'Housing Is Health Care'
The U.S. spends less on social services than other advanced countries -- and pays the price in higher health care spending
John Caver is no stranger to the violence that has plagued Chicago’s North Lawndale neighborhood for multiple generations. After returning home from serving in Germany during the Vietnam War, the 74-year-old veteran joined the Vice Lords gang, a pervasive presence in his neighborhood. He became addicted to drugs and alcohol, a lifelong affliction.
In 1992, his son, then 22, “got killed out here hustling in the streets.” The tragedy propelled him to become a substance abuse counselor – the only job he held over the past half century that he is proud enough to mention when asked what he did for a living during his working years.
Just over a year ago, Caver became the first tenant to move into a neighborhood apartment complex run by A Safe Haven Foundation. The complex and its 90 fully furnished, studio apartments, built with $20 million in federal and state funding with support from the Veterans Administration, included space to provide comprehensive social services for its residents. The plan called for individualized case management, food assistance, substance abuse treatment, education and job training, and introduction to employment opportunities. The family foundation of former governor and venture capitalist Bruce Rauner and his wife Diana kicked in $1 million to jumpstart the provision of those services.
Caver said it is working for him. “They have programs for everything,” Caver said after one of his fellow tenants came up to his interviewer to ask for money. “A lot of guys say they don’t have stuff but all they want to do is get high.” He regularly attends Alcoholics Anonymous sessions run by the facility.
But Mark Mulroe, the president of A Safe Haven Foundation, admits the project has stumbled since opening in January 2022. The organization expected it would be full within a month. Sixteen months later, only a dozen apartments are occupied.
Social Services are key to success
Although there are nearly 6,000 homeless people in Chicago, a small portion of the more than half million Americans who are without shelter on any given night, only an estimated six percent of the homeless are veterans. Most have long-standing mental and behavioral illnesses and cycle on and off drugs and alcohol.
Like most people who are homeless, those chronic conditions need constant attention if the provision of subsidized housing is going to succeed in transforming their lives. “Comprehensive services are necessary to make projects work,” Mulroe told a housing and health care forum run by the Health Care Council of Chicago earlier this week. “The project is in serious trouble because the support services aren’t there.”
For much of the past decade, the health care policy world has united around the need to address the social conditions that drive ill-health. They say that approach is the surest way to bring down health care costs in the U.S., which are the highest in the world. Just five percent of the population accounts for half of all health care spending. Those high-cost patients are disproportionately poor and minority and more likely to be ill-housed, ill-fed and under-employed.
The homeless are just the most graphic example of how health care spending rises through holes in the safety net. The daily lives of the homeless make them more prone to substance abuse and mental disorders. They are more likely to suffer from poorly treated or untreated diabetes, cancers and heart diseases, and wind up in the most expensive place imaginable – the hospital – when those conditions reach crisis stages. The life expectancy in Caver’s neighborhood is 15 years below that of people living in Chicago’s downtown high-rises or nearby suburbs.
Yet addressing what policymakers now call the social drivers of health or health-related social needs (the phrase “social determinants of health” has been jettisoned because it suggested poor peoples’ fates were predetermined) requires long-term investment in creating a society that eliminates the drivers of ill-health. That would include full employment and greater income support for low-wage workers; affordable housing; access to nutritious food; and making available transportation to reach jobs, shopping and doctor appointments.
Yet, despite its highest-in-the-world health care spending and a growing base of research showing investment in social services could lower those costs, the U.S. remains the least generous country in the developed world in providing the social services that would create a kinder society.
We spend less than two percent of gross domestic product on non-health care social services. The average for advanced industrial countries that belong to the Organization of Economic Cooperation and Development is around 10 percent. Conversely, we spend 17 percent of GDP on health care, more than any other country and nearly twice the OECD average.
The Biden administration has begun to address this glaring disparity by giving state-run Medicaid programs, most of which are now managed by private insurance companies, some flexibility to invest health care dollars in social services. Several states (Arizona, Arkansas, Massachusetts and Oregon) have initiated programs that address food insecurity and housing instability. California Gov. Gavin Newsom recently announced a $1 billion program to provide grants to address the housing and behavioral health needs of the homeless.
Medicaid to the rescue?
Earlier this year, the Centers for Medicare and Medicaid Services issued updated guidelines for states applying for a waiver to Medicaid’s usual rules, which limit spending to the direct provision of health care. However, payments for social services “in lieu of a service or setting covered under a state plan” are limited to five percent of a plan’s total expenditures and are justified only if they “reduce the need for future costly plan-covered services.” In other words, they must be cost-effective.
Cost-effectiveness was not defined in the guidance, but the requirement could wind up reducing the number of states and Medicaid managed care organizations willing to invest in housing, food and other social programs. Most cost-effectiveness studies look only at the short-term benefits of social investing. Not surprisingly, when looked at that way, they come up with mixed results.
For instance, the City of Chicago and Cook County in 2018 created a flexible housing pool that placed over 900 previously homeless individuals and families in permanent housing between the program’s inception and 2021, a period that included the first two years of the pandemic. Using claims data from government-run CountyCare, the county’s largest Medicaid managed care organization, researchers found that compared to a matched cohort of individuals not receiving supportive housing, the newly housed individuals reduced emergency room visits by 19 percent and reduced hospital in-patient days by 33 percent. Even though the investment in housing was large – $27,000 per housed individual – the program led to a $1.4 million reduction in total costs. It also reduced overall mortality by 30 percent, which wasn’t included in the cost-benefit analysis.
“Housing the homeless can be one of the quick wins,” said Karolina Duszczak, chief plan officer for Medicaid services at CountyCare. “While there was an increase in outpatient services and pharmaceutical costs, the decrease in ER use and lengths of stay” more than offset those other costs.
On the other hand, an Urban Institute study of a smaller program in Denver, which targeted a homeless population that routinely bounced between the streets and local jails and hospitals, found the cost savings from providing subsidized housing offset just some of the additional spending. The study estimated a comprehensive program would cost between $14.6 million and $18.7 million to house Denver’s more than 1,200 homeless, but determined only $8.3 million of that would be offset by savings on reduced use of hospital ERs, jails and ambulance services. The study deemed that a cost-effective investment for the county since more than half the housing costs would come from federally-funded housing vouchers.
Proponents of spending more Medicaid dollars on social services say CMS should give states and their managed care organizations more flexibility. “We’re taking a short-term view of long-term problems,” said Mulroe at the A Safe Haven Foundation, which like most social service organizations is constantly scrambling for government or charitable grants to provide ancillary services. “It is difficult to get people services once they’re housed. They need to get a G.E.D. to get a job. Some of these people have been homeless for five or ten years. It’s just not going to get done in 120 days.”
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