For Release on Delivery

Expected at 1:00 p.m.

Thursday, July 20, 2000

GAO/T-HEHS-00-158

CHILD WELFARE

New Financing and Service

Strategies Hold Promise,

but Effects Unknown

Statement of Cynthia M. Fagnoni, Director

Education, Workforce, and Income Security Issues

Health, Education, and Human Services Division

Testimony

Before the Subcommittee on Human Resources,

Committee on Ways and Means, House of Representatives

United States General Accounting Office

GAO
Page 1 GAO/T-HEHS-00-158

Madam Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss the progress made by states and

localities as they develop new financing, service-delivery, and

accountability strategies for their child welfare programs. In the mid1980s, child welfare agencies faced a poorly integrated patchwork of

services for children and families accompanied by escalating costs. As we

reported to this Subcommittee in October 1998, a number of states have

incorporated or are considering incorporating some of the principles of

managed care into their family preservation, foster care, and adoption

programs.1 Under a managed care approach, states and localities

prospectively pay fixed, capitated amounts to providers to coordinate and

meet all the service needs of referred children and families. The officials

responsible for these new managed care initiatives saw this approach as a

strategy both to improve the quality of care children and families in the

child welfare system received and to control the rising costs of delivering

services while holding all the partners in the system accountable.

Now that many of these initiatives have been in operation for 3 or more

years, you asked us to report on their progress. As you requested, I will

focus my remarks on (1) the financial and service-delivery changes states

and localities have made in their managed care initiatives, (2) how they are

measuring the initiatives’ outcomes, and (3) what is known about the

effect of these changes on children and families. My testimony is based on

our past and ongoing work on 27 state and local initiatives that have been

in operation since January 1998 or earlier.

In summary, states and localities that are implementing child welfare

managed care initiatives are moving away from a traditional fee-for-service

reimbursement approach to one that funds a single provider in advance

under a capitated payment. This allows the single provider—now

assuming greater responsibility for case planning and providing needed

services—the flexibility to package and manage an array of child and

family services. Under these new arrangements, states and localities are

taking steps toward becoming more performance-based and resultsoriented as they implement child welfare managed care initiatives. We

found that the state and local agencies operating these initiatives are

beginning to identify measures associated with five child and family

outcome categories—child safety, a permanent home for the child, child

and family well-being, the stability of out-of-home placements, and clients’

1Child Welfare: Early Experiences Implementing a Managed Care Approach (GAO/HEHS-99-8, Oct. 21,

1998).

Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 2 GAO/T-HEHS-00-158

satisfaction with the services they received. In addition, these agencies are

using such strategies as setting performance standards and incorporating

financial incentives in contracts with service providers to hold them

accountable for their performance and ensure that desired results are

achieved. However, we found that many of the state and local agencies

operating these initiatives do not have appropriate data systems in place to

store, analyze, and retrieve information on client outcomes. Most state and

local officials we talked with who were responsible for the initiatives are

encouraged by the changes occurring in child and family outcomes. While

controlling costs was seen as a potential benefit of managed care, an

equally if not more important goal was improved services for children and

families. In fact, in some cases, overall spending has increased. Whether

any outcome changes associated with these initiatives can be attributed to

the new strategies is still largely unknown because they have not been

rigorously evaluated. Planned evaluations under the federal waiver

demonstration program will—in the future—yield additional information

about the effectiveness of child welfare managed care arrangements.

The Administration for Children and Families within the Department of

Health and Human Services (HHS) administers the federal child welfare

programs. Federal involvement includes monitoring states’ compliance

with federal statutes and regulations, providing technical assistance to

states, and supporting research and evaluation efforts. In 1994, the

Congress gave HHS the authority to establish up to 10 child welfare

demonstrations that waive certain restrictions in title IV-E—the federal

foster care program—and allow broader use of federal foster care funds.

The Adoption and Safe Families Act of 1997 (P.L. 105-89) expanded HHS’

authority to approve up to 10 states’ waiver demonstrations in each of the

5 fiscal years 1998 through 2002. The purpose for granting waivers is to

test a variety of innovations, including but not limited to managed care. Of

the 21 states that have federally approved waivers, 12 states have waivers

to test managed care or capitated payment systems.2

In our 1998 report, we concluded that initiatives in which principles of

managed care were being implemented were still in the early stages of

program development and, as a result, were largely untested. We found

that, for these initiatives to mature and meet officials’ program

expectations, state and local agencies needed to resolve three important

issues. The first was to address cash flow problems in a new environment

2None of the 27 initiatives included in this study were implemented with a title IV-E waiver.

Background
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 3 GAO/T-HEHS-00-158

of funding services prospectively under a capitated payment system while

seeking reimbursement for the federal share of costs only after services

are delivered. In addition, state and local agencies stood a better chance of

reducing or eliminating the service access problems often associated with

different eligibility requirements in categorical funding streams if there

was funding flexibility. The second issue facing state and local agencies

was to continue to improve their capacity to collect, analyze, and report

client and service data. Such data are paramount for state and local

agencies to set reasonable and appropriate payment rates and

performance standards, make additional programmatic changes or give

service providers feedback, and improve policies and procedures for

serving children and families. The third issue requiring resolution was that

state and local agencies needed to continue to develop and refine

strategies to hold both themselves and their private partners accountable

for achieving desired outcomes. Moreover, these agencies needed to

develop the capacity to continuously measure and report their progress

toward meeting performance goals. Outcome measurement and

performance management were new areas of focus for the child welfare

system.

During the mid- to late-1990s, in an effort to reduce inefficiencies and

improve the quality of care, states and localities began to implement new

financing and service-delivery arrangements into their child welfare

systems. By 1999, according to the Child Welfare League of America, 29

states had one or more initiatives to change management, financing, or

service-delivery practices by adopting some principles of managed care.3

Managed care arrangements in child welfare have two primary elements.

