Angela Hart, Kaiser Health News

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SACRAMENTO, Calif. — Gov. Gavin Newsom’s administration is having trouble controlling a worsening homelessness crisis despite record expenditures. They are trying something bold: tap federal healthcare funding to pay rent for homeless and people at risk of losing their homes.

States are prohibited from using federal Medicaid dollars directly to pay rent. However, California’s governor has asked the administration of President Joe Biden (a fellow Democrat) to authorize a program called “transitional rental.” This program would provide up to six months’ rent or temporary housing to low-income enrollees who rely upon the state’s health insurance safety net. It is a new initiative in his arsenal to combat and prevent homelessness.

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“I’ve been talking with the president. KHN was told by Newsom that this cannot be done alone.

California’s Medicaid version, known as Medi-Cal, is being used by the governor to fund housing subsidies for the homeless. He believes it’s cheaper for taxpayers than to pay rent for people who are in crisis or need of costly institutional care such as nursing homes, hospitals, and jails. Newsom stated that doctors should be able write housing prescriptions in the same way as they do for insulin and antibiotics early in his tenure.

It’s risky in a high-cost State where the median rent is almost $3,000 per month. The cost is even higher in coastal areas, where most California’s homeless live. Experts expect that the Biden administration will scrutinize the plan to rent using healthcare money and also question its effectiveness given California’s housing crisis.

Vikki Wachino was the Obama administration’s national Medicaid director. “But, there is a recognition of social factors such as inadequate housing driving health outcomes. I think the federal government will be open to exploring approaches to address that.”

Bruce Alexander, a spokesperson for Centers for Medicare & Medicaid Services declined to comment on whether the federal government would approve California’s request. However, Biden’s Medicaid officials approved similar programs in Arizona and Oregon, and California is following their lead.

California is home to 30% of the nation’s homeless, even though it only makes up 12% of the country. Newsom acknowledged that these numbers are likely to be much higher than the official homeless statistics show. Top health officials state that Medi-Cal cannot afford to mix housing and social services in order to curb rising safety-net spending and help the homeless get well.

According to state data, 5% of MediCal patients account for 44% of the state’s spending. Many of the most expensive patients are not able to afford stable housing. Nearly half of those experiencing homelessness visited the emergency department four times or more in 2019. They were more likely than other low income adults to be admitted to the hospital. According to the Public Policy Institute of California, a large number of visits were covered under Medi-Cal.

“What we have now doesn’t work,” Dr. Mark Ghaly, secretary at the California Health and Human Services Agency said, explaining that housing is a crucial component of health care. “Why must we wait so long before people get so sick?”

CalAIM, a massive social experiment that is transforming Medi-Cal, has been approved by the federal government. The initiative is expected to invest $12 billion in new Medi-Cal services that are not traditional health care over the next five years. It is funding services in some low-income communities throughout the state, including paying security deposits for homeless and those facing eviction, delivering healthy meals to people with diabetes, and helping people who were previously incarcerated find work.

The transitional rent program would be an additional service to the existing ones, but only a small fraction of the 15.4million Medi-Cal enrollees actually receive these new and costly social services.

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Rent payments could start as soon as 2025, and would cost approximately $117 million per annum once fully implemented. Although state officials claim that anyone who is homeless or at-risk of becoming homeless will be eligible, there are limitations on the capacity of new services. Nearly 11,000 people are already enrolled in MediCal housing services.

Mari Cantwell, who was the Medi-Cal director between 2015 and 2020, said that “the ongoing conversation is how we convince the federal government housing is a healthcare issue.” “You must convince them that you are going to save money by not having as many people in the emergency room or in long-term hospitals.”

Housing support funding has been a key component of healthcare experiments in California and across the country. They have shown early success in reducing costs, and making people healthier. While some programs covered housing security deposits and the first month’s rent for participants, they did not cover rent for a longer period.

Newsom stated, “Without that foundational backing, we are playing at the margins.”

Officials from the state health department claim that six months rent payment will be more effective in reducing health care costs and improving enrollees’ health. However, experts agree that it must be accountable and be combined with a variety of social services.

