Gov. Gavin Newsom, whose administration is struggling to contain a worsening homelessness crisis despite record spending, is trying something daring: tapping federal health care funding to cover rent for homeless people and people liable to 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 latest program called “transitional rent,” which would offer as much as six months of rent or temporary housing for low-income enrollees who depend on the state’s health care safety net — a latest initiative in his arsenal of programs to fight and forestall homelessness.

“I have been talking to the president. We cannot do that alone,” Newsom told KHN.

The governor is pushing California’s version of Medicaid, called Medi-Cal, to fund experimental housing subsidies for homeless people, betting that it’s cheaper for taxpayers to cover rent than to permit people to fall into crisis or costly institutional care in hospitals, nursing homes, and jails. Early in his tenure, Newsom proclaimed that “doctors should give you the chance to jot down prescriptions for housing the identical way they do for insulin or antibiotics.”

But it surely’s a dangerous endeavor in a high-cost state where median rent is sort of $3,000 a month, and even higher in coastal regions, where most of California’s homeless people reside. Experts expect the Biden administration to scrutinize the plan to make use of health care money to pay rent; and in addition query its potential effectiveness in light of the state’s housing crisis.

“A part of the query is whether or not this is absolutely Medicaid’s job,” said Vikki Wachino, who served as national Medicaid director within the Obama administration. “But there may be a recognition that social aspects like inadequate housing are driving health outcomes, and I believe the federal government is open to developing approaches to attempt to address that.”

Bruce Alexander, a spokesperson for the Centers for Medicare & 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 the homeless people within 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 homeless tallies show. Top health officials say that, to contain soaring safety-net spending and help homeless people get healthy, Medi-Cal has no selection but to mix social services with housing.

Statewide, 5% of Medi-Cal patients account for a staggering 44% of this system’s spending, in response to state data. And plenty of of the most expensive patients lack stable housing: Nearly half of patients experiencing homelessness visited the emergency room 4 times or more in 2019 and were more likely than other low-income adults to be admitted to the hospital, and a big majority of visits were covered by Medi-Cal, in response to the Public Policy Institute of California.

“What we’ve got 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’ve got to attend so long for people to be so sick?”

The federal government has already approved an enormous social experiment in California, often called CalAIM, which is transforming Medi-Cal. Over five years, the initiative is predicted to pour $12 billion into latest Medi-Cal services delivered outside of traditional health care. In communities across the state, it’s already funding services for some low-income patients, including paying rental security deposits for homeless people and people facing eviction; delivering prepared healthy meals for individuals with diabetes; and helping formerly incarcerated people find jobs.

The transitional rent program would add one other service to those already available, though only a sliver of the 15.4 million Medi-Cal enrollees actually receive those latest and expensive social services.

Rent payments could begin as soon as 2025 and value roughly $117 million per 12 months once fully implemented. And while state officials say anyone who’s homeless or liable to becoming homeless could be eligible, not everyone who qualifies will receive latest services on account of capability limits. Amongst those that stand to learn are nearly 11,000 people already enrolled in Medi-Cal housing services.

“The continuing conversation is how will we persuade the federal government that housing is a health care issue,” said Mari Cantwell, who served as Medi-Cal director from 2015 to 2020. “You may have to persuade them that you will lower your expenses because you are not going to have as many individuals showing up on the emergency room and in long-term hospitalizations.”

Health care experiments in California and across 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 prolonged period.

“Without that foundational support, we’re playing within the margins,” Newsom said.

State health officials argue that paying for six months of rent shall be much more successful at reducing health care costs and improving enrollees’ health, but experts say that, to work, the initiative will need to have strict accountability and be bundled with an array of social services.

In a precursor to the state’s current initiative, California experimented with a combination of housing assistance programs and social services through its “Whole Person Care” pilot program. Nadereh Pourat, of the UCLA Center for Health Policy Research, evaluated this system for the state concluding that local trials reduced emergency visits and hospitalizations, saving a median of $383 per Medi-Cal beneficiary per 12 months — a meager amount compared with this system’s cost.

