California’s use of “in lieu of services” (ILOS) classification for Medicaid funding has protected permanent supportive housing wraparound services from recent federal restrictions on social service spending. The federal Centers for Medicare & Medicaid Services confirmed that California’s designation of nonhousing social services—such as mental health care, drug counseling, and job training—as Medicaid-funded services is allowed under federal regulations, ensuring continued reimbursement beyond the expiration of experimental waivers at the end of 2026.
Under the state’s five-year CalAIM initiative to modernize the Medicaid system, housing nonprofits like Jamboree Housing Corp. and MidPen Housing have leveraged federal funding to provide wraparound social services proven essential to maintaining permanent housing. A recent state evaluation found that people using at least one housing support service—including navigation into new housing, health care assistance, and apartment deposits—saw a 13% reduction in emergency department visits and a 24% reduction in inpatient admissions in the six months that followed.
According to Larry Levitt, executive vice president for health policy at KFF, “California has tried to future-proof many of the policy changes it has made in Medi-Cal by including them in mechanisms like ILOS that do not require federal waiver approval.” The ILOS designation allows services to be funded through Medicaid managed-care plans as cost-effective substitutes that reduce the likelihood of patients needing other Medicaid-covered services. Early results show that when housing providers employ holistic approaches including social services, formerly homeless residents remain in housing at higher rates and use costly emergency health services less frequently.
California’s homeless population has soared to more than 187,000 on a given night—nearly a quarter of the U.S. total. Several other states, including Arizona, Arkansas, Florida, New York, and North Carolina, are now using the ILOS mechanism similarly. Jamboree Housing Corp., founded in 1990 in Orange County, dedicates about a fifth of its portfolio to permanent supportive housing, with residents reporting dramatically improved employment and health outcomes after receiving integrated support services.
This article is an AI-assisted summary. All facts and figures are drawn from the original report: https://kffhealthnews.org/news/article/permanent-supportive-housing-california-medicaid-social-services-future-proofed/