Medicaid’s Essential Investments to Address Health-Related Social Needs

Consider the story of John Miller, a fictionalized Chicagoan, who lives with a serious mental illness and co-occurring addiction disorders. He recently left a psychiatric inpatient facility.  Estranged from his family, Mr. Miller was on the verge of becoming street homeless. Fortunately, he avoided that fate, receiving a combination of housing navigation, nutrition, and behavioral health services financed under a Medicaid 1115(b) waiver granted by the Biden Administration to Illinois. Or consider the fictionalized story of Edith Jones. She receives Medicaid-supported nutritional supports under that very same waiver that aid her recovery from colon cancer.

Such stories underscore the value of Medicaid—not only to finance essential health care, but also to provide crucial supports to address health-related social needs (HRSN). Such Medicaid policies are now under threat. States that have existing 1115(b) waivers to address HRSN face new Medicaid funding cuts. Others have applied for similar waivers, now unlikely to be funded. This is a huge missed opportunity to improve America’s health.

For at least two reasons, Medicaid plays a unique role to undergird services for the most vulnerable Americans, who so often endure a complicated blend of physical and/or mental health challenges, housing insecurity, and related needs.  

The first reason is most obvious and widely-discussed. When Medicaid covers a service, it’s a uniquely powerful structural move. Service providers and state governments know that they can make long-term investments, secure in the knowledge that accompanying services will be sustainably reimbursed via Medicaid’s $918 billion  combined state-federal budget, which dwarfs that of every federal or state social service effort. Consider, for example, if states and the federal government were to devote just 2% of these dollars to assist precariously-housed Medicaid recipients, that Medicaid budgetary tweak would notably exceed the Department of Housing and Urban Development’s entire budget for homeless assistance efforts across America, much of which is actually focused on Medicaid recipients.

The second reason is more subtle, but no less important. Medicaid supports for HRSN ameliorate the damaged incentives now imposed by Medicaid itself, through which the program specifically disincentivizes state spending to meet those very needs.

To see why, suppose that a state contemplates spending $100 million on new Medicaid dental or medical services versus spending that same $100 million on more cost-effective, but non-Medicaid-reimbursable, services for homeless persons.

From a political perspective, patients and providers of these Medicaid-financed medical and dental services will be grateful constituencies. In contrast, providers and recipients connected to homeless services are typically more diffuse and politically marginalized. Moreover, the state will receive at least a 50-50 federal match for those Medicaid health services. With no comparable federal match, the services for homeless persons would cost the state at least $50 million more.

These political and fiscal dynamics have obvious consequences: States prioritize personal health services at the expense of other, sometimes superior efforts to address critical social needs.

The Biden administration introduced modest but valuable Medicaid 1115(b) waivers to address these problems. Approved waivers included coverage for diverse services, including nutrition assistance, eviction prevention, and diverse housing supports. Reading these provisions, one is reminded of H. Jack Geiger’s 1960s medical practice in the Mississippi Delta. As Geiger later recounted: “The last time I looked in my textbook, the specific therapy for malnutrition is food.” He prescribed accordingly, defying local officials by sending patients to local pharmacies with prescriptions for food, implementing one of the first successful efforts to deploy health system dollars to address HRSN.

Housing-first and permanent supportive housing services are two imperfect but valuable interventions financed through HRSN waivers. Such services can be especially valuable for people like our Mr. Miller, whose behavioral health challenges deepen his housing precarity and also jeopardize his ties with those closest to him who are crucial sources of shelter and support. A pertinent randomized trial underscores the benefits of housing-first services combined with mental health supports. Related supports for homeless persons during the COVID emergency yielded similarly promising results. Illinois and other states are building on these experiences, bolstering permanent supportive housing and related programs. Such measures are particularly important for persons with serious addiction disorders, which are categorically excluded as qualifying conditions for federal disability programs. A valuable recent paper by Sydney Costantini compared housing-first and treatment-first interventions for nearly 300,000 unhoused, mentally ill Veterans. She finds that “enrolling in Housing First reduces three-year mortality by 4.6 percentage points relative to a no-program counterfactual. In contrast, Treatment First has no long-term effects on health.” Costantini argues that housing-first is also cost-saving, as it causes individuals to substitute away from lengthy inpatient stays.

The Trump administration seeks to reverse such efforts to address HRSN, specifically targeting housing-first services. Although the administration did not revoke Biden-era waivers, it rescinded the HRSN language. Administration initiatives also worsen administrative burdens and barriers that thwart eligible Medicaid recipients from receiving needed services.  

A recent Executive Order in this domain seeks to effectively criminalize homelessness, with the President and others focusing on salient but atypical cases where unhoused persons or persons with serious behavioral health challenges have perpetrated serious crimes.

There are indeed public safety challenges associated with serious mental illness and addiction disorders. At times, we in the public health and harm reduction communities undermine our legitimacy by downplaying these realities. Diversion and deflection interventions, mandated treatment, and directive efforts such as Forensic Assertive Community Treatment are sometimes warranted to address these challenges, serving justice-involved adults and others living with behavioral health disorders. Yet the great majority of unhoused persons and persons with serious mental illness or addiction disorders do not threaten public safety. As a first-line intervention, concerning behaviors among people with behavioral health challenges or with prior justice involvement are often best-prevented or best-addressed through a portfolio of measures that include cash assistance and supportive housing—HRSN interventions specifically under threat from the Trump administration.

Effective policies to address HRSN also require proper, sustained funding. As described by the Center for American Progress and the Arc, the recent One Big Beautiful Bill Act (HR 1) creates a new category of Medicaid Home and Community-Based Services waivers to serve people in-need who do not meet existing requirements of needing an institutional level of care. This is a potentially helpful innovation to assist many Medicaid recipients who live with disabilities and physical and mental health disorders. Yet, to implement this new category, Congress appropriated $50 million in Fiscal Year 2026, and $100 million in Fiscal Year 2027.  Given the high unit costs of pertinent services, these appropriations are inadequate to provide services for more than a few thousand Americans every year.

Expanding Medicaid’s footprint brings understandable anxieties for policymakers and service providers.  Not every valuable service should be packaged as improving health, and federal policymakers are understandably leery of subsidizing states’ safety-net funding. Medicaid program administrators often lack expertise to oversee housing and other social services. Many service providers are ill-equipped to navigate the administrative burdens that Medicaid imposes. An expanded Medicaid footprint, thus, requires greater capacity among service providers and state Medicaid agencies. Successful collaborations underscore that such pragmatic barriers can be addressed, and that pertinent services can be highly cost-effective. In one study of Denver supportive housing, about half of the total cost was offset by cost reductions in jail stays, ambulance rides, and other public services.

For these reasons and more, the Trump administration would be wise to reverse course.  Federal and state officials must collaborate to realize Medicaid’s full potential. The program remains our most valuable tool to address basic needs among 70 million people who rely upon Medicaid every day across America.

About the Author