Over five years, the state spent $3.6 billion serving about 250,000 patients enrolled in local experiments, Pourat said.

And a randomized control trial in Santa Clara County that provided supportive housing for homeless people showed reductions in psychiatric emergency room visits and enhancements in care. “Lives stabilized and we saw an enormous uptick in substance use care and mental health care, the things that everyone wants people to make use of to get healthier,” said Dr. Margot Kushel, director of the University of California-San Francisco’s Center for Vulnerable Populations at Zuckerberg San Francisco General Hospital and Trauma Center, who worked on the study.

But insurers implementing the broader Medi-Cal initiative say they’re skeptical that spending health care money on housing will save the system money. And health care experts say that, while six months of rent could be a bridge while people wait for everlasting housing, there’s a much bigger obstacle: California’s reasonably priced housing shortage.

“We will design incredible Medicaid policies to alleviate homelessness and pay for all of the mandatory supportive services, but without the adequate housing, frankly, it is not going to work,” Kushel said.

Newsom acknowledges that criticism. “The crisis of homelessness won’t ever be solved without first solving the crisis of housing,” he said last week, arguing California should plow more cash into housing for homeless individuals with severe mental health conditions or addiction disorders.

He’ll ask the legislature to place before voters a 2024 ballot initiative that will infuse California’s mental health system with at the very least 6,000 latest treatment beds and supportive housing units for people battling mental health and addiction disorders, a lot of whom are homeless. The proposed bond measure would generate from $3 billion to $5 billion for psychiatric housing and treatment villages geared toward serving greater than 10,000 additional people a 12 months. The initiative also would ask voters to put aside at the very least $1 billion a 12 months for supportive housing from an existing tax on California millionaires that funds local mental health programs.

“People who find themselves battling these issues, especially those that are on the streets or in other vulnerable conditions, may have more resources to get the assistance they need,” Newsom said.

For transitional rent, six months of payments could be available for select high-need residents enrolled in Medi-Cal, particularly those that are homeless or liable to becoming homeless — and people transitioning from more costly institutions similar to mental health crisis centers, jails and prisons, and foster care. Medi-Cal patients liable to inpatient hospitalization or who frequent the emergency room would even be eligible.

“It’s a fairly large challenge; I’m not going to lie,” said Jacey Cooper, the Medi-Cal director. “But we all know that folks experiencing homelessness cycle out and in of emergency rooms, so we’ve got an actual role to play in each stopping and ending homelessness.”

Public health experts say the issue will proceed to blow up without creative enthusiastic about how you can fund housing in health care, but they warn the state should be wary of potential abuses of this system.

“It must be designed fastidiously because, unfortunately, there are all the time people seeking to game the system,” said Dr. Tony Iton, a public health expert who’s now a senior vp on the California Endowment. “Decisions should be made by clinicians — not housing organizations just in search of one other income.”

For Stephen Morton, who lives within the Orange County community of Laguna Woods, the journey from homelessness into everlasting housing illustrates the quantity of public spending it will probably take for the trouble to repay.

Morton, 60, bounced between shelters and his automobile for nearly two years and racked up extraordinary Medi-Cal costs on account of prolonged hospitalizations and repeated emergency room trips to treat chronic heart disease, asthma, and diabetes.

Medi-Cal covered Morton’s open-heart surgery and hospital stays, which lasted weeks. He landed temporary housing through a state-sponsored program called Project Roomkey before getting everlasting housing through a federal low-income housing voucher — an ongoing profit that covers all but $50 of his rent.

Since getting his apartment, Morton said, he’s been in a position to stop taking one diabetes medication and shed extra pounds. He attributes improvements in his blood sugar levels to his housing and the healthy, home-delivered meals he receives via Medi-Cal.

“It’s always scrambled eggs for breakfast and the fish menu for dinner. I’m shocked it is so good,” Morton said. “Now I even have a microwave and I’m indoors. I’m so grateful and a lot healthier.”

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.