U.S. GOVERNMENT PRINTING OFFICE

68–872 DTP WASHINGTON : 2001

INCREASING STATE FLEXIBILITY IN USE OF

FEDERAL CHILD PROTECTION FUNDS

HEARING

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JULY 20, 2000

Serial 106–98

Printed for the use of the Committee on Ways and Means

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC

ii

COMMITTEE ON WAYS AND MEANS

BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois

BILL THOMAS, California

E. CLAY SHAW, JR., Florida

NANCY L. JOHNSON, Connecticut

AMO HOUGHTON, New York

WALLY HERGER, California

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JIM NUSSLE, Iowa

SAM JOHNSON, Texas

JENNIFER DUNN, Washington

MAC COLLINS, Georgia

ROB PORTMAN, Ohio

PHILIP S. ENGLISH, Pennsylvania

WES WATKINS, Oklahoma

J.D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY HULSHOF, Missouri

SCOTT MCINNIS, Colorado

RON LEWIS, Kentucky

MARK FOLEY, Florida

CHARLES B. RANGEL, New York

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

WILLIAM J. COYNE, Pennsylvania

SANDER M. LEVIN, Michigan

BENJAMIN L. CARDIN, Maryland

JIM MCDERMOTT, Washington

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

JOHN S. TANNER, Tennessee

XAVIER BECERRA, California

KAREN L. THURMAN, Florida

LLOYD DOGGETT, Texas

A.L. SINGLETON, Chief of Staff

JANICE MAYS, Minority Chief Counsel

SUBCOMMITTEE ON HUMAN RESOURCES

NANCY L. JOHNSON, Connecticut, Chairman

PHILIP S. ENGLISH, Pennsylvania

WES WATKINS, Oklahoma

RON LEWIS, Kentucky

MARK FOLEY, Florida

SCOTT MCINNIS, Colorado

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

BENJAMIN L. CARDIN, Maryland

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

WILLIAM J. COYNE, Pennsylvania

WILLIAM J. JEFFERSON, Louisiana

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records

of the Committee on Ways and Means are also published in electronic form. The printed

hearing record remains the official version. Because electronic submissions are used to

prepare both printed and electronic versions of the hearing record, the process of converting

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process

is further refined.

iii

C O N T E N T S

Page

Advisory of July 13, 2000, announcing the hearing .............................................. 2

WITNESSES

U.S. General Accounting Office, Cynthia M. Fagnoni, Director, Education,

Workforce, and Income Security Issues, Health, Education, and Human

Services Division; accompanied by David Bellis, Assistant Director, Education, Workforce, and Income Security Issues, Health, Education, and

Human Services Division; and Karen Lyons, Evaluator, Education, Workforce, and Income Security Issues, Health, Education, and Human Services

Division ................................................................................................................. 7

American Public Human Services Association, William Waldman ..................... 37

Children’s Defense Fund, MaryLee Allen .............................................................. 67

Geen, Robert, Urban Institute ................................................................................ 76

Florida Department of Children and Families, Hon. Kathleen A. Kearney ....... 57

Massachusetts Department of Social Services, Robert Wentworth ..................... 64

McCullough, Charlotte, Chevy Chase, Maryland .................................................. 48

SUBMISSION FOR THE RECORD

Marcus, Hope, Miami, FL, letter and attachments .............................................. 81

(1)

INCREASING STATE FLEXIBILITY IN USE OF

FEDERAL CHILD PROTECTION FUNDS

THURSDAY, JULY 20, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,

SUBCOMMITTEE ON HUMAN RESOURCES,

Washington, D.C.

The Subcommittee met, pursuant to call, at 1:05 p.m., in room

B318 Rayburn Building, Hon. Nancy L. Johnson (Chairman of the

Subcommittee) presiding.

