SEATTLE — A plan to boost homelessness funding while lowering public health care spending has fallen short of expectations.
In 2018, Washington became one of the first states to pay for homelessness services with Medicaid, a federal health care program for low-income people. It's part of a newer concept gaining momentum nationally that addressing housing needs is a cost-effective way to care for people's health.
Many in the homelessness sector believe federal funding is the only realistic way to pay the full cost of the homelessness crisis, especially with local government budgets tightening.
Some organizations, including the King County Regional Homelessness Authority, hoped this program could fund big-dream solutions as well as supplement local funding.
The agency projected it would get $5 million from the program this year in a pilot. Halfway through the year, it didn't break five figures.
And there have been more disappointments.
Earlier this year, just as homelessness service providers were coming to rely on the program, the state suddenly closed its books, saying the program was running out of money. While some other states have more flexible limits, Washington's program is hard-capped. The state Health Care Authority said with more than 14,000 people enrolled in the program, it was projected to go over its 2024 budget of $33.5 million.
While the Health Care Authority expects additional funding, nonprofits are experiencing whiplash, and saying the instability of the program makes it unclear how much they can rely on it going forward and whether health care funding can really match the scale of the homelessness crisis.
The cost of homelessness
Living outside makes people more susceptible to health problems like wounds and infections, and without easy access to routine doctor visits or places to recover, even minor issues can land them in emergency rooms or hospital beds, where the cost of care is highest. Homeless people also face disproportionately higher rates of physical, mental and substance use issues.
Homeless people are among the most frequent users of hospital emergency rooms, making up 1 in every 10 visits in Washington, according to a report by Challenge Seattle, a nonprofit run by former Gov. Christine Gregoire. At thousands of dollars per visit, these rack up about $1 billion per year for hospitals and local governments.
Numerous studies over the last few decades have shown that providing housing for homeless people can stabilize people's health and provide tens of thousands of dollars in savings each year per individual.
That's why in 2015, the federal government authorized the use of Medicaid, a federally funded health insurance program for low-income people, to help house homeless people with medical, mental and substance use issues. Washington officials jumped on the opportunity in 2018, seeing a way to supplement their homelessness funding, and created the Foundational Community Supports program. Now, 20 states have something similar.
But adoption was slow locally.
A huge administrative burden fell on nonprofit service providers if they wanted to access the program. Similar to billing insurance, staff needed to log the minutes they spent helping people get off the street and then submit documentation to get reimbursed.
Not only did this take time away from directly helping people, many of their reimbursement requests were denied because staff had filled out forms incorrectly or because their services didn't meet strict program requirements.
One of the biggest issues for providers is that the program pays "per encounter" that staff have with a client. They say they should be paid per month of service like some other states' programs.
Underused
King County Regional Homelessness Authority's first CEO, Marc Dones, saw untapped potential, and made increasing use of Medicaid funding a cornerstone in their five-year plan to address homelessness.
The authority was working on a project to end homelessness downtown, but funds were running out. In April of last year, Dones told board members the authority planned to receive $5 million from the state's Medicaid program.
They encouraged nonprofits to figure out how to use that money, as well, and said authority staff would help organizations manage the paperwork.
Even after Dones resigned, the city of Seattle commissioned them to write a report about how the homelessness system in King County could better capture Medicaid dollars for homelessness.
Some authority board members were skeptical the program would yield that much money. But they didn't anticipate how short the plan would fall.
The Regional Homelessness Authority shut down its downtown project at the end of last year, saying it didn't have enough money to continue. Partly, that was because philanthropic money was no longer guaranteed.
But this past June, the authority's staff revealed to board members it had received a total of $9,048 from the Medicaid program, eliciting shock.
Implementation Board Co-Chair Ben Maritz asked if that was a clerical error.
"[Foundational Community Supports] was supposed to be the big thing to bring money into the system," Maritz said in an interview. "We had been talking about that for so long."
A spokesperson for the Regional Homelessness Authority said the amount it received from the program was so low because it began to shut down its project before it had a chance to ramp up use of the Medicaid program.
The bad news continued.
The authority also told board members that the state had paused new enrollments into the program entirely.
Paused
In the six years since the program began, some nonprofits were finally getting the hang of the paperwork required to receive funding from it. It was sometimes costly.
For example, shelter and housing nonprofit Low Income Housing Institute purchased a new software system a year ago to track hours and hired staff to manage it.
The investment seemed worth it as nonprofits need the funding more. Over the last several years, they have struggled to maintain the same level of services as the gap between relatively stagnant public funding and rapidly rising costs grows.
Plus, the program is becoming more attractive. The program used to be limited to paying for outreach workers or case managers. In a few months, people enrolled in the program will be able to receive rent assistance as well, a potential game changer.
"It's not this little thing on the side anymore," said Low Income Housing Institute Executive Director Sharon Lee.
Downtown Emergency Service Center, one of the largest homelessness service providers in the state, said it received $1 million from the program in 2023 and was on track to receive $1.75 million this year before the state paused enrollment.
The state Health Care Authority said in a notice on its website it had to pause enrollments into its Foundational Community Supports program in April because it experienced an "unprecedented increase in new enrollments" in 2023 and reached its budget limit.
"We are always trying to grow the program," said Matt Christie, administrator of the program for the state Health Care Authority. "We're victims to our own success to a degree."
He also pointed out the number of homeless people in the state has grown, meaning the number of people eligible for the state program has increased. Pierce County counted 23% more homeless people in 2023 than the year before. King County also saw a 23% increase between 2022 and 2024.
Catholic Community Services Deputy Director Dan Wise said the pause would require her organization to reduce its number of case managers, which would ultimately result in fewer people becoming housed.
Five months later, just as suddenly, providers received an email saying the program would open back up again in September, and people would be enrolled off the waitlist.
The Health Care Authority said that some people had dropped out of the program, creating openings, and that the agency was preparing to request more money from the state. The Washington Legislature has not yet voted to approve that. Plus, the agency has requested more funding from the federal Centers for Medicare & Medicaid Services.
While service providers are relieved the program has reopened, they're not sure how much they can count on it going forward.
But they are still hopeful this is a blip in the road toward another significant source of sustained funding to address the homelessness crisis.
"This is really, across the country, the best opportunity we have to increase services funding," said Thiele at the Corporation for Supportive Housing.
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