More Proof that Housing is Health Care and Lowers Costs

Medicaid demonstrations prove that housing supports aren't “mission creep,” but instead a key strategy for reducing costs in an era of fiscal uncertainty — all while improving health outcomes.

Author: Richard Cho
Editors: Patti Boozang and Amanda Eisenberg

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tl;dr

• For people experiencing homelessness or housing instability, especially those with complex health and behavioral health needs, the most effective care extends beyond clinical services. Helping these individuals secure and maintain housing can be the most important factor in improving health outcomes and preventing premature death.

• Medicaid Section 1115 waivers have demonstrated that housing-related supports, such as pre-tenancy and tenancy-sustaining services, improve health while reducing costs associated with a reliance on emergency, inpatient and acute care services. Evidence from states like Massachusetts, North Carolina, California and Maryland shows these services can even offset their own costs.

• As states face significant Medicaid funding constraints, they face pressures to cut back on wraparound supports that help people with complex needs. Instead, states should continue and expand housing-related services that improve health outcomes while lowering costs.

The 80 Million Impact

State Medicaid agencies are staring down the barrel of a fiscal crisis. Over the next decade, federal Medicaid funding to states is projected to decline by roughly 15%, or about $1 trillion. In this climate, every Medicaid dollar must work harder, particularly for members who drive a disproportionate share of total costs.

Across states, one conclusion is becoming increasingly clear: providing housing-related services for members experiencing homelessness is not a “nice-to-have” wraparound, and housing is not ancillary to Medicaid’s mission: Housing-related services are central to reducing costs and utilization and improving health outcomes for some enrollees.

A small subset of Medicaid enrollees with complex, chronic conditions accounts for a significant share of total Medicaid spending. When these individuals are unhoused, their health conditions worsen, triggering higher ED utilization, frequent inpatient admissions and avoidable long-term care placements. They also die young. We see it in the data; one peer-reviewed study found that Medicaid spending for people experiencing homelessness is about $4,300 higher per person per year than for comparable housed enrollees — even after adjusting for health risk. Non-elderly individuals experiencing homelessness also have a premature mortality risk 3.5 times that of comparable housed individuals, according to the National Bureau of Economic Research.

Providing more medical treatment without addressing housing is health care’s version of Sisyphus pushing the boulder up the hill — significant resources expended for zero progress. But when a member is stable, adherence to treatment becomes possible — to continue the metaphor, the boulder finally stays at the top of the hill.

New Study Shows the Value of Housing

We’ve long suspected that addressing social needs saves money. Now, we have the proof points. The recent final evaluation report from the Center for Medicare and Medicaid Innovation (CMMI)’s Accountable Health Communities (AHC) Model found that screening and navigating Medicaid and Medicare beneficiaries to address social needs like food insecurity, housing instability, violence, utility instability and transportation problems reduced ED visits, inpatient admissions, and total health care expenditures across 28 communities and more than one million individuals.

Several states have pursued 1115 Demonstration flexibility to cover housing supports under Medicaid — services like pre-tenancy services that help people navigate housing, tenancy sustaining services that help people maintain housing, and home modifications and remediations that make homes healthier and more accessible.

Massachusetts was one of the first states to cover these housing services under Medicaid, first as a pilot for members experiencing homelessness. Based on the promising results of this pilot, Massachusetts implemented a similar set of housing supports under a Flexible Services Program (FSP) for members enrolled in accountable care organizations through an 1115 waiver.

This month, researchers published evaluation findings on the impact of these 1115 Demonstration FSP housing supports among over 6,500 members with behavioral health needs who were enrolled from 2020–2023. The study found that 12 months after receiving FSP housing supports, participants experienced:

• 5% fewer ED visits compared to the primary comparison group

• 36% fewer hospital readmissions, and

• A reduction in total health care costs of $3,260.

The average cost of these housing services was $3,129 per member. In just one year, the program more than paid for itself. And this isn’t an isolated success — we’re seeing this pattern across the country:

• An evaluation of California’s Whole Person Care pilot — the precursor to CalAIM — found that the provision of care coordination and housing supports for people experiencing homelessness reduced ED visits and inpatient hospitalizations and increased utilization of mental health and substance use disorder treatment. The pilots resulted in a net decrease in total Medicaid costs over the five-year pilot period.

• An evaluation of North Carolina’s Healthy Opportunities Pilots found that members decreased ED visits and inpatient hospitalizations and was associated with an $85 per person per month reduction in total Medicaid costs.

• A preliminary evaluation of Maryland’s ​Assistance in Community Integration Services program found a 48% reduction in hospital visits and a 51% reduction in emergency department visits among members who received the intervention.

The Bottom Line

Critics often label housing supports as Medicaid “mission creep,” as if helping a member with a chronic complex physical or behavioral health condition (or both) get and keep housing is somehow outside the scope of health. They are wrong. Pre-tenancy navigation and tenancy-sustaining supports are the same services that have been the backbone of home and community-based services and Money Follows the Person for years, and which have also been integral to behavioral health care management models like Assertive Community Treatment (ACT) teams for people with serious mental illnesses. We aren’t inventing new services; we are scaling what works to the people for whom we know it works.

What happens if we fail to scale? Look to Idaho. When the state eliminated funding for ACT teams to curtail state spending, the results were tragic. One client was found dead in a closet, having slept there to avoid the pests in his apartment. He was one week away from moving into a new home, per the New York Times report.

In the face of H.R. 1 and massive federal cuts, states cannot afford to back away from scaling services that reduce costs and deliver better health outcomes to the most vulnerable people in our society. Far from mission creep, services that help members navigate to and maintain their housing are, under the right circumstances, the best way to deliver care at lower cost. And for some members, it could mean the difference between life and death.

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