[The advisory announcing the hearing follows:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON HUMAN RESOURCES

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1025

July 13, 2000

No. HR–23

Johnson Announces Hearing on Increasing State

Flexibility in Use of Federal Child Protection

Funds

Congresswoman Nancy L. Johnson (R–CT), Chairman, Subcommittee on Human

Resources of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on increasing the flexibility States have in their use

of Federal funds in the child protection program. The hearing will take place on

Thursday, July 20, 2000, in room B–318 Rayburn House Office Building, beginning

at 1:00 p.m.

In view of the limited time available to hear witnesses, oral testimony at this

hearing will be from invited witnesses only. Witnesses will include representatives

from the U.S. General Accounting Office, State administrators of child protection

programs, child advocates, and researchers. However, any individual or organization

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.

BACKGROUND:

In 1980, Congress enacted legislation that created a program of Federal support

for child protection programs conducted by State and local governments. The legislation created two major programs, a capped grant program under Title IV-B of the

Social Security Act that gave States flexibility in providing treatment for families

and children involved in abuse or neglect as well as services for foster and adoptive

families, and a series of open-ended entitlement programs under Title IV-E that

help States operate their foster care and adoption programs for children who have

been removed from their families. Many critics have observed that because the IVB grant program has grown very little since 1980 while the IV-E program has

grown rapidly, the emphasis in Federal funding may appear unintentionally to be

on maintaining children in out-of-home care and not on providing services so that

children can be either safely returned to their families or adopted in timely fashion.

The Subcommittee is interested in increasing the amount of flexibility States have

in using their IV-E dollars. The goal is to find ways to allow States to use the IVE dollars for prevention and treatment as well as out-of-home placement. The Subcommittee has developed three options that would increase flexibility in State use

of Federal IV-E dollars. In the first approach, States would negotiate a baseline of

expected spending with the Secretary of the U.S. Department of Health and Human

Services. States would then receive the exact amount of money specified in the baseline in quarterly payments and would be free to spend the dollars on any child protection activity including prevention, treatment, and out-of-home care. However,

States could return to the IV-E program of open-ended funding at the start of any

fiscal year. In the second approach, States would also negotiate a baseline. In this

case, however, States would identify a specific intervention program expected to

save money by reducing out-of-home care or by other means. If the program does

save money, the savings could be transferred out of the IV-E program into the IVB program where States would have more flexibility in using the funds for prevention and treatment. The third proposal would strengthen the current waiver authorVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
3

ity for child protection programs in the Social Security Act, especially by allowing

permanent waivers.

States have already shown their interest in flexible Federal funding by taking advantage of Federal legislation enacted in 1993 that provides them with the opportunity to obtain waivers from Federal child protection law. Several States are now

conducting waiver programs to test whether they can use the greater flexibility permitted by waivers to improve their child protection programs. Other States have

simply moved ahead on their own with new methods of financing child protection

services.

In announcing the hearing, Chairman Johnson stated: ‘‘We simply must find ways

to allow States to make maximum use of Federal dollars in their programs to protect children who have been abused or neglected. The welfare reform bill shows

what States can do when they have flexibility in their use of Federal resources.

After working closely with States to develop these proposals, I am confident that

they would lead to great improvements by helping more children grow up in safe

and loving families.’’

FOCUS OF THE HEARING:

The hearing will provide an opportunity for witnesses to give their reactions to

the funding flexibility proposals being considered by the Subcommittee.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Any person or organization wishing to submit a written statement for the printed

record of the hearing should submit six (6) single-spaced copies of their statement,

along with an IBM compatible 3.5-inch diskette in WordPerfect or MS Word format,

with their name, address, and hearing date noted on a label, by the close of business, Thursday, August 3, 2000 , to A.L. Singleton, Chief of Staff, Committee on

Ways and Means, U.S. House of Representatives, 1102 Longworth House Office

Building, Washington, D.C. 20515. If those filing written statements wish to have

their statements distributed to the press and interested public at the hearing, they

may deliver 200 additional copies for this purpose to the Subcommittee on Human

Resources office, room B–317 Rayburn House Office Building, by close of business

the day before the hearing.