The first is a financing system whereby the state or locality makes

prospective, fixed or capitated payments to one or more service providers

rather than traditional fee-for-service reimbursement payments. The

second element is that, under this new payment method, a single entity is

responsible for ensuring that children and families receive appropriate and

quality services.

Some states and localities are developing new payment systems in which

there are incentives to both seek the most appropriate placement for

children and have the flexibility to provide the most appropriate array of

3Charlotte McCullough and Barbara Schmitt, Managed Care and Privatization Child Welfare Tracking

Project, 1998 State and County Survey Results (Washington, D.C.: Child Welfare League of America,

1999).

States and Localities

Implement New

Financing and

Service-Delivery

Strategies

Capitated Payments

Provide Flexibility
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 4 GAO/T-HEHS-00-158

services. In their managed care initiatives, states and localities—often for

the first time—are making prospective, capitated payments to providers to

serve a defined group of children and families. A capitated payment is a

fixed fee that a provider receives either for each eligible client—that is, a

single rate for each referred child or family—or for members of a pool of

potential service users—such as a single rate to serve all eligible children

and families in one county. The service provider must then manage clients’

care within the fixed fee. This approach is a departure from the traditional

fee-for-service system states and localities have used to pay service

providers. Under a fee-for-service arrangement, providers are reimbursed

for the number and types of services delivered. Such a payment approach

offers few incentives for service providers to control costs by considering

the most suitable arrays of services for children and families or more

quickly returning children to their biological parent or seeking other

permanent placements such as adoption.

To further increase service flexibility, some states and localities are

funding capitated payment arrangements by pooling individual state

funding streams that support different services that children and families

in the child welfare system need. Because of restrictions on eligibility and

prohibitions on certain uses of funds, public and private child welfare

caseworkers often encounter problems accessing needed services for

clients. By pooling or blending funds from various sources, these states

and localities seek to reduce service access problems sometimes

associated with categorical programs and increase flexibility in the use of

funds. In Colorado, for example, the state blended funds from several

child welfare and child care budget line items and allocated a fixed level of

funding—equivalent to a block grant—to its counties. Block-granting state

dollars in this way loosened the restrictions on the use of these typically

categorical funds and increased counties’ flexibility. Boulder County

further pooled its child welfare block grant with funding from the mental

health agency and youth corrections agency to finance its Integrated

Managed Partnership for Adolescent Community Treatment (IMPACT)

initiative, serving adolescents at imminent risk of placement in group or

residential care.

States and localities are trying to improve access to services for children

and families by charging a single entity with the responsibility of

identifying and providing all appropriate services. This approach is

designed to reduce the need for families to navigate—often with little or

no assistance—a maze of community services, as well as increase the

likelihood that the service needs of children and families match the

services they receive. In most of the 27 initiatives we studied, states and

Service-Delivery Changes

Are Designed to Improve

Access to Care
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 5 GAO/T-HEHS-00-158

localities have contracted with experienced private nonprofit, communitybased providers—many of whom have a long history of providing child

welfare services for states and localities. These services often included

temporary housing for foster children, mental health services, services to

improve parenting skills, and some case management services such as

developing treatment plans. As the managed care entity operating under a

capitated payment, these providers take lead responsibility for

coordinating specified child welfare services for a defined population of

children and families. As the single point of entry to the service system,

the managed care entity usually must provide, create, or purchase a wide

range of services to meet the needs of children and families. If not

providing services itself, this primary contractor may develop and

subcontract with a network of service providers to make available all the

services referred clients need.

States and localities have also shifted more case management

responsibilities—much of which public agency workers had performed—

to private contractors as part of their new role as care coordinators. In an

effort to better match services with client needs, the primary contractor in

many of the 27 initiatives included in our study uses a team approach to

managing its caseload of children and families. This approach is designed

to avoid the duplication, time delays, and fragmentation that often result

under traditional case management, when different service systems and

the many providers involved in a child’s care are not part of the treatment

planning and decision-making process. In some initiatives, the treatment

team consists of those individuals who are regularly in direct contact with

the child, including the case manager, therapist, parents or guardians,

school officials, and other service providers. In other initiatives, case

management teams include representatives from multiple agencies, such

as child welfare, mental health, and juvenile justice agencies.

In most of the 27 initiatives, states and localities have contracted both the

management and the coordination of care for children who have been or

are at risk of being abused and neglected. However, not all aspects of the

child welfare system have been contracted to private entities. States and

localities have retained certain functions that officials believe are critical

to meeting their legal responsibility for the safety and well-being of

children in the child welfare system. In every initiative, the state or locality

continues to conduct all child protection functions related to investigating

reports of child maltreatment and recommending to the courts whether a

child needs to enter the child welfare system for protective or any other

services. A child enters the managed care system on the basis of a referral

from the state or locality to the managed care entity. In some initiatives,

the state or locality also maintains its presence by retaining the authority
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 6 GAO/T-HEHS-00-158

to approve contractors’ decisions related to reducing a child’s level of

care, such as moving a child from residential care to family foster care.

For child welfare managed care initiatives to effectively monitor the

progress of children and families and hold service providers accountable,

states and localities recognize that data on services and outcomes are

needed. We found that states and localities are taking steps toward

establishing a more performance-based and results-oriented system.

Experts have identified critical steps to developing such a system,

including identifying the outcomes to be achieved and their measures,

establishing accountability for performance and results, and developing a

data system to manage information on outcomes.4 We found that states

and localities are identifying child and family outcome measures in the

areas of child safety, a permanent home for the child, child and family

well-being, the stability of out-of-home placements, and clients’

satisfaction with the services that they received. Many agencies operating

these initiatives are holding managed care contractors accountable for

desired results by using outcome measures to establish performance

standards and link performance to financial incentives. However, not all of

the initiatives have the most appropriate data systems in place to enable

state and local agencies to develop outcome measures and monitor and

assess whether desired results are being achieved.

