San Jose is looking to offset a sizable portion of its homeless shelter expenses through Medi-Cal reimbursements, but homeless service providers aren’t making full use of the opportunity. That’s about to change with help from a federal grant.
The San Jose City Council on Tuesday voted unanimously to accept and match $1.3 million from the federal Providing Access and Transforming Health grant. The grant will provide assistance with data collection and billing to ensure homeless service providers working with the city become compliant with California Advancing and Innovating Medi-Cal (CalAIM), which will help San Jose get partially reimbursed for what it spends maintaining a handful of its homeless shelters. Mayor Matt Mahan was not present for the vote.
The city will begin a pilot program this year at the Cherry Avenue, Evans Lane and Cerone tiny home villages. It typically takes 12 to 18 months to implement the program, and San Jose will consider expanding it to other shelters after the pilot phase ends.
Once fully implemented across all shelters, the city could see savings of about $7 million to $9 million a year, according to city housing officials.
“That (could) go toward libraries, prevention programs, police officers, fire fighters — you name it,” District 8 Councilmember Domingo Candelas said at the meeting.
San Jose is projecting its homeless shelters will rack up $94 million in maintenance and operating costs in the upcoming fiscal year, while it tackles a $56 million budget shortfall. City officials are trying to rein in spending on 23 temporary housing sites in its portfolio — 10 tiny home villages, two safe parking sites, a safe sleeping site and 10 motels converted to shelters.
Mahan has suggested ways to cut shelter costs, including rebidding service contracts and standardizing shelter operations. He also wants to explore asking homeless residents to pay a fee to stay in the city’s shelters.
“We’ve helped thousands of people leave encampments and come indoors, and we can help thousands more when every level of government leans in,” Mahan told San José Spotlight. “CalAIM reimbursements will allow us to expand supportive services and help more homeless neighbors come indoors without putting additional pressure on our city budget.”
California expanded Medi-Cal services in 2022 to prevent vulnerable people — particularly homeless people — from falling through the cracks. CalAIM was meant to establish more coordinated, holistic care and allows providers to bill Medi-Cal for services that aren’t considered traditional medical care. Providers have been slow to utilize it due to technical difficulties and the long lag time for payments, Elizabeth Funk, CEO of DignityMoves which builds tiny homes across the state, said.
Once the homeless service providers managing the three pilot shelter sites — HomeFirst and People Assisting the Homeless (PATH) — become registered CalAIM providers, they can bill Medi-Cal for case management, medical care and housing navigation services — offsetting shelter costs the city is paying for.
Representatives for HomeFirst and PATH declined to comment.
Funk said allowing service providers to bill Medi-Cal will let the city eventually expand its shelter capacity.
San Jose doesn’t have enough beds for people who need them. The city has 6,503 homeless residents, up 237 people from 2023. About 60% of that population — 3,959 people — is unsheltered, and 2,544 are sheltered. Since the 2025 point-in-time count, the city has added more than 1,000 beds across a dozen new or expanded temporary housing sites, and manages more than 2,000 beds.
“The single biggest barrier to San Jose expanding its interim housing dramatically is the cost of operating,” Funk told San José Spotlight. “This CalAIM reimbursement is an order of magnitude. Rather than reducing the quality and reducing the services so that we can squeeze a few extra inches off of our belt, I would rather see us doing the full robust services and offsetting those costs by reimbursement.”
Last year, Santa Clara County started implementing CalAIM at some shelters in partnership with San Jose, and is covering the administrative costs. The county’s CalAIM implementation across all shelter sites could take two years. District 1 Supervisor Sylvia Arenas wrote in a memo the city’s efforts may duplicate what the county is doing. As CalAIM is getting off the ground, the county projects it could save up to $5 million in administrative costs and help San Jose save up to $2 million in annual shelter expenses.
Representatives for the San Jose Housing Department did not answer questions about why CalAIM reimbursements weren’t implemented sooner.
With emergency visits on the rise among homeless people, CalAIM also works to avoid costly hospital visits by allowing a wider range of holistic and preventative services to be billed.
In 2011, there were about 141 visits per 100 homeless people, according to the U.S. Centers for Disease Control and Prevention. That number has more than doubled to 310 visits a decade later. Conversely, rates among people not experiencing homelessness has held steady at about 40 visits per 100 people a year over the past decade.
The National Alliance to End Homelessness estimates it costs a taxpayer an average of $35,500 per year to pay for hospital visits, jail time and other emergency services for a chronically homeless person.
“(The funding) ought to be coming from our medical system, because our medical system is what’s bearing the brunt of not solving the problem,” Funk said.
Contact Joyce Chu at joyce@sanjosespotlight.com or @joyce_speaks on X.
This story originally appeared in San José Spotlight.