Key Takeaways
- Adult residential facilities (ARFs) and residential care facilities for the elderly (RCFEs) – jointly referred to as assisted living facilities (ALFs) – offer a proven, cost-effective path to stability and independence for Californians with serious mental illness and/or substance use disorders — yet they remain significantly underutilized for people with behavioral health and functional needs.
- As a result, the flow between housing/treatment settings across the care continuum remains inefficient, and vulnerable people can get “stuck” at a level of care or in a setting that doesn’t serve their needs. The main reason for this underutilization? The players don’t understand the delivery and payment systems for assisted living (Medi-Cal and county safety net programs) and the universe of what’s available to support people with behavioral health needs.
- Expanding assisted living as a viable option for people with behavioral health needs requires managed care plans, county behavioral health plans, and assisted living operators to work together to build clearer referral pathways, strengthen cross-system care coordination, and better leverage existing Medi-Cal and county funding tools.
For Californians living with behavioral health needs — serious mental illness, substance use disorder, or both — stable and supportive housing is often the difference between recovery and crisis. Assisted living facilities (ALFs) — home-like residential settings offering 24/7 daily living support — can meet both the functional and behavioral health needs of this population. Yet, assisted living remains significantly underused, leaving too many people cycling between hospitals, institutions, and the streets.
The core challenge is a fragmented system. Managed care plans and county behavioral health plans each hold a piece of the puzzle, but coordination between them is inconsistent and referral pathways to assisted living are poorly understood. The result is a care continuum with unnecessary gaps, where people who could thrive in a community-based setting are instead placed in higher-cost, more restrictive environments.
This report outlines concrete steps that managed care plans, county behavioral health plans, and assisted living operators can take to improve referral pathways, expand use of available funding, and strengthen care coordination. With Proposition 1 now requiring counties to dedicate 30% of Behavioral Health Services Act funds to housing for people with serious mental illness and substance use disorder beginning in July 2026, the opportunity — and the urgency — to make assisted living work better for this population has never been greater.