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement

or exhibit submitted for the printed record or any written comments in response to a request

for written comments must conform to the guidelines listed below. Any statement or exhibit not

in compliance with these guidelines will not be printed, but will be maintained in the Committee

files for review and use by the Committee.

1. All statements and any accompanying exhibits for printing must be submitted on an IBM

compatible 3.5-inch diskette WordPerfect 5.1 format, typed in single space and may not exceed

a total of 10 pages including attachments. Witnesses are advised that the Committee will rely

on electronic submissions for printing the official hearing record.

2. Copies of whole documents submitted as exhibit material will not be accepted for printing.

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material

not meeting these specifications will be maintained in the Committee files for review and use

by the Committee.

3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments

by the Committee, must include on his statement or submission a list of all clients, persons,

or organizations on whose behalf the witness appears.

4. A supplemental sheet must accompany each statement listing the name, company, address,

telephone and fax numbers where the witness or the designated representative may be reached.

This supplemental sheet will not be included in the printed record.

The above restrictions and limitations apply only to material being submitted for printing.

Statements and exhibits or supplementary material submitted solely for distribution to the

4

Members, the press, and the public during the course of a public hearing may be submitted in

other forms.

Note: All Committee advisories and news releases are available on the World

Wide Web at ‘http://www.waysandmeans.house.gov’.

The Committee seeks to make its facilities accessible to persons with disabilities.

If you are in need of special accommodations, please call 202–225–1721 or 202–226–

3411 TTD/TTY in advance of the event (four business days notice is requested).

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Comabout Federal policy around our child protective and foster care

mittee as noted above.

Chairman JOHNSON. There is a certain fundamental irrationality

f programs.

Although I greatly admire the 1980 legislation that generated

the money we now give to states to operate programs like that, the

legislation is really seriously fundamentally flawed. To simplify

somewhat, think of the 1980 legislation as establishing two programs. The first program is a capped and appropriated program

that provides money for prevention and treatment services. This

money was intended to solve the problems before they exploded to

prevent abuse and neglect. The second program is an open-ended

entitlement, actually a series of open-ended entitlements that support a system of removing children from their homes.

The service program is capped and appropriated and therefore

has hardly grown in two decades despite the valiant effort of Tom

Downey and many since Tom was chairman of this Committee. By

contrast, the maintenance programs were open-ended and have

grown by leaps and bounds. In nominal dollars since 1980, the

service program has grown only by $160 million. In other words,

the program has barely kept up with inflation and on a per-child

basis, has declined dramatically. By contrast, the maintenance programs have grown by $4.5 billion. So programs for prevention

treatment grow by $160 million over two decades while programs

for removing children from their home grow by $4.5 billion, 35

times as much as the prevention and treatment programs.

We simply must find ways to correct this situation. I have been

trying to find a solution to this problem for more than a decade,

and I believe we are now at a point where at least we can begin

to move forward on a bipartisan basis.

I want to give the Secretary the authority to grant waivers for

funding flexibility to not more than ten states. Five of these waiver

programs would involve giving states complete flexibility over the

combined funds for prevention and maintenance. These states

would know the total amount of Federal money they have available

at the beginning of the year and have complete flexibility in spending that money. A second proposal would increase flexibility by allowing states to transfer funds from the maintenance to the services program.

Second, continue all the entitlements and guarantees for children

found in current law. States that participate would have the same

5

level of responsibility for ensuring child safety as they do under

current law.

Third, carefully evaluate the programs so that we will know

what happens to the money and the children and the families.

Under my proposal, we will know even more about the children

and their outcomes than we do under current law. Moreover, if the

programs provide better services to families and better outcomes,

we will know that too.

Fourth, we’ll guarantee that the states that embark on these

waiver experiments can return to the system of open-ended entitlements at any time. To me, the most compelling argument against

flexibility has always been that without the open-ended entitlement, a surge in foster care cases could leave states stranded for

funds. Our proposal would allow states to return to the open-ended

entitlement. And that should satisfy the very reasonable concern

that we must ensure Federal money for removal in emergencies.

