Restructuring Medicare payments to address homelessness

Abstract

Social determinants of health (SDOH) contribute upwards of 37 percent to geographic variation in Medicare per beneficiary spending. Consequently, the Centers for Medicare and Medicaid Services (CMS) in recent years has restructured policies to incentivize providers to address SDOH.

In 2015, CMS released ICD-10 Z codes representing SDOH, the non-medical factors known to affect health-related outcomes that CMS has categorized into five domains—food insecurity, housing instability, transportation needs, utility difficulties, and interpersonal safety. These codes are intended to help CMS better understand the contribution of these factors to health care costs and help providers document their patient populations. However, Z codes have been highly underused and were associated with only about 0.11 percent of Medicare fee-for-service claims in 2019.

This could change, however, with the CMS Inpatient Prospective Payment System (IPPS) 2025 proposed rule released on April 10, 2024. This rule builds on the prior year’s rule and would ensure providers receive additional reimbursement for treating patients with Z codes specific to homelessness due to their outsized impact on costs. In this article, we highlight CMS’s historical approach in Medicare to addressing homelessness, review recent reforms, and present opportunities for improvement.