California tried out a combination of housing assistance programs as well as social services in its pilot program “Whole Person Care”. This was a precursor to the state’s current initiative. Nadereh Pourat of the UCLA Center for Health Policy Research evaluated the program for California. She concluded that local trials resulted in a reduction in emergency visits and hospitalizations. This saved the state an average of $383 per MediCal beneficiary per year, which is a small amount when compared to the program’s cost.

Pourat stated that the state spent $3.6B over five years to serve approximately 250,000 patients who were enrolled in local experiments.

A Santa Clara County randomized control trial that provided supportive housing to homeless people showed a reduction in psychiatric emergency rooms visits and improvements in care. “Lives stabilized, and we saw an increase in substance use care, mental health, and the things that everybody wants to use to improve their health,” said Dr. Margot Kushel of the University of California-San Francisco’s Center for Vulnerable Populations at Zuckerberg San Francisco General Hospital, Trauma Center, who was involved in the study.

However, insurers implementing the larger Medi-Cal initiative claim they are skeptical about the system’s ability to save money by spending money on housing. Experts in health care say that while six months of rent may be sufficient to bridge the gap while people wait for permanent housing, California’s housing shortage is a greater problem.

Kushel stated, “We can create incredible Medicaid policies to alleviate homeless and pay for all the supportive services, but without adequate housing, frankly it’s not going work.”

Newsom accepts this criticism. Newsom acknowledged that criticism.

He will ask the legislature for a ballot initiative in 2024 that would provide California’s mental healthcare system with at least 6 000 new treatment beds and supportive housing units to people with mental and addiction disorders. Many of these people are homeless. The proposed bond measure would generate between $3 billion and $5 billion to fund psychiatric housing, treatment villages, and other services that will serve more than 10,000 people per year. The initiative would also ask voters to allocate at least $1 billion annually from the existing tax on California millionaires for supportive housing. This money is used to fund local mental health programs.

Newsom stated that people who are struggling with these issues, particularly those living on the streets or in other vulnerable situations, will have greater access to the resources they need to get the help they require.

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Six months of transitional rent would be available to select residents who are in Medi-Cal. This includes those who are homeless, at risk of becoming homeless, and those who are transitioning from more expensive institutions like jails and prisons, mental health crisis centers, foster care, or jails and prisons. Medi-Cal patients who are at risk of being admitted to hospital or who visit the emergency room regularly would be eligible.

Jacey Cooper, Medi-Cal director, said that it was a difficult task. “But we know that those experiencing homelessness are often in and out of emergency departments, so we have a role to play in both preventing homelessness and ending it.

Experts in public health warn that the problem will only get worse if there is no creative solution to housing costs. However, they warn that the state must be aware of possible abuses of the program.

“It must be designed carefully because, unfortunately,” Dr. Tony Iton, a public-health expert and now senior vice president at California Endowment, said. “Medical professionals must make decisions, not housing organizations looking for another source.

Stephen Morton, a Laguna Woods resident, describes the cost of moving from homelessness to permanent housing.

Morton, 60, bounced from shelters to his car for almost two years. He racked up extraordinary MediCal costs due to long hospitalizations and frequent emergency room visits to treat chronic heart disease, asthma and diabetes.

Medi-Cal paid for Morton’s open heart surgery and hospital stays that lasted several weeks. He was able to get temporary housing through the state-sponsored Project Roomkey program, and then he was able to secure permanent housing through a federal low income housing voucher. This ongoing benefit covers all but $50 of his rent.

Morton stated that he has been able to quit taking one diabetes medication since moving into his apartment. He also lost weight. Morton attributes his improvements in blood sugar levels to his apartment and the healthy, home-delivered meals that he receives through Medi-Cal.

“It’s usually scrambled eggs at breakfast and fish for dinner. Morton stated that he was shocked at how good it tastes. “Now I have a microwave, and I’m indoors. I am so grateful and healthier.

This story was produced and published by KHN, which is the California Health Care Foundation’s independent publication California Healthline.

Kaiser Health News is a national news service on health policy. It is an independent editorial program of the Henry J. Kaiser Family Foundation, and is not affiliated to Kaiser Permanente.