State and local agencies responsible for the managed care initiatives have

identified a variety of child and family outcomes to monitor—and the

associated measures for those outcomes—that traditionally reflect the

child welfare system’s priorities. These outcomes include measures of

child safety, permanency, and well-being—that is, children remain safe

from harm, achieve a permanent home in which to grow up, and are

physically and emotionally healthy. Other types of outcomes for which

measures have also been identified include the stability of out-of-home

placements—sometimes measured by the number of times children are

moved from one foster care placement to another—and client

satisfaction—sometimes defined as the extent to which children or

families express positive or negative feelings about the services provided

by public or private agency workers. Most agencies have established a

4National Partnership for Reinventing Government, Balancing Measures: Best Practices in

Performance Management (Aug. 1999); Casey Outcomes and Decision-Making Project, Assessing

Outcomes in Child Welfare Services: Principles, Concepts, and a Framework of Core Outcome

Indicators (Englewood, Colo.: 1998).

States and Localities

Are Taking Steps

Toward a More

Performance-Based

and Results-Oriented

Approach

Agencies Are Beginning to

Identify Various Child and

Family Outcome Measures
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 7 GAO/T-HEHS-00-158

range of measures that cover some, if not all, of the five outcome

categories. (Examples of the child welfare outcome measures for each of

the five outcome categories are illustrated in table 1.) This strategy

enables a dual focus of ensuring desired results are achieved—such as

finding children a permanent home in a timely manner—and unintended

results are not overlooked—such as children needing to reenter care

because they were inappropriately discharged. Under a permanency

outcome for its foster care initiative, for example, Kansas seeks to reunite

children with their families in a timely manner and measures the

percentage of children who return home within 6 months. To ensure that

contractors responsible for managing the initiative provide quality services

and do not return children to an unsafe home, the state also—under a

safety and a permanency outcome—measures the recurrence of abuse and

reentry into foster care within 12 months of reunification.

Table 1: Examples of Child and Family Outcome Measures

Category Outcome Measure

Safety Children are safe from

maltreatment

Confirmed reports of abuse and neglect in the

general population

Recurrence of abuse or neglect while children

are receiving in-home services

Reports of abuse or neglect while the children

are in out-of-home care

Recurrence of physical abuse, sexual abuse, or

neglect after children have left care

Permanency Children are placed in a

permanent home in a

timely manner

Children who are returned to their parents or

relatives within a specified time

Finalized adoptions

Children who achieve permanency within a

specified time

Average length of stay in out-of-home care

Children who are maintained in their home and

do not enter out-of-home care

Children maintain the

permanent placement

Children who reenter care within a specified time

Well-being Children function

adequately in their

families and

communities

Children’s emotional and behavior crises that

result in hospital use or police calls

Children’s behaviors related to sexual

misconduct, running away, and suicide

Children’s scores on standardized tests of

childhood functioning

Children’s movement to less restrictive

placement settings
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 8 GAO/T-HEHS-00-158

Category Outcome Measure

Youths discharged from care who have

completed high school, have obtained a general

equivalency diploma, or are participating in an

educational or job training program

Families function

adequately in their

communities

Families’ adaptation to caregiving

Stability Children experience a

minimum number of

placements

Number of placements while in out-of-home care

Children maintain

contact with their family

and community

Children placed with at least one sibling

Children placed within their home or contiguous

county

Children placed out-of-state

Satisfaction Clients are satisfied with

services

Youths who reported satisfaction with services,

as measured by the Client Satisfaction Survey

Children who reported satisfaction with

their foster care placement, based on an

exit interview

Families who reported that the initiative provided

them a valuable service

Source: GAO analysis of interview data.

We also found that states and localities are measuring different outcomes,

depending on the population served by the initiative and the states’ or

localities’ goals. For example, El Paso County’s initiative in Colorado

encompasses all children and services in the county’s child welfare

system; as a result, the county established a broad safety outcome and is

measuring child abuse and neglect rates among the general population. In

contrast, Massachusetts targets older children in residential care for its

Commonworks initiative in which the lead contractors only serve children,

while the state serves the family and decides when a child can return

home. Instead of monitoring the recurrence of maltreatment, the state

measures outcomes related to children’s movement to less restrictive

settings and reentry into residential care. One of Illinois’ goals for its

performance contracting initiative is to find foster children a permanent

home in a timely manner while minimizing multiple out-of-home

placements. To monitor progress toward this goal, the state established

several outcome measures, including average length of stay and the

number of placements in different foster homes while children are in outof-home care.
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 9 GAO/T-HEHS-00-158

States and localities responsible for these child welfare initiatives are

using their outcome measures to establish performance standards for both

public and private service providers. By doing so, they are trying to hold

all the parties in the initiative accountable for results. States and localities

have established performance standards for 11 of the 27 initiatives we

reviewed. Most performance standards are expressed as a specified level

of outcome to be attained. For its Multi-Agency Team for Children

(MATCH) initiative for seriously emotionally disturbed children, for

example, Georgia has included standards that 40 percent of the children

will improve their functioning and be discharged to a less restrictive

placement setting, and that a 20-percent decrease will occur in the

frequency with which children harm others.

As states and localities gain more experience with managed care, officials

expect to adjust existing standards or introduce new ones. For example, in

Kansas’ foster care initiative, state officials realized that their first-year

performance expectations for the lead contractors were in all likelihood

unrealistic because the standards were not based on past program

performance. As a result, Kansas officials expected to and did adjust

performance standards annually as more current information was

collected. In contrast, Massachusetts took a more incremental approach

for its Commonworks initiative. The state did not introduce performance

standards in the lead agencies’ contracts until the third year of operation,

after sufficient information had been collected to establish a baseline from

which to set standards.

