while state officials say anyone who is homeless or at risk of homelessness would be eligible, not everyone who qualifies will receive new services due to capacity limits. Among those who will benefit are nearly 11,000 people who are already enrolled in Medi-Cal housing services.
“The ongoing conversation is how do we convince the federal government that housing is a health care issue,” said Mari Cantwell, who served as head of Medi-Cal from 2015 to 2020. “You have to convince them that you are going to save money because there are not going to be as many people showing up in the ER and in long-term hospitalizations.”
Health care experiments in California and across the country that funded housing supports have shown early success in lowering costs and improving people’s health. But while some programs paid participants’ security deposits or first month’s rent, none directly covered rent for an extended period.
State health officials argue that paying six months’ rent will be even more successful in lowering health care costs and improving the health of members, but experts say that to work, the initiative must have strict liability and combined with a variety of social services.
In a precursor to the state’s current initiative, California experimented with a combination of housing assistance programs and social services through its “Whole Person Care” pilot program. Nadereh Pourat, of the UCLA Center for Health Policy Research, evaluated the program for the state and concluded that the local trials reduced emergency visits and hospitalizations, saving an average of $383 per Medi-Cal beneficiary per year, a meager amount compared to the cost of the program. Over five years, the state spent $3.6 billion to care for some 250,000 patients enrolled in local trials, Pourat said.
TO randomized control trial in Santa Clara County that provided supportive housing for the homeless showed reductions in psychiatric emergency room visits and improvements in care. “Lives stabilized and we saw a huge increase in substance abuse care and mental health care, the things that everyone wants people to use to be healthier,” said Dr. Margot Kushel, director of the Center for Vulnerable Populations at the University of California-San Francisco. at the Zuckerberg San Francisco General Hospital and Trauma Center, which she worked on on the study.
But insurers implementing the broader Medi-Cal initiative say they are skeptical that spending health care dollars on housing will save the system money. And health care experts say that while six months’ rent can be a bridge while people wait for permanent housing, there’s a bigger hurdle: California’s shortage of affordable housing.
“We can design incredible Medicaid policies to alleviate homelessness and pay for all the necessary supportive services, but without the right housing, quite frankly, it’s not going to work,” Kushel said.
Newsom acknowledges that criticism. “The homelessness crisis will never be solved without first solving the housing crisis,” he said this month, arguing that California should invest more money in housing for homeless people with severe mental illness or addiction disorders.
He announced Sunday that he would ask the Legislature to present to voters a 2024 ballot initiative that would infuse California’s mental health system with new treatment beds and supportive housing for people battling mental illness and addiction disorders, many of they homeless. The proposed bond measure would generate an estimated $3 billion to $5 billion for psychiatric housing and treatment towns intended to serve more than 10,000 additional people a year. The initiative would also ask voters to set aside about $1 billion a year for supportive housing for one existing tax on California millionaires which funds local mental health programs.
For transitional rent, six months of payments would be available to select high-need residents enrolled in Medi-Cal, particularly those who are homeless or at risk of homelessness, and those who are transitioning from more expensive institutions such as mental health crisis centers, jails and prisons, and foster homes. Medi-Cal patients at risk of hospitalization or who frequent the emergency room would also be eligible.
“It’s a pretty big challenge; I’m not going to lie,” said Jacey Cooper, director of Medi-Cal. “But we know that homeless people are in and out of emergency rooms, so we have a real role to play in both preventing and ending homelessness.”
For Stephen Morton, who lives in the Orange County community of Laguna Woods, the journey from homelessness to permanent housing illustrates the amount of public spending the effort may require to pay off.
Morton, 60, hopped between shelters and her car for nearly two years and racked up extraordinary Medi-Cal costs due to prolonged hospital stays and repeated trips to the emergency room to treat chronic heart disease, asthma and diabetes.
Medi-Cal covered Morton’s open-heart surgery and hospital stays, which lasted weeks. She got temporary housing through a state-sponsored program called Roomkey Project prior to obtaining permanent housing through a federal low-income housing voucher, an ongoing benefit that covers all but $50 of your rent.
Since getting her apartment, Morton said, she has been able to stop taking a diabetes medication and lose weight. She attributes the improvements in her blood sugar levels to her housing and the healthy home-delivered meals she receives through Medi-Cal.
“Usually it’s scrambled eggs for breakfast and the fish menu for dinner. I’m surprised it’s that good,” Morton said. “Now I have a microwave and I’m inside. I am very grateful and much healthier.”
This story was produced by KHNan editorially independent newsroom of the KFF (Kaiser Family Foundation) that provides detailed coverage of health issues.