We have made great progress over the years in working through

this issue with program operators, state officials, and others. I

think it’s fair to say that we would not be introducing this proposal

today if there weren’t states that are already doing this. Just like

with welfare reform, it isn’t really the Federal Government that

leads. It’s the people close to the problem that lead in developing

the solution. And if the states hadn’t been so inventive in finding,

frankly, more humane realistic practical right-feeling solutions to

helping people on welfare, the Federal Government would never

have passed welfare reform. The states are really finding there are

much better ways to help families. And many of them have waivers.

When I went and visited with the researchers at Yale, I was really stunned and profoundly saddened to see that the brain pictures

of children who are removed from their homes are identical to

those of veterans suffering from traumatic brain injury. And the

more often, yes, the pictures are exactly the same, the colors. And

if you have gone through that level of trauma two or three times

by the time you are six, it’s not surprising you have trouble controlling your emotions as you grow up.

So, I feel the matter before us in its broad outlines—in its generic nature—is of extraordinary importance. And I think the current system does not only an injustice to America’s children, but

destroys the possibilities for families and children to grow together.

I feel very strongly about it. This is a modest proposal. I hope those

testifying will be as straightforward as they can be. And I hope

that you will all begin to realize that if half the states have a waiver of one kind or another, shouldn’t we be making it much easier

to move money. There are so many examples now of money better

managed that to have states tethered to a system that rewards

taking children from their families and punishes preventing outplacement is truly a tragedy.

So, I hope that out of this hearing we will make some substantial

progress in developing our thinking. And I hope that the proposal

before you is only a step. But if we don’t take a step this year, even

if it doesn’t get through the senate, the issue will never survive the

change in administrations that is inevitable. So, I take this matter

6

very seriously though I recognize it is near the end of July of an

election year. Mr. Cardin.

Mr. CARDIN. Thank you, Madam Chair. I didn’t realize it was the

end of July of an election year. Thanks for pointing that out.

First, let me thank you for conducting this hearing. I think it’s

extremely important that we look at ways to provide increased

flexibility to our states in spending Federal child welfare funds. So,

I applaud this hearing. Like you, I believe that we need to spend

or invest more resources in many areas than we are today. And I

look forward to listening to the witnesses and looking at your proposal. Let me say from the beginning that I’m very concerned that

we maintain a national priority in this area. And I think that’s the

reasons why the programs were created over time to establish a

Federal priority for protecting our children, our must vulnerable.

We have an entitlement to certain funds. And as we look at granting more flexibility to our states, I want to make sure that we

maintain the Federal Government’s priority and full partnership in

providing the type of assistance that’s needed to protect the children of our society. So, as we consider these proposals, let me outline a few issues that I hope that we will look at.

First, we must ensure that the Federal entitlement to services is

maintained for those children currently eligible for the IV-E foster

care and adoption programs.

Second, we should be careful not to extend flexibility so far to

allow states to back off their own commitments in this area and we

actually find that there are less resources rather than more being

devoted toward prevention and other program to help our children.

Third, I hope we could take advantage of some of the savings the

state child welfare system may make compared to a projected baseline as proposed in the chairman’s draft legislation, that we must

find a workable way for the states and HHS to negotiate a predetermined baseline for child welfare spending without completely

inconsistent with estimates from the CBO.

And fourth, we must develop a system that can illustrate its

positive impact on improving outcomes of at-risk children.

And fifth, and finally, we must acknowledge that the total

amount of resources provided for child welfare services is inadequate to meet the growing demand particularly for addressing the

connection between substance abuse and child abuse.

So, I think all these areas we need to make sure as we move forward to modifying the system that we are mindful of these very,

very important goals. I look forward to hearing the witnesses particularly as they relate to some of the specific recommendations

that are contained in the Chair’s draft legislation which would provide demonstration authority to the Secretary of HHS and a limited number of states. I am very much interested in hearing the

views of the witnesses in that regard. And I hope that we will all

continue to work together to make preventing child abuse and finding safe and stable homes for children that have been abused to be

our highest priority. I can think of no more important responsibility of this Committee than to address those needs. Thank you,

Madam Chair.