Another strategy to hold managed care providers accountable for their

performance and achieving desired results is to link financial rewards and

penalties to outcomes. In some initiatives, the state or local agency offers

bonuses as a financial incentive for the managed care entity to meet

performance standards and penalties for poor performance. In the

TrueCare partnership initiative in Hamilton County, Ohio, for example, the

managed care contractor can earn bonuses when it meets individual

performance indicators related to (1) child and family outcomes, such as

ensuring children’s safety and reducing the risk of harm, and (2)

management services, including maintaining a competent provider

network and maximizing revenues. Similarly, the contractor can incur

financial penalties when it fails to meet the performance indicators.

Massachusetts offers bonuses to the lead contractors for achieving interim

or successful outcomes. In Massachusetts’ Commonworks initiative, a lead

contractor can earn bonuses at three different intervals—when a child

transitions to a less costly level of care, when a child leaves placement,

and when a child does not re-enter the lead contractor’s care within 6

months of discharge. In addition, in the Massachusetts initiative as well as

Agencies Are Attempting

to Hold Service Providers

Accountable
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 10 GAO/T-HEHS-00-158

others, poor performers risk not having their contracts renewed. However,

even satisfactory performers may lose their contracts because of other

factors. For Illinois’ performance contracting initiative, foster care

providers that met performance standards but were not the top performers

lost their contracts when the successful outcome of a declining child

welfare population resulted in a need for fewer providers.

Data systems are the linchpin between a state or locality’s efforts to

identify and measure outcomes and fully implement a performance-based,

results-oriented system. As states and localities move from a processmonitoring environment to a performance-based approach, information on

client and service outcomes is needed to develop outcome measures and

to monitor and assess whether desired results are being achieved. Nearly

all the state and local officials we contacted reported that developing data

systems to implement, manage, and monitor their initiatives continues to

be a challenge.

Although agencies are taking steps to identify and measure outcomes,

many have done so without appropriate information systems in place. In

many instances, private service providers and states and localities are

working with multiple, incompatible, or manual systems. While these

systems may yield information on child and family outcomes, they are

inefficient. For example, the lead contractor for the managed care

initiative in Sarasota County, Florida, uses three separate, unintegrated

data systems to track client and service data, and must enter duplicate

information into each system and physically locate the three computer

terminals side-by-side to ensure consistent data. For some initiatives in

other states, agency staff manually collected outcome data because

information systems had yet to be developed.

In several locations, data systems were developed specifically for the child

welfare managed care initiative. In both Massachusetts’ Commonworks

and the Hamilton County, Ohio, TrueCare Partnership initiatives, the state

or local agency required one of its managed care contractors to develop a

data system specifically for the managed care initiative at the same time

that new financial and service-delivery arrangements were implemented.

These systems were not integrated with the state or local agencies’ child

welfare information systems at the time of our study, but may be in the

future.

Data Systems Are Needed

to Manage Information on

Outcomes
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 11 GAO/T-HEHS-00-158

States and localities have not used federally supported statewide data

systems to implement, monitor, or manage their child welfare managed

care initiatives.5 Among the 12 initiatives we contacted about this issue,

none of the state or local agencies are using their state’s Statewide

Automated Child Welfare Information Systems (SACWIS) to manage

information on their initiatives’ clients, services, or outcomes. Whether the

state’s SACWIS was operational or still under development, officials for

some initiatives told us they hoped to either link their initiatives’ data

system to SACWIS or incorporate SACWIS into their initiative in the

future.

Most of the states and localities involved in the 27 initiatives are

encouraged by the results of the new financial and service-delivery

changes. In particular, available data show that some of the ongoing

managed care initiatives are associated with improved child and family

outcomes in one or more areas of child safety, permanency, and wellbeing. In some initiatives, children are spending less time away from their

biological parent or another permanent family than was the case before.

While controlling costs was seen as a potential benefit of managed care, an

equally if not more important goal was improved services for children and

families. In fact, in some cases, overall spending has increased. Although

reported results generally appear positive, few rigorous evaluations have

been completed to determine whether the managed care arrangements are

more effective or efficient than traditional financial and service-delivery

methods. Future, planned evaluations under the federal title IV-E waiver

demonstration program are expected to yield additional information about

the effectiveness of child welfare managed care arrangements.

For at least half of the managed care initiatives we reviewed, state and

local child welfare officials said that they believed the initiatives resulted

in children spending less time in out-of-home care and away from their

biological or other permanent family, improvements in children’s wellbeing, and less maltreatment recurring. For most of the 27 initiatives,

available data reflected results encompassing outcome measures in three

5The Congress had authorized enhanced funding to states under the Omnibus Budget Reconciliation

Act of 1993 for the development and implementation of Statewide Automated Child Welfare

Information Systems (SACWIS) amid concerns about the lack of information on children in the child

welfare system and their families. As of May 2000, HHS reported that 27 states’ systems were fully or

partially operational—including some of the states with ongoing child welfare managed care

initiatives; the remaining 23 states were not yet operational, and 1 state had elected not to pursue a

statewide SACWIS.

