Jackson Hammond is a Senior Policy Analyst at Paragon Health Institute. He has been active in the federal and state health policy space since 2017.
Prior to joining Paragon, Jackson was a health care policy analyst for American Action Forum (AAF). While at AAF, his work focused on payer issues including private insurance, Medicare, and Medicare Advantage. Furthermore, Jackson wrote extensively about the 340B Program and contributed to AAF’s research on a variety of drug pricing issues.
Over the last three years, the Centers for Medicare and Medicaid Services (CMS) has pushed for Medicaid dollars to be used for housing-related spending. Why is funding meant for the provision of health care services to the poor and disabled being used for things like carpet cleaning, air conditioning, and rent? The answer is a unique alliance of state governments, special interests, and proponents of the “social determinants of health” (SDOH) theory, all of whom are looking to maximize the amount of federal dollars they can funnel toward their own agendas. A central problem is that Medicaid’s already-massive budget is one of the main contributors to our nation’s federal debt crisis, and using Medicaid dollars to subsidize housing will raise housing prices. Below, we’ll explore why the health care financing program is being used for housing in the first place, how Medicaid funds get used for housing, and why all of this is bad policy.
States
States want Medicaid to fund housing services because of the financing structure of the program. Medicaid’s financial design strongly encourages states to spend lots of money, because for every dollar a state spends, it is guaranteed to receive at least a dollar from the federal government, and in many cases much more. This level of federal matching doesn’t exist for other federal programs.
As such, states have a huge incentive to classify as many programs as possible as health care, and specifically as Medicaid, in order to obtain more federal funds. Classifying housing as a “health care” expense provides states with yet another opportunity to use federal dollars for state programs. Technically, CMS guidance requires that Medicaid funds being used for housing cannot replace existing state dollars for these programs, but money is fungible and states know that as well as anyone. Essentially, Medicaid funding now has an additional avenue to subsidize state budgets.
Special Interests
As always, there’s also special interest involvement: Major insurers, including UnitedHealth Group and Centene, have recently been investing billions in building low-income housing. While this doesn’t sound problematic (“It’s private money, who cares?”), Sally Pipes of the Pacific Research Institute pointed out that these insurers are building and financing housing – with the help of federal tax credits – that they can potentially fill with beneficiaries whose rent is at least in part being paid by the state. Centene is the largest Medicaid managed care organization and most of its profits already come from Medicaid. The potential for insurers to access even more taxpayer dollars puts additional pressure on CMS to allow more Medicaid funds to be put towards housing.
Social Determinants of Health
Additionally, there’s an ideological component providing rhetorical support to the push for housing coverage in Medicaid –the “social determinants of health” (SDOH) theory. According to SDOH theory, health outcomes are largely determined by social factors beyond direct medical services, including housing, nutrition, socioeconomic status, environment, and education – while problematically ignoring individual behavior and genetics, two of the main contributors to health outcomes.
More to the point, SDOH theory implicitly calls for more public funding to address social problems under the guise of their impacts on health. Medicaid’s financing structure provides an ideal way for its proponents to shovel money towards their preferred SDOH policies. As such, correlations between housing access and quality and individual health outcomes (weak as those correlations may be, as Chris Pope of the Manhattan Institute explores in a recent paper critical of SDOH theory) are used to justify federal health care dollars in Medicaid going towards non-health care ends. CMS has explicitly suggested states use Medicaid and the Children’s Health Insurance Program (CHIP, which has a similar fiscal matching mechanism as Medicaid) to address housing through the framework of SDOH.
So how does Medicaid finance housing expenses in the first place? In 2023, CMS laid out a framework of four different waiver mechanisms for states to use Medicaid and CHIP funding for “health-related social needs” (HRSNs): Section 1115 waivers, Section 1915 waivers, In Lieu of Service waivers, and CHIP health services initiatives. These waivers allow states to dedicate funds for housing that cover everything from short-term (less than six months) room and board to utility assistance to carpet cleaning, and more.
Section 1115 waivers allow for the most flexible (read: expansive) coverage, and 19 states have been approved to use Section 1115 waivers for housing supports of varying kinds, though only eight of these states were under the 2023 HRSN framework. Costs are difficult to tally because these waivers often cover other non-housing initiatives as well. Section 1115 waivers cap HRSN spending at 3 percent of total state Medicaid spending. The Kaiser Family Foundation estimates the total Section 1115 HRSN spending cap at around $11.7 billion for the eight states approved under the 2023 framework.
The ultimate problem with using Medicaid dollars to fund housing initiatives is that Medicaid spending is already growing unsustainably. Medicaid spent $852 billion in 2023 and is projected to spend over $1.3 trillion by 2032 – the program is massive and is a primary contributor to our nation’s $35 trillion in debt. While Section 1115 waivers currently cap HRSN spending, if every state spent the full 3 percent in 2024, it would equal roughly $25 billion. That’s more than the current funding level for the Housing Choice Voucher program, the nation’s primary housing aid program. The additional $25 billion also doesn’t count the other avenues states have to spend Medicaid dollars on housing.
Additionally, Medicaid is already incredibly inefficient at paying for health care, and that inefficiency has had numerous negative effects on the health care market. Why would we want an inefficient program subsidizing the housing market? Remember: Subsidies make goods and services more expensive, and housing is no different. An increase in housing subsidies, particularly through a program as inefficient as Medicaid, will make housing less affordable for Americans. If states believe that HRSN policies are worth pursuing, they should use state resources for them. If these state policies and programs are only worth pursuing with the aid of federal subsidies that pay most of the cost, then maybe those programs aren’t all that worthwhile to begin with. Housing isn’t health care, and pretending otherwise is a blueprint for bad policy.
Subscribe
Sign up now for your health policy updates.