Chairman JOHNSON. Thank you very much, Mr. Cardin. Let me

call Ms. Fagnoni of the Division of Education, Workforce, and InVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
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come Security Issues of the Health Education and Human Services

Division of the GAO. It’s always a pleasure to have you with us,

Ms. Fagnoni.

STATEMENT OF CYNTHIA M. FAGNONI, DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES,

HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, U.S.

GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY DAVID

BELLIS, ASSISTANT DIRECTOR, EDUCATION, WORKFORCE,

AND INCOME SECURITY ISSUES, HEALTH, EDUCATION, AND

HUMAN SERVICES DIVISION; AND KAREN LYONS, EVALUATOR, EDUCATION, WORKFORCE, AND INCOME SECURITY

ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION

Ms. FAGNONI. Thank you. Good afternoon, Chairman Johnson

and Members of the Subcommittee, Congressman Cardin. I am

pleased to be here today to discuss the progress made by a number

of states and localities as they incorporate principles of managed

care into their family preservation, foster care, and adoption programs. About 3 years ago, many of them began new managed care

initiatives as a strategy to improve the quality of care provided to

children and families and to control rising costs. Today I will discuss the financial and service delivery changes states and localities

have made, their progress in measuring outcomes, and what is

known about the effect of these changes on children and families.

This information is based on our past and ongoing work.

Beginning with the financial and service delivery changes occurring under managed care, certain elements distinguish managed

care from traditional child welfare. In place of a fee-for-service reimbursement approach, a single provider receives a prospective

fixed fee also known as a capitated payment. The service provider

must then manage the client’s care within the fixed fee. Unlike the

fee-for-service approach, under a capitated payment there are incentives for service providers to control costs by considering the

most suitable arrays of services for children and families while

working more quickly toward getting children into a permanent

home.

The other element in managed care is that under this new payment method, a single entity is responsible for identifying, coordinating, and providing all appropriate services for children and families under their care. This new service delivery 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 localities have contracted with experienced, private,

non-profit community-based providers, many of whom have a long

history of providing child welfare services for states and localities

to serve as the managed care entity under a capitated payment. In

every initiative we studied, the state or locality continues to hold

the responsibility of investigating reports of child maltreatment

and recommending to the courts whether a child needs to enter the

child welfare system.

8

Turning now to the progress in measuring outcomes, states and

localities are taking steps toward establishing a more performance

based and results oriented system. They are beginning to identify

outcome measures in the areas of child safety, a permanent home

for the child, child and family well-being, the stability of out-ofhome placements, and client satisfaction with services received.

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 returned to an unsafe home.

For 11 of the 27 initiatives we reviewed, states and localities are

using their outcome measures to establish performance standards

for service providers. Some states and localities are looking to further hold providers accountable for their performance and results

by using outcome measures to 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 assess whether desired results are being

achieved. In many instances, private service providers and public

agencies are working with multiple, incompatible, or manual systems which may yield information on child and family outcomes,

but are inefficient. In addition, among the 12 initiatives we contacted about this issue, none of the states or local agencies are

using federally supported statewide data systems to implement,

monitor, or manage their child welfare managed care initiatives.

What do we know about the effects of these changes on children

and their families? Some of the 27 initiatives have resulted in improved child and family outcomes in one or more areas of child

safety, permanency, and well-being. Well, let’s provide some examples.

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. A third of

the initiatives reported that children and families improved their

well-being in such areas as the family’s relationship with one another and children’s school performance. In particular, initiatives

that target the hard to serve and most costly children, those in

need of placement in residential treatment centers, had a positive

outcome when children successfully transitioned to less restrictive,

less costly place settings.

While the potential to control costs attracted state and local 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 in-home or after-care services.

For some initiatives, officials reported that overall spending has actually increased due to additional administrative costs associated

with private entities assuming responsibility for managing clients’

care and the state or locality overseeing contracts.

Whether any results from these initiatives can be attributed to

the new service delivery and financing strategies is