Effectiveness of

Managed Care

Initiatives Is Largely

Unknown

Officials Report Improved

Child and Family

Outcomes
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 12 GAO/T-HEHS-00-158

areas—permanency, child well-being, and child safety. About half the

initiatives resulted in improvements in the number or percentage of

children for whom a permanent home was found and, in some instances,

they did so more quickly. In Florida, for example, the state reported that

adolescents spent 66 percent less time in out-of-home care in District 4’s

managed care initiative when compared with another location where

children were served by the traditional state service system. A third of the

initiatives reported that children and families improved their well-being in

such areas as their involvement in the community, the family’s

relationships with one another, parenting skills, and children’s school

performance. For example, Tompkins County in New York reported in

1997 that its youth advocate program resulted in all families improving

parenting skills, all the youths improving their ability to control violent

and impulsive behaviors, and 55 percent of the youths improving their

school performance. Lastly, Colorado reported in 1999 a decrease in the

incidence of abuse and neglect ranging from 18 to 23 percent compared

with the previous year in the four counties with ongoing initiatives. (See

appendix for a summary of the reported outcomes for the 27 initiatives.)

State and local agencies used their outcome measures to track their

initiatives’ progress in several ways. For some initiatives, outcomes were

reported as change that occurred during the initiative. The Colorado

example on the reduced incidence of abuse and neglect used the previous

year as a comparison. For other initiatives, agencies reported outcomes

without any indication of change—sometimes because comparisons had

not been made. Initiatives that targeted the hard to serve and most costly

children—those in need of placement in residential treatment centers—

were considered to have had a positive outcome when children

successfully transitioned to less restrictive, less costly placement settings.

For Georgia’s MATCH initiative, for example, officials reported that 41

percent of the program participants improved functioning and were

discharged from a more restrictive residential setting to a less restrictive

placement, such as a group home, treatment foster home, or their own

home.

While the potential to control costs attracted state and local child welfare

agencies to managed care, their primary objective was not necessarily to

reduce spending. Instead, some officials expressed a desire to reduce

certain types of costs—such as the living expenses for out-of-home

placements—or to use existing funds more efficiently and reinvest any

savings into services. For some initiatives, officials reported that overall

spending has actually increased as a result of additional administrative

costs associated with private entities assuming responsibility for managing

clients’ care and the state or locality overseeing contracts. For example,
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 13 GAO/T-HEHS-00-158

Massachusetts reported that its Commonworks initiative is costing more,

overall, despite realizing savings in some specific areas. Out-of-home

placement costs averaged 3 percent less than the lead contractors’

capitated payment rate. Although spending for in-home or aftercare

services increased 80 percent as more children moved from residential

treatment to less restrictive settings, the net effect was a cost reduction in

spending for out-of-home and in-home services combined. Both the state

and its lead contractors have reinvested the service-cost savings into

program development. However, the state has incurred additional costs

for an administrative services organization (ASO) to provide management

services, lead contractors to manage their respective service-provider

networks, and the state’s oversight and management of the ASO and six

lead contracts.

Although state and local child welfare agencies are tracking progress on

most initiatives’ identified outcomes—some by independent researchers—

and reporting positive results, more rigorous studies are needed to

determine whether the results can be attributed to the initiatives’ new

service-delivery and financial strategies. To date, few rigorous evaluations

of the 27 initiatives we studied have occurred. Two evaluations, both

completed in 1999, respectively included three local initiatives in Florida

and a county initiative in California, and they attempted to compare

program outcomes with a comparison group of children who were not

participating in the initiative. However, both studies had serious design

and data comparability problems and were inconclusive in their findings.

A Colorado evaluation, which includes four of the county initiatives in our

study, has established comparison groups for evaluation purposes.

However, the study is ongoing and results have not been released.

While the 27 initiatives included in our study have had limited evaluation,

planned evaluations under the federal title IV-E waiver demonstration

program will yield additional information about the effectiveness of child

welfare managed care arrangements. By law, states receiving this waiver

must have an independent evaluation of the initiative that, at a minimum,

compares and assesses child and family outcomes, methods of service

delivery, and fiscal consequences. According to HHS officials, evaluations

for the 12 waiver states that are testing managed care principles for child

welfare services should be completed within the next 5 years. To date, one

ongoing evaluation—of Ohio’s demonstration of child welfare managed

care in several counties—has compiled baseline information on child and

family outcomes. Evaluation results are not yet available from any of the

waiver states.

Lack of Rigorous

Evaluation Leaves

Initiatives’ Effects

Unknown
Child Welfare: New Financing and Service

Strategies Hold Promise, but Effects

Unknown

Page 14 GAO/T-HEHS-00-158

Madam Chairman, this concludes my prepared statement. I will be happy

to respond to any questions that you or other Members of the

Subcommittee may have.

For further contacts regarding this testimony, please call Cynthia M.

Fagnoni at (202) 512-7215. Individuals making key contributions to this

testimony included David D. Bellis, Karen E. Lyons, Ann T. Walker, and

Rodina S. Tungol.

GAO Contact And

Acknowledgments
Page 15 GAO/T-HEHS-00-158

Table 3 includes the 27 managed care initiatives about which we collected

information regarding documented child and family outcomes, as of April

2000. In particular, we list quantitative results in the outcome areas of

child safety, permanent homes, child and family well-being, out-of-home

placement stability, and clients’ satisfaction with the services that they

received. Preinitiative baseline data were generally not available. We

indicate changes and describe cost savings where data were available. In

some cases, results were not reported for individual initiatives but were

aggregated across multiple initiatives in a single state. Unless otherwise

noted, the combined outcomes are shown for (1) the three district

initiatives in Florida and (2) Champaign and Madison Counties in Ohio.

