Late last year, OnTrack, an addiction treatment and recovery agency based in Medford, considered buying a 15-unit apartment complex and turning the building into transitional housing for the organization’s clients and their families.

The building was dilapidated; the foundation was seriously damaged after a creek bordering the property flooded. The costs to repair the building to make it habitable made purchasing the property nearly impossible.

AllCare CCO, the coordinated care organization that provides care to people covered by Medicaid in Curry, Jackson and Josephine counties, footed the bill.

“We wanted to make sure they could get over the hump,” said Josh Balloch, AllCare’s vice president for governmental relations and health policy.

The money came from AllCare’s administrative budget, which makes up 8 percent of its total budget and some of which is used as “community benefit” money — money that AllCare can spend flexibly on non-medical services that help its patients stay healthy.

The federal government will not reimburse AllCare for the expenditure, as the government does for AllCare’s medical and health-related expenses. Services related to housing — whether to rehab a building, the case management that helps a mentally ill person navigate the rental applications, or retention services that keep people housed — are not considered services that Medicaid can pay for.

That could soon change in Oregon, freeing up funds to house its most vulnerable, high-need and expensive patients. The Oregon Health Authority is seeking a waiver from the Centers for Medicaid and the Medicare (CMS), the federal regulatory agency that regulates Medicaid and Medicare, that would allow Oregon’s coordinated care organizations to pay for supportive housing services that help homeless or formerly homeless people, as well as people with severe mental illnesses and substance abuse addictions, get into and stay in housing.

Those who provide supportive services to homeless or formerly homeless people say the change would be a boon for an affordable housing system that is being damaged by rising rents. Medicaid providers say paying for housing-related services is essential to saving hundreds of thousands of dollars.

FURTHER READING: National Health Care for the Homeless Council: 'Housing is health care'

The federal waiver is the latest step coordinated care organizations — also known as CCOs — have taken to be able to flexibly spend Medicaid dollars on services that may not necessarily happen in a doctor’s office but nonetheless keep patients healthy.

Since the Oregon Legislature created CCOs in 2011, they have been tasked with coordinating and integrating the primary, mental and dental health care of the 100,000 Oregonians who are covered by Medicaid, the federal program that provides health care for people living in poverty.

CCOs are also expected to provide that integrated, coordinated care at a lower cost to patients and the state, focusing on primary care and other preventive services that reduce the necessity of emergency room visits and other high-cost services.

It has led CCOs to fund pilot projects and experiment with services and programs considered a non-traditional part of health care delivery. The thinking goes that any expenses that can help Medicaid patients maintain their health and stay out of the emergency room will keep costs down.

Medicaid has already allowed Oregon’s CCOs to pay for air-conditioners and other similar non-medical services and to have more flexibility in how a CCOs’ budgets are spent.

FURTHER READING: Make health a part of all policy, doctor says

The hope is that the recently submitted waiver will be approved before the Obama administration ends in January. Once approved, Medicaid will begin reimbursing CCOs for an array of services that reduce barriers to housing. This includes case management to help people with mental illness navigate housing; help for people with substance abuse disorders to seek treatment and to have good relationships with a landlord; and paying for unresolved, past-due utility bills or other debts that can derail housing. It could also include retention services with individuals after they are housed to help address any challenges that may arise.

The services would be targeted not only for people who are chronically homeless or threatened with homelessness, but also toward Medicaid patients who are transitioning out of jails or prisons, residential treatment centers, assisted living facilities, foster care, and institutional settings such as hospitals and nursing homes.

The supportive services covered under the waiver are the type of services that housing advocates say are essential to helping extremely impoverished people remain stably housed.

“The housing system has broken down so much,” said Kenny LaPoint, the Oregon Housing and Community Service’s housing integrator. “To bring this in to provide services brings stability in the funding stream.”

“This would have a huge impact,” said Rachel Post, Central City Concern’s public policy director. “It would acknowledge that housing is the most important social determinant of health.”

Social determinants of health are the factors in a person’s life that directly affect their health, such as housing, education, physical living environment, access to transportation and socio-economic status.

Post, LaPoint and others say that housing, and remaining stably housed, is the most important factor in staying healthy.

FURTHER READING: The trauma of housing instability

“If you don’t meet basic needs, then people are not able to engage in meaningful treatment,” said Kevin Campbell, executive director of Greater Oregon Behavioral Healthcare Inc., a member of the Eastern Oregon Coordinated Care Organization. “If we are able to integrate housing into their care, then that gives us a much better chance to ensure that they can stay in their community and participate in treatment.”

