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Cutting health costs by subsidizing housing

David Weinberg Dec 4, 2014

Cutting health costs by subsidizing housing

David Weinberg Dec 4, 2014

Last year, I reported a story about a building under construction, the Star apartments in Los Angeles’ Skid Row neighborhood. The area is home to the largest concentration of homeless people in the country, and for the first time, developers were showing an interest in parts of downtown that border Skid Row.

There was new pressure to do something about the thousands of people sleeping on the streets. The Star Apartments was an experiment in how to do that.

In March of last year, Mike Alvidrez brought me to the corner of 6th and Wall streets to show me the construction site of the Star Apartments. Alvidrez, executive director of the Skid Row Housing Trust, had high hopes for the project. “We want to target the people who are costing the taxpayer the most by not being in housing, so that’s the whole purpose,” he says.

Construction is now complete, and all 100 units are occupied. The building stands out in Skid Row. The gleaming white angular structure towers over sidewalks that fill with dirty tents every night. It has a rooftop garden, an exercise room, free Wi-Fi, the sorts of amenities you would find in a luxury condo. In fact,  the architect who designed the Star Apartments also designed an apartment building a few blocks away where units rent for as much as $4,000 a month.

The residents of the Star pay considerably less. “They pay their rent on the basis of 30 percent of their gross income per month,” Alvidrez said.The remainder is subsidized by the federal Section 8 program.

Lupe Ericson lives on the third floor. She’s 5 feet tall and feisty. Most of her life she worked in restaurants and warehouses and as a clown at children’s parties. These days, her only income is a $221 monthly check from the county Department of Social Services. So, she pays 30 percent of that, $66 a month, for her studio apartment.

This is the best thing that’s ever happened to me, Ericson says. “I don’t like the area. Skid Row is crazy. There’s a bunch of nuts out there. There’s a lot of danger. But these apartments are beautiful.”

Before she moved in, Ericson was homeless for seven years. One way she stayed safe was by sleeping on rooftops. “I would go to the roof, and then I would pull the ladder up with me,” she said. Ericson also sought refuge in hospitals. “If you learn how to manipulate the system,” she said, “you can sleep there. It’s a really safe sleep”

This is precisely why she qualified for an apartment. Ericson spent a lot of time in hospitals and emergency rooms. The longer she was on the street, the sicker she got and the more she went to the ER. “Between 2009 and 2013, she had 29 ER visits, so that’s a lot,” said Leepi Shimkhada, program manager in the housing for health unit at the Department of Health Services.

Shimkhada went over a condensed version of Lupe Ericson’s medical records, a basic list of Ericson’s ER and hospital visits. It was nine pages long.

Ericson also takes lots of medicine, suffers from depression, has a thyroid condition and is HIV positive. Until recently, she did not have health insurance and could not pay her medical bills. “So the county ends up paying,” Shimkhada says.

According to Department of Health Services data, providing someone like Ericson an apartment reduces hospital and ER visits by about 70 percent. Agency director Marc Trotts said those savings are greater than what it costs to provide Ericson an apartment. “No one disputes the fact that it’s a less expensive and more humane way to care for someone.”

The trick, Trotts says, is figuring out how to reroute the health savings into funding for permanent supportive housing, because the savings don’t come until after someone is housed, and the housing requires spending up front. “And that’s sort of the rejiggering of the funding system we are all trying to work on,” Trotts says. 

The Star Apartments is one attempt at that rejiggering. The department is covering the cost of onsite mental health services, substance abuse counseling and a health clinic on the ground floor of the building.

It’s too early to tell if this new model is working, but in the first 10 months of the experiment, the health of many of the residents has stabilized. That’s especially true of Ericson, who has been going to doctors for preventive care. “I got to go see this guy, he’s a gastroenterologist, figure out why I get nausea in the morning,” Ericson says.

Scheduled appointments like this one have replaced Ericson’s frequent trips to the hospital.

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