California Looks to Spend $100 Million Per Year of Medicaid Money on Housing

California is proposing spending more than $100 million per year in the state’s Medicaid program to pay for as many as six months of housing for people who are homeless or at risk of becoming homeless, are at risk for emergency room visits or hospitalization or are coming out of foster care or prison.

The move would be the state’s most significant test of using Medicaid money for housing. California has the country’s most extensive Medicaid program, with over 13 million patients — around a third of the state’s population. California also has almost a third of the nation’s homeless population, according to data from the federal government.

“It’s a huge step toward breaking down the silos that have gotten in the way of taking care of the whole person rather than limb by limb and illness by illness,” said the executive director of Health Access California, a consumer advocacy group, Anthony Wright.

California’s move would be expensive as the state is expected to have a $22.5 billion budget deficit this year, which is expected to grow in the upcoming years. In the meantime, the state’s Medicaid spending is projected to increase by $2.5 billion over the next three years, according to the Legislative Analyst’s Office, which is nonpartisan.

“What we’re really doing is expanding the welfare state, which is going to become just a huge financial problem,” said Wayne Winegarden, a senior fellow at the Pacific Research Institute. The institute advocates for free-market policies.

California experimented with utilizing Medicaid money in 2016 for some housing-related expenses when it launched the pilot program in 26 counties. While the Medicaid funds did not pay for rent, they paid for things like furniture and security deposits.

Over five years, the program has reduced costly emergency room visits, and hospital stays for people on Medicaid, saving taxpayers an average of $383 per year, per patient, according to a study by researchers at UCLA.

Program aims to use Medicaid funds to pay for rent directly

After the pilot program, California aims to use Medicaid money to pay directly for people’s rent. Democrat Assemblymember Joaquin Arambula, the chair of the budget subcommittee that will vet Governor Newsom’s proposal, lawmakers are supportive.

“I became very good at being able to get cockroaches out of people’s ears,” said Arambula. “The living conditions of many of our communities, especially in our rural communities, really can affect a person’s ability to get adequate sleep, to be prepared for the next day, and to stay healthy,” said Arambula, who spent a decade as an emergency room doctor.

Homeless advocates say they welcome similar programs, but spending additional money on rent isn’t enough, considering the state still has a massive shortage of affordable housing.

Kelly Bennett, CEO and founder of Sacramento Covered, said that during California’s first stint with using Medicaid money for housing services, workers frequently took up to eight months to place a patient in an apartment. In some cases, individuals have waited years to find a place.

“Even when you have the deposit money, and you have some rental subsidy, it’s still very, very challenging to find units — and to find units where the landlords will lease to our clients,” said Bennett.