Historically, health care providers and systems have been reluctant to spend any money on housing or housing-related services.

“They don’t want to pay for bricks and mortar,” Post said. “They feel that’s the federal government’s responsibility. But the feds don’t have the political will to finance (housing and supportive services) to the degree that it needs to be financed.”

Research is beginning to clearly show that a person’s housing and their health are integrally connected.

Earlier this year, the Center for Outcomes Research and Education (CORE), a Portland-based research group, released a study showing that Medicaid expenditures drop substantially if patients live in stable, affordable housing.

The study partnered with Health Share of Oregon, the largest coordinated care organization in the Portland metro area, and analyzed claims data, between January 2011 and June 2015, of 1,625 individuals who moved into affordable housing during that period of time and were also covered by Medicaid.

Medicaid expenditures by those individuals decreased, on average, by 12 percent. Patients who lived in permanent supportive housing — housing that is connected with case management and access to mental health or substance abuse treatment — decreased by 14 percent. The costs of Medicaid patients who were seniors and disabled declined the most, by 16 percent.

Emergency room visits declined by 18 percent, and outpatient primary care fell also, by 20 percent.

The study concluded that “health care experiences” of the 1,625 patients in the study “changed dramatically” as a result of moving into affordable housing. The study recommends that “states, localities and (coordinated care organizations) should invest resources such as Medicaid in housing solutions” and that Medicaid dollars should be spent on resident service coordinators and other housing services.

“As this study shows,” the report reads, “stable housing plus health-related services can yield significant cost savings and improve resident health outcomes.”

FURTHER READING: Housing is health care, worthy of equal attention (SR editorial)

Some CCOs are already investing in housing-related services. In addition to the apartment complex AllCare provided funding to, the southern Oregon CCO also gave funds to the Josephine County Sobering Center, where people with substance abuse issues can stay for up to three days to detox.

“It’s emergency housing,” Balloch says. “But it’s not jail.”

AllCare gave funds to Hearts with a Mission, a homeless youth agency in Jackson County, to help fund a new shelter for homeless youths. AllCare also gave $100,000 in grant funding to Curry County to fund a research project that will identify ways to address housing needs along the southern Oregon coast.

Balloch says the vacancy rates in Jackson and Josephine counties are close to zero percent — meaning that there are virtually no apartments or homes available for rent. The people who face the most pressure, when it comes to finding housing, are the poorest, those with the highest barriers, and the sickest, he said.

“Housing keeps coming up over and over again” as a major issue for AllCare’s patients, Balloch said. “There’s such a need, I don’t know there’s enough that we can do.”

Campbell tells a story about a homeless man who is well known to a certain community in Eastern Oregon. Campbell did not give specifics — everyone in a small town knows everyone else, after all. The man has asthma and went to the emergency room two weeks ago because he had lost his inhaler.

If that person had a home, Campbell said, he probably would be able to keep track of his inhaler and any other medications he is on and avoid the emergency room altogether.

“An inhaler costs $50 or $60,” he said. “An ER visit costs a thousand dollars. You could have paid rent for a month or six weeks for that same amount of money.”

Campbell said that in 2013, the Eastern Oregon Coordinated Care Organization spent 42 percent of its budget on only 2.4 percent of its 48,000 members. That small number of patients has numerous issues, including medical and behavioral health diagnoses, as well as poor access to transportation and housing issues.

“That’s what got us serious about being more aggressive at addressing the social determinants of health,” Campbell said.

If the waiver is approved, Post estimates, 25 percent of Oregon Health Plan patients will benefit from the reimbursable supportive housing services through CCOs.

“It’s the most vulnerable of the vulnerable,” she said.

It is not yet clear how much funding could be available for supportive housing services. Post said that the services Medicaid patients will receive will be more comprehensive and that it could free up some money that social service agencies such as Central City Concern currently use on other services.

The waiver will not allow CCOs to receive reimbursement for providing rental assistance funds or the construction of new affordable housing. Even if the supportive services low-income Medicaid patients receive is substantial, there will still be a bottleneck faced throughout Oregon as a result of the lack of affordable housing.

“Even if the health care system said, ‘Yeah, we’re going to get behind this,’ there are no units to rent,” Post said. “It means that we can provide these services to people who are already housed in the units that are available.”