Table 3: Child and Family Outcomes for 27 Ongoing Child Welfare Managed Care Initiatives, as of April

2000

Location and

project name

Managed care modela and

project description

Child and family outcomes

State-level initiatives

Georgia

Multi-Agency

Team for Children

(MATCH)

Public model

Statewide residential

treatment services for

severely emotionally

disturbed children

Fiscal year 1998-99 results

Children’s behavior improved—incidents of negative behavior, such as

aggression, self abuse, and property damage, decreased 21 percent

between the 6-month and 12-month evaluations for children admitted

during 1998, and decreased 35 percent between the 6-month and

discharge evaluations for children discharged during 1998

41 percent of the children were either discharged from the project or

stepped down to a less restrictive setting during 1999

66 percent of the children who were discharged from the project were

still in a less restrictive setting 6 months after discharge during 1999

42 percent of the children who had progressed to a less restrictive

setting were still in a less restrictive setting 6 months after their

transfer in 1999

All children were placed within the state during 1999

Illinois

Performance

Contracting

Public model

Relative and traditional foster

care statewide

1998-99 results

Permanency rate in 1999 increased 149 percent over the previous

year in Cook County’s Home of Relative Foster Care program

Number of 1999 adoptions increased 70 percent over 1998 and 228

percent over 1997

3,660 children achieved permanency through subsidized guardianship

between 1997 and 1999

Number of reunited families increased 12 percent between 1997 and

Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 16 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

1999

Movement of children to more restrictive placement settings fell by

more than half statewide

Indiana

The Dawn Project

Managed care organization

model

Wraparound services for

seriously emotionally

disturbed children, aged 5 to

17, who have been impaired

for more than 6 months and

involved with multiple service

systems in Marion County

Outcomes were not provided

Kansas

Foster Care

Privatization

Lead agency model

Statewide foster care services

to children in state custody

Year 3 evaluation results, Jan.–Sept. 1999

99 percent of the children did not experience abuse or neglect while in

out-of-home placement (consistent with years 1 and 2)

97 percent of the children did not experience abuse or neglect within

12 months of reuniting with their families (same as year 2)

27 percent of the children placed in out-of-home care were returned to

their families within 6 months (consistent with year 2; decrease of 49

percent from year 1)

41 percent of the children placed in out-of-home care were returned to

their families or achieved other permanency within 12 months

(increase of 24 percent from year 2)

74 percent of the children who returned to their families did not reenter

out-of-home care within 12 months of returning home (increase of 9

percent from year 2)

81 percent of youths, who were aged 16 and over and released from

the state’s custody, had completed high school, obtained a general

equivalency diploma, or were participating in an educational or job

training program (increase of 8 percent from year 2 and 53 percent

from year 1)

99 percent of the children experienced no more than three placement

moves while in out-of-home care (consistent with years 1 and 2)

71 percent of all children were placed with at least one sibling

(decrease of 9 percent from year 2; consistent with year 1)

78 percent of the children were placed within their regional boundaries

(consistent with year 2; decrease of 9 percent from year 1)
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 17 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

47 percent of the adults and 70 percent of the youths (aged 14 and

over) reported satisfaction with services (decrease of 6 percent for the

adults and consistent for the youth from year 2)

Massachusetts

Commonworks

Administrative services

organization with lead agency

model

Statewide foster care for

adolescents needing group

care or residential treatment

Administrative services organization report, 1999

More children moved from residential treatment to less restrictive

settings—the use of group homes, specialized foster care, and

independent living increased 73 percent from July 1997 to June 1999

Children’s placement in less restrictive settings was supported by

increased provision of aftercare services—expenditures for aftercare

services increased 80 percent, and the monthly average number of

clients receiving aftercare services increased 51 percent over 1998

Recidivism rate of 6 percent for youths who had a planned discharge,

such as return to home; 17 percent for all youths discharged, including

unplanned discharges such as running away from foster care

placement (Jan. 1997-Sept. 1998)

Savings achieved for out-of-home and aftercare services in 1999

(excludes administrative costs associated with the administrative

service organization, lead contractors’ management of provider

networks, and state oversight)—lead contractors’ monthly client

placement costs averaged 3 percent less than the capitated case rate

Michigan

Interagency Family

Preservation

Initiative (MIFPI)

Lead agency model

Wraparound services for

seriously emotionally

disturbed children involved

with multiple service systems

at selected sites

Descriptive evaluation results, 1998

Child abuse and neglect rate of 9 percent during families’ involvement

in MIFPI (compared with the rate for all children in the state of 8.4 per

1,000 in 1996)

Child abuse and neglect rate of 2 percent after families’ involvement in

MIFPI

Out-of-home placement rate decreased 38 percent during involvement

with MIFPI for children who were in a placement setting at the time

they entered the project; decrease of 39 percent for children who were

not in a placement setting at the time they entered the project

Children and families improved, on average, on all scales of well-being

and functioning, such as family and peer relationships, community

involvement, behavior, school experiences, and family’s adaptation to

caregiving, with the greatest improvement in lowering detentions and

increasing the family’s adaptation to caregiving

94 percent of the parents involved in MIFPI reported satisfaction with

the services they received

Tennessee

Continuum of Care

Contracts

Public model

Statewide foster care for older

children with moderate to

severe emotional and

behavioral problems

Annual report, July 1998-June 1999

59 percent of the children discharged were discharged to their own

family, an adoptive family, or a less restrictive setting
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 18 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

Wisconsin

Safety Services

Program

Lead agency model

Family preservation services

for noncourt families in

Milwaukee County

Outcomes were not provided

Local-level initiatives

Alameda County,

Calif.

Project Destiny

Lead agency model

Foster care for seriously

emotionally disturbed children

in residential treatment in the

county

Evaluation results, 1999

Project children were at least as safe as children in the comparison

group on risk indexes such as alcohol and drug use, abuse against

other children, medical emergencies, and running away

75 percent of the project children were residing in a less restrictive

setting; 25 percent of the children could not be maintained in less

restrictive settings (comparison data were not available)

No significant difference in improvement in children’s mental health

between the project and comparison groups

Academic performance of project children was comparable to the

comparison group on three measures—school attendance, conduct

reports, and academic improvement; however, project children’s

academic performance relative to grade level declined significantly

over time while the comparison group improved on this measure

Reduced levels of placement were not stable for a majority of the

project children—60 percent of the children experienced two to eight

additional changes in placement (comparison data were not available)

Project very nearly reached its goal of revenue neutrality by the end of

the second year; between 1997 and 1999, the project realized a net

gain of 2 percent of its capitated rate

Boulder County,

Colo.

