To Curb Medicaid Spending Tomorrow, Invest in Housing Today

Terri Ludwig is the President and CEO of Enterprise Community Partners. Larry Minnix is President and CEO of LeadingAge. William Kelly is President of Stewards of Affordable Housing for the Future.

Modest investments in housing and services, especially for low-income seniors, could dramatically reduce the government's healthcare bill

Forty-eight years after it was signed into law, Medicaid is at a critical crossroads. In most states the program is undergoing a significant expansion under President Obama's healthcare reform law, leaving state officials searching for bold new ideas to improve services and curtail costs.

The State of New York has a particularly smart plan for accomplishing both goals: Invest in affordable, long-term housing for Medicaid recipients.

Each year, New York Medicaid spends billions of dollars on costly services like trips to the emergency room and overnight hospital stays. State officials believe that many of these costs can be avoided -- or at least made less expensive -- by ensuring that low-income families and people with disabilities are in quality, stable homes. Get people off the streets and connect them with the right services, the logic goes, and they'll stay healthier.

Under the proposed pilot, New York State will appropriate additional funds to build permanent supportive housing for 5,000 people. Officials hope that the additional cost to the state -- roughly $50-$60 per day per person, according to the Wall Street Journal -- will generate even bigger savings down the line through lower healthcare costs.

That theory is backed by a wealth of data. According to researchers at the University of Pennsylvania, every dollar invested in permanent supportive housing in New York City -- which offers both long-term housing and services for physical and mental health, substance abuse and other problems common in the chronically homeless population -- saves more than two dollars in other publicly funded services. Local studies in Seattle, Los Angelesand Maine and have reached similar conclusions.

New York's pilot is certainly a step in the right direction. But when it comes to curbing Medicaid costs, the plan could be leaving out a crucial population: low-income seniors.

Most people don't realize that Medicaid covers a significant portion of America's aging population. Roughly one in five Medicare recipients are also eligible for Medicaid. Older adults account for about 10 percent of Medicaid enrollees and 25 percent of the program's expenditures, according to estimates from Kaiser Family Foundation and the Urban Institute. A significant portion of this spending is long-term nursing home care.

It's clear that we can generate massive savings by better serving this population. And similar to the chronically homeless population, relatively modest investments in housing plus services could have a profound impact on long-term healthcare costs.

In a recent report, the Bipartisan Policy Center's Housing Commission recommended a series of policy changes to help low-income seniors age in place instead of moving to nursing homes or other costly transitions. This could include new financing options for physical enhancements to the home -- slip-resistant floors, hand rails, etc. -- and funding for ready access to on-site preventative and non-emergency health services.

We don't yet have comprehensive data to estimate the long-term savings of these housing-related investments, but we have plenty of anecdotal evidence that the savings are real. For example, the Cathedral Square Corporation in Vermont recently piloted a model for better coordinating on-site health services to help aging residents stay independent, a program they're calling Support and Services at Home or SASH. In its first year alone, the SASH program helped reduce falls by 22 percent and hospital admissions by 19 percent, translating into an estimated $40 million in healthcare savings. (It's worth noting that most of those savings came from Medicare, not Medicaid.)

To help rein in healthcare spending, we need to build off programs like SASH and rethink how we house and care for our aging low-income population. That's why our organizations formed the "Learning Collaborative," a new platform for fostering innovation in services to lower-income seniors living in affordable housing. The collaborative brings together the country's top housing and service providers -- including Cathedral Square -- to exchange new ideas and lessons learned for improving health outcomes and reducing costs.

As more states look to revamp their Medicaid programs in the coming months, we urge them to balance the rising need to care for low-income people and aging adults with a long-term goal of controlling healthcare and other spending. By investing in housing and services, we could have the rare opportunity to do both.