Kylie Tiemeyer and Sam Bell: Rhode Island has been turning away federal funds for substance use disorder recovery housing - Let’s change that

"These critical reforms will not get to be policy unless Rhode Islanders know how painful the current system is."

The story captivated Rhode Island. In the blink of an eye, Holly Barchie, Kiel Strong, and their four kids, a loving family just like any other, had their lives thrown into an endless search for a home. Barchie and Strong always worked hard to support their families and live in stability - Strong working as a full-time roofer and Barchie as a remote customer service specialist so she could still care for their kids. With both parents working and their oldest two daughters, Ariana, 10, and Briella, 7, being homeschooled, all seemed well until August 2021, when their landlord gave them 30 days’ notice to vacate their home. Having no other choice, the family searched for a space to rent out, but couldn’t afford any of the places they looked into. Barchie couldn’t believe the unavailability of any place to rent out for her family. “There’s all these empty buildings all around Rhode Island, but it’s impossible for us to find an apartment… Shelters don’t have space for my family, my children… How is that not a crisis?” she says. Since then, Barchie and her family have moved from place to place, staying in various motels or camping outside to get by. 

Barchie’s family is not alone. For years now, many Rhode Islanders haven’t been able to find available housing for a fair price and have fallen into homelessness as a result. According to the 2023 Point in Time count run by the Rhode Island Coalition to End Homelessness, just from 2022 to 2023 alone, Rhode Island has seen about a 15% increase in overall homelessness. It’s become a serious problem: many people, including families, can no longer afford to have a roof over their heads. 

Despite their circumstances, Barchie claims that she and her family still have each other to fall back on. “Everything we’ve been through over the last year would break other people… Yet here, Kiel and I know we are all we and our children have,” she told the Boston Globe’s Alexa Gagosz. But what does that mean for those who don’t have support from their loved ones, or anyone else for that matter? Amidst the chaos of seeking out a safe and stable home, not everyone is lucky enough to have the support they need to keep them from falling apart, and those who have already reached their breaking point struggle to get back on their feet. 

The homelessness crisis in our state is starting to hit middle-class families like the Strong family who never expected to face this horror, and that is how so many Rhode Islanders see it. But so often it hits people who are already struggling. In particular, homelessness disproportionately afflicts Rhode Islanders suffering from a particularly brutal disease - substance use disorder. Today, we want to talk about this heartbreaking side of the homelessness crisis. For, as painful as it is, it offers a critical way to help address homelessness. Addressing this crisis has proved challenging. We are proposing a way to help - a way that’s mostly paid for with federal money we are currently turning away. It isn’t our idea. In fact, it’s a McKee Administration proposal they never moved forward on. 

What makes addressing this crisis particularly difficult is that homelessness is itself an extreme risk factor for the disease. It can become a vicious cycle. In hidden cemetery plots, tucked away in dark alleys, in shelters, or under overpasses, uncomfortably large numbers of homeless individuals try to find a safe place to stay. However, without proper support, some fall into addiction, and those already living under the influence of drugs struggle to free themselves from its grasp without safe and stable living conditions. Through Prevent Overdose RI, a woman named Cece shared her addiction story, noting that, “I lived on the street and worked the street. I lived in abandoned houses and slept in my car. Things got crazy so fast.” In a video released by the Rhode Island Department of Health (RIDOH), one man named George, who struggled with his heroin, cocaine, and alcohol addictions, states, “I was also suicidal, I didn’t want to live. I didn’t want to be around anymore. My family had left me. I had no support anywhere.” Many experiencing homelessness and substance use disorder suffer from similar situations, living under the clasp of their addictions in mediocre or unsheltered environments harmful to their mental health and spiraling into depression with no support. 

Without the help they need, substance use disorder patients find it much harder to break free from their addictions and succumb to overdoses, especially from opioids like fentanyl, resulting in unnecessary deaths that could have otherwise been prevented with proper treatment. In theory, there is supposed to be a way for drug users to get help. Instead of waiting for an overdose to happen, substance use disorder recovery providers - who offer residential beds to help treat substance use disorder in a safe, sheltered space - are supposed to be there to provide patients with the support they need to recover from this disease before an overdose happens. In reality, however, the few substance use disorder recovery beds we do have in our state don’t come close to meeting the demand. 

This shortage doesn’t save money. When someone, like a homeless individual, overdoses and is unable to pay for treatment (which can cost up to tens of thousands of dollars), hospitalization is not cheap. By using substance use disorder recovery beds, overdoses can be prevented, thereby decreasing the cost burden on the state, the medical system, and society as a whole. The costs go beyond money. Substance use disorder is not pleasant to watch. It can be deeply painful for neighbors to watch homeless patients suffer. Within homeless shelters, these diseases can cause patients to act in ways that seriously disrupt the other guests. Recovery beds give people who need treatment for their substance use disorder, including homeless people, a place to get that treatment. In the short term, they provide homeless patients with a bed to get them off the streets while they recover from the illness that makes it so hard for them to find a home. 