Integrated Managed

Partnership for

Adolescent

Community

Treatment (IMPACT)

Public model

Foster care for adolescents

needing group care or

residential treatment in the

county

State managed care report, 1999

Confirmed reports of abuse and neglect decreased 23 percent over

1998 baseline

Finalized adoptions increased 13 percent over 1998 baseline

Savings were reinvested in child welfare services—the county realized

a savings of less than 1 percent of its capped allocation from the state

in 1998; the dollar amount of savings increased 128 percent in 1999

El Paso County,

Colo.

Child Placement

Agency Pilot

Administrative services

organization with lead agency

model

Foster care for children placed

by Child Placement Agencies

in the county

State managed care report, 1999

Confirmed reports of abuse and neglect decreased 19 percent over

1998 baseline

Finalized adoptions increased 84 percent over 1998 baseline

Savings were reinvested in child welfare services—the county realized

$1.3 million in savings in 1999
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 19 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

Jefferson County,

Colo.

Child Welfare Pilot

Public model

All child welfare services in

the county

State managed care report, 1999

Confirmed reports of abuse and neglect decreased 18 percent over

1998 baseline

Finalized adoptions decreased 23 percent and family reunification

increased 21 percent over 1998 baseline

Savings were reinvested in child welfare services—the county accrued

no savings in 1998 and $175,000 in 1999

Mesa County, Colo.

Child Welfare Pilot

Public model

All child welfare services in

the county

State managed care report, 1999

Confirmed reports of abuse and neglect decreased 20 percent over

1998 baseline

Finalized adoptions increased 118 percent over 1998 baseline

Savings were placed in a reserve account in 1998 and reinvested in

child welfare services in 1999—the dollar amount of savings to the

county increased 50 percent between 1998 and 1999

District 4, Fla.

Privatization Pilot

Administrative services

organization with lead agency

model

Foster care and independent

living services for adolescents

in the district

Outcome evaluation report covering all Florida initiatives, 1998-99

Placement rate was 69 percent more than the comparison site

(specific to District 4)

Length of stay was 66 percent less than the comparison site (specific

to District 4)

73 percent of the families served in Districts 4, 8, and 13 combined

were satisfied with the care they received (similar to comparison sites)

District 8, Fla.

Sarasota County

Privatization Pilot

Lead agency model

All children needing protective

services, foster care, and

adoption services in Sarasota

and Manatee Counties

Outcome evaluation report covering all Florida initiatives, 1998-99

86 percent of the cases in Districts 8 and 13 combined were closed in

1997-98 without reported recurrence of abuse or neglect within 1 year

of case closure (similar to statewide rate)

Placement rate in Districts 8 and 13 combined was 29 percent less

than the comparison sites

Cases were closed at a faster rate than the public agency had before

the initiative (specific to District 8)

Average length of stay in Districts 8 and 13 combined was 111 days

(similar to comparison sites)

20 percent of the children in Districts 8 and 13 combined were placed

with a parent, guardian, or relative within 15 months of the date of

removal from their home (43 percent less than the comparison sites)

40 percent or more of the children legally available for adoption were

adopted (specific to District 8)
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 20 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

77 percent of the children in Districts 8 and 13 combined were still in

foster care 15 months after removal from their home (51 percent more

than the comparison sites)

73 percent of the families served in Districts 4, 8, and 13 combined

were satisfied with the care they received (similar to comparison sites)

Average case cost in 1997-98 was about 10 percent less than what

the public agency spent before the initiative (specific to District 8)

District 13, Fla.

Bridges Program

Lead agency model

Children needing foster care

and adoption services in Lake

and Sumter Counties

Outcome evaluation report covering all Florida initiatives, 1998-99

86 percent of the cases in Districts 8 and 13 combined were closed in

1997-98 without reported recurrence of abuse or neglect within 1 year

of case closure (similar to the statewide rate)

Placement rate in Districts 8 and 13 combined was 29 percent less

than the comparison sites

Average length of stay in Districts 8 and 13 combined was 111 days

(similar to comparison sites)

20 percent of the children in Districts 8 and 13 combined were placed

with a parent, guardian, or relative within 15 months of the date of

removal from their homes (43 percent less than the comparison site)

77 percent of the children in Districts 8 and 13 combined were still in

foster care 15 months after removal from their home (51 percent more

than the comparison sites)

73 percent of the families served in Districts 4, 8, and 13 combined

were satisfied with the care they received (similar to comparison sites)

Albany County, N.Y.

Preventive Services

Public model

Children needing preventive

services in the county

Outcomes were not available

Broome County,

N.Y.

Child Welfare Care

Management

Lead agency model

Children needing family

preservation, foster care, and

independent living services at

one site

Outcomes were not available. The pilot project has been discontinued

because of problems with implementing new financial and servicedelivery arrangements in accordance with federal and state

regulations.

Oneida County,

N.Y.

Kids Oneida

Lead agency model

Wraparound services for

seriously emotionally

disturbed children in the

county in or at risk of out-ofhome placement

Outcomes were not available

Onondaga County,

N.Y.

