Gov. Gavin Newsom, whose administration is struggling to contain a worsening homelessness crisis despite record spending, is trying something bold: tapping federal health care funding to cover rent for unhoused people and those at risk of losing their housing.
States are barred from using federal Medicaid dollars to pay directly for rent, but California’s governor is asking the administration of President Joe Biden, a fellow Democrat, to authorize a new program called “transitional rent (PDF),” which would provide up to six months of rent or temporary housing for enrollees with lower incomes who rely on the state’s health care safety net — a new initiative to fight and prevent homelessness.
“I’ve been talking to the president. We cannot do this alone,” Newsom told California Healthline.
The governor is pushing California’s version of Medicaid, called Medi-Cal, to fund experimental housing subsidies for people experiencing homelessness, betting that it’s cheaper for taxpayers to cover rent than to allow people to fall into crisis or costly institutional care in hospitals, nursing homes and jails. Early in his tenure, Newsom proclaimed that “doctors should be able to write prescriptions for housing 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 most of California’s unhoused people reside. Experts expect the Biden administration to scrutinize the plan to use health care money to pay rent, 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 national Medicaid director in the Obama administration. “But there is a recognition that social factors like inadequate housing are driving health outcomes, and I think the federal government is open to developing approaches to try and address that.”
Bruce Alexander, spokesperson for the Centers for Medicare and Medicaid Services, declined to say whether the federal government would approve California’s request. Yet, Biden’s Medicaid officials have approved similar experimental programs in Oregon and Arizona, and California is modeling its program after them.
California is home to an estimated 30% of unhoused people in the U.S., despite representing just 12% of the country’s overall population. And Newsom has acknowledged that the numbers are likely far greater than official homelessness tallies show. Top health officials say that, to contain soaring safety-net spending and to help unhoused people get healthy, Medi-Cal has no choice but to combine social services with housing.
Statewide, 5% of Medi-Cal patients account for a staggering 44% of the program’s spending, according to state data. And many of the costliest patients lack stable housing: Nearly half of patients experiencing homelessness visited the emergency room four times or more in 2019 and were more likely than other adults with lower incomes to be admitted to the hospital, and a large majority of visits were covered by Medi-Cal, according to the Public Policy Institute of California.
“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, which is transforming Medi-Cal. Over five years, the initiative is expected to pour $12 billion into new Medi-Cal services delivered outside of traditional health care. In communities across the state, it is already funding services for some patients with lower income, including paying rental security deposits for unhoused people and those facing eviction; delivering prepared healthy meals for people with diabetes; and helping formerly incarcerated people find jobs.
The transitional rent program would add another service to those already available (PDF), though only a sliver of the 15.4 million Medi-Cal enrollees actually receive those new and expensive social services.
Rent payments could begin as soon as 2025 and cost roughly $117 million per year once fully implemented. And while state officials say anyone who is homeless or at risk of becoming homeless would be eligible, not everyone who qualifies will receive new services due to capacity limits. Among those who stand to benefit are nearly 11,000 people already enrolled in Medi-Cal housing services (PDF).
“The ongoing conversation is how do we convince the federal government that housing is a health care issue,” said Mari Cantwell, who served as Medi-Cal director from 2015 to 2020. “You have to convince them that you’re going to save money because you’re not going to have as many people showing up at the emergency room and in long-term hospitalizations.”
Health care experiments in California and around the country that funded housing supports have demonstrated early success in reducing costs and making people healthier. But while some programs paid for housing security deposits or participants’ first month of rent, none directly covered rent for an extended period.