Despite the benefits, providers still have to wrestle with state policies that make proper treatment almost impossible. Many residential providers rely on Medicaid reimbursement to cover residential fees for those like Jonathan who are homeless and can’t afford the costs, and the Medicaid rates are very low. The situation is bleak. BHDDH (Behavioral Healthcare, Developmental Disabilities & Hospitals), the state agency that oversees mental healthcare, put out a call for more substance use disorder recovery beds, and not a single provider responded. They sent the request out once again. This time they did get a response, but the potential provider dropped out after learning about just how low the Medicaid reimbursement rates are.

Fortunately, this problem can be solved. There’s an innovative proposal already written that would be a great start. Under Governor Daniel McKee, the Medicaid Office noticed these issues and submitted an agency budget proposal in the fall of 2021, a proposal for addressing the Medicaid reimbursement rate and supporting recovery beds. It would make a real difference, and the best part is that it would barely cost the state anything. Each year in the fall, administrative departments make agency-level budget proposals. Many of these proposals make their way into the Governor’s budget. Some do not. This proposal did not make it. We think it’s time to revive it. 

To understand why the proposal to raise Medicaid rates for recovery beds costs so little, it’s time to delve into the mechanics of how the State of Rhode Island’s largest program works. Medicaid pays for healthcare for low-income people. It’s run by the states according to complex rules set by the feds. To pay for Medicaid, the federal and state governments split the costs, with the federal government covering most of the costs. Except for a small percentage of the costs that the feds won’t cover, the feds typically pay 50% to 90% depending on the income and age of the patient. This federal money matters. The more Medicaid the federal government covers, the more money is left for the state to allocate towards other needs. 

For years, the federal government wouldn’t pay to cover the biggest recovery bed facilities. There’s a federal rule called the Institute for Mental Disease rule (the IMD rule for short). It says that any inpatient facility (where the patients spend the night) where most of the patients’ primary concern is mental health cannot get federal Medicaid funding. The state must pay all the costs. The feds would pay their share of Medicaid for a recovery bed that was part of a larger facility or for a tiny facility with fewer than 16 beds, but they wouldn’t cover the main facilities. To cover those costs, Rhode Island dipped into a limited federal block grant designed to cover substance use disorder-related costs. Because those funds went to recovery beds, they were unavailable to address the pressing needs in our community. However, around 2019, the feds gave us a waiver to ignore the IMD rule for substance use disorder recovery beds. Now, if Medicaid covers the service, the feds will pay part of the costs. 

There’s just one problem: We’ve never taken the federal Medicaid money. We’re still paying for these essential services out of the block grant. The Medicaid Office’s proposal proposed fixing this, but it never made it through the budget process. So we’re continuing to turn away these critical federal funds. Even though it could have drastically improved conditions for these facilities, the IMD waiver was never used, leaving patients suffering in substance use disorder recovery bed facilities without any support from federal Medicaid funds. Patients who could have had access to improved care are still being denied. 

If we took the federal funds, we could reinvest the same level of limited state funds and draw down much more federal Medicaid funding. Because the feds would be matching the funds, we would be able to raise rates substantially. For their proposal, the Medicaid Office crunched most of the numbers. They projected that general revenue state funds would go up by just $679,244, while federal funds would go up by $1,956,611. They did not estimate the amount of funds that would be freed up out of the existing block grant to go to other uses, but it is likely to be a significant percentage of these expenditures. Although we cannot say for sure, more funds might be freed up than the state would have to invest out of general revenue. 

The Medicaid Office’s proposal highlighted the extreme inconsistencies between current substance use disorder residential treatment coverage and coverage that is needed for proper treatment. In their proposal, the McKee Administration’s Medicaid Office proposed rates in three tiers. The lowest tier was $188.83, for low-intensity residential care. The second tier was $287.42, for high-intensity residential care. The third tier was $555.15, for medically monitored intensive inpatient care and withdrawal management. (These three tiers correspond to the H0018, H0010, and H0011 codes in the Healthcare Common Procedure Coding (HCPC) system.) In comparison, according to the proposal document, the block grant coverage method currently only pays $94.80 per day per resident. With the current coverage, far too many patients can’t get the care they need at these facilities to recover from their substance use disorder. This proposal would make things much better. With the higher rates, hopefully, more providers will be able to open, and the Rhode Islanders who need these services will be able to access them. 