Public model Outcome data, 1994-98
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 21 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

Family Support

Center Program

Children needing emergency

foster care services in the

county

Foster care days were reduced—children admitted and discharged

from the program avoided staying in foster care 246,834 days since

1994

Children were discharged from foster care more quickly—76 percent

of the children were discharged from foster care; half the children who

were placed in foster care since 1994 were discharged in 79 days

(decrease of 77 percent from 1992, 78 percent from 1991, and 75

percent from 1990)

56 percent of the children who were discharged returned to their

parents and 33 percent were released to relatives

Children had early contact with their families, where appropriate—70

percent of the children visited with a family member within 72 hours of

placement and 41 percent visited within 24 hours

88 percent of the children with siblings were initially placed with their

siblings

20 percent of the children discharged from foster care were readmitted

(14 percent less than the overall county rate)

Educational continuity was maintained—all school-aged children

attended their home schools

Tompkins County,

N.Y.

Youth Advocate

Program

Lead agency

Wraparound services for

youth in residential or

institutional placements in the

county

Program review, 1997

86 percent of the youths were free of legal involvement, such as

arrests

All families improved their functioning, such as parenting skills

All youths improved their ability to control violent and impulsive

behaviors both inside and outside the home

Little effect in reducing youths’ involvement with drugs and alcohol—

17 percent of the youths improved on this measure

School performance varied among participants but improved for 55

percent of the youths

60 percent of the youths had successful reports from their employers

88 percent of the youths improved in their community involvement

Champaign County,

Ohio

Human

Services/Adriel

School

Public model

Foster care for children

needing out-of-home

placement with a nonrelative

in the county

Outcomes report covering Champaign and Madison Counties, 1999

All children discharged from managed care in Champaign and

Madison Counties were discharged to a less restrictive setting

In 1999, 63 percent of the children who were placed through managed

care did not reenter a managed care placement within 12 months
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 22 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

Crawford County,

Ohio

Out-of-County

Placement

Lead agency model

Foster care for children placed

outside the county in

therapeutic family foster

home, group care, or

residential treatment

Outcomes were not available

Hamilton County,

Ohio

TrueCare

Partnership

Managed care organization

model

Foster care and independent

living services for children in

outpatient mental health and

therapeutic placements.

Managed care entity report, 1998

62 percent of the children who had been in a more restrictive setting—

such as residential treatment, group home, treatment foster care, or

day treatment—were able to remain in a stable, less restrictive setting

after 6 months

Madison County,

Ohio

Adriel Out-of-Home

Care Placements

Lead agency model

Foster care for children in the

county needing nonrelative,

out-of-home placement

Outcomes report covering Champaign and Madison Counties, 1999

All children discharged from managed care in Champaign and

Madison Counties were discharged to a less restrictive setting

In 1999, 63 percent of the children who were placed through managed

care did not reenter a managed care placement within 12 months

Dodge County, Wis.b

Family Partnership

Initiative

Lead agency model

Wraparound services for

adolescents in child care

institutions or juvenile

corrections in 10 counties

Outcome report, Aug. 1997-Aug. 1999

Status offenders—youths with delinquent behaviors such as disorderly

conduct, fighting, truancy, possession of marijuana, and curfew

violation—had fewer contacts with the courts after participating in the

initiative: 70 percent of the youths had no contact, 25 percent had one

to five contacts, and 5 percent had six or more contacts compared with

before the initiative, when 42 percent had no contact, 44 percent had

one to five contacts, and 14 percent had six or more contacts

Criminal offenders—those youths with delinquent behaviors such as

theft, criminal damage to property, burglary, bomb threat, battery,

sexual assault, receiving stolen property, possession of a firearm, and

auto theft—similarly had fewer contacts with the courts: 75 percent

had no contact and 25 percent had up to five contacts compared with

before the initiative, when 72 percent had no contact, 43 percent had

up to five contacts, and 15 percent had six or more contacts

Truancy rate improved from 25 percent before the initiative to 15

percent after the initiative

Milwaukee County,

Wis.

Wraparound

Milwaukee

Public model

Wraparound services for

children in the county in or at

risk of residential treatment

Quality assurance/improvement and utilization review report, second

quarter of 1999

Youths spent less time in residential care during their first year in the

program—the percentage of days youths were in residential care

decreased 29 percent

Youths spent more time with their parent—the percentage of days

youths were with their biological parent increased 32 percent
Appendix

Child Welfare Managed Care Initiatives’

Outcomes to Date

Page 23 GAO/T-HEHS-00-158

Location and

project name

Managed care modela and

project description

Child and family outcomes

Children experienced an overall improvement of 21 percent on

measures of behavioral change—such as symptoms of depression,

anxiety, withdrawal, social problems, delinquency, and aggressive

behavior—at 12 months after entry into the program

Children experienced an overall improvement of 34 percent on scales

of child-adolescent functioning, such as their ability to function

adequately at home, in the community, and at school; their behavior

toward others; emotional problems; self-harmful behavior; and

substance abuse, at 12 months after entry into the program

Average monthly cost of providing services decreased 8 percent

between the first and second quarters of 1999 a

Organizational arrangements among public and private entities generally fell into one of

the following managed care models: (1) public model, which maintains the traditional

management and service-delivery structure while the public agency incorporates

managed care elements into its own practices and existing contracts with service

providers; (2) lead agency model, where the public agency contracts with a private entity

that is responsible for coordinating and providing all necessary services—either directly

itself or by subcontracting with a network of service providers—for a defined population of

children and families; (3) administrative services organization model, where the public

agency contracts with a private organization for administrative services only, and direct

services are structured as in the lead agency or public models; and (4) managed care

organization (MCO) model, where the public agency contracts with a private organization

as in the lead agency model, but the MCO arranges for the delivery of all necessary

services by subcontracting with other service providers and does not itself provide direct

services.

b

Ten-county initiative includes Columbia, Dodge, Green Lake, Jefferson, Manitowoc,

Ozaukee, Sauk, Sheboygan, Washington, and Winnebago Counties.

(116039)
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