This year, the Medicaid Office has revived this proposal, with adjustments for inflation. The new rates become $202.80, $308.69, and $596.23, and they have added a $361.17 rate for patients suffering from additional serious mental health conditions. The proposal has made it past the first stage. The Executive Office of Health and Human Services has approved it. It is now officially an agency budget proposal. However, this is the step where it failed last time. The Governor failed to include it in his proposed budget. Let us hope that this does not happen this time. Whether or not the Governor includes it in his proposal, let us make sure the legislature includes it in the final version. 

However, there are two areas where this proposal falls short, and changes should be made. The first is the billing model. The Medicaid office proposes to use a billing model called full-risk capitation. Under full-risk capitation, providers are paid a fixed amount for each person treated per day based on the level of care they need. In doing so, healthcare providers will be paid the same amount regardless of how much treatment is given, leading to a strong incentive to deliver cheaper and ineffective care. More subtly, providers will have an incentive to favor patients who are less work to treat, instead of those with severe illnesses or disorders who need costly treatment, as it will lower financial stress on the provider. Perhaps most importantly, providers will bear the financial risk of getting a very expensive patient they lose money on. Without reforming this aspect of the proposal, substance use disorder patients will only be unfairly put at risk, making a successful recovery much harder. Additional costs such as drug costs, working hours for the staff, and the actual amount of therapy time given to each patient must be reflected in the billing process to prevent harm from falling on substance use disorder patients. 

Under fee-for-service billing, healthcare providers are paid for each service, meaning the more treatment a provider gives, the more they will get paid. This means that the provider will not bear the risk of having a patient who requires more treatment. It means the provider will be incentivized to give the patient the treatment they need. We understand that some compromise may be needed. Because some of the costs are fixed, having a per-day component might be reasonable, but some costs are not fixed. Providers should be paid more if a patient needs more therapy, and they should be paid less if a patient gets less actual therapy time. 

In defense of the proposal, the current system is not ideal. Patients billed out of the block grant are already in full-risk capitation, and the billing is not even adjusted for the overall class the patient falls into. Under privatized Medicaid, the state gives the money to an insurance company. The insurance company then negotiates the rates they pay the providers. Here, they follow the same billing model of full-risk capitation with tiers that the Medicaid office proposes. In unprivatized Medicaid, however, there is a fee-for-service billing component where providers are paid more for giving patients more therapy time. This proposal would be a huge step forward as is, but if the billing system were reformed to ensure providers are billed for the actual care delivered, it would make it even better. 

The second problem relates to privatized Medicaid. Under privatized Medicaid, insurance companies often negotiate very low rates with providers. In the original Medicaid office proposal, these insurance companies could not pay less than the unprivatized Medicaid rate. In the new, more limited proposal description language, that critical protection seems to be missing. While this may be an oversight, it needs to be fixed. 

With our Medicaid reimbursement rates for substance use disorder recovery beds, Rhode Islanders are facing a crisis. Those battling substance use disorder are finding it nearly impossible to get proper treatment with current Medicaid rates. These low rates have driven a severe lack of substance use disorder recovery beds. Furthermore, with the way Medicaid rates are right now, they are far too low to cover necessary treatment costs for an extended period, which is crucial in helping those dealing with substance use disorder to recover. Fortunately, there is a solution. By using the IMD waiver, taking federal funds, and raising Medicaid reimbursement rates, these issues can be solved. Only then can lives be saved as countless Rhode Islanders coping with substance use disorder finally receive the help they have been waiting for and a chance at a new, healthier life. 

Perhaps most powerfully, we will find a place to house some of our most vulnerable homeless people. Instead of disrupting neighborhoods and shelters, homeless people suffering from substance use disorder will be able to get the housing they need; housing that treats them, treats the illness, and makes it hard for them to climb out of homelessness. The McKee Administration has a great idea. Let’s hope they do it. 

This is why pushing for the Mckee administration’s budget proposal document is so important. With the way Medicaid coverage for substance use disorder IMDs and substance use disorder residential facilities currently functions, it is impossible to properly treat those struggling with substance use disorder with the life-changing treatment they need. However, the proposed billing procedure within the document should be reformed before it is implemented, as it could potentially disincentivize proper substance use disorder treatment. Critically, we cannot let the insurance companies that run privatized Medicaid ignore these higher rates. With these two reforms, the McKee Administration’s proposal provides a uniquely transformative solution to a heartbreaking problem. 

Words on paper are powerful, but they are not enough. These critical reforms will not get to be policy unless Rhode Islanders know how painful the current system is.

Rise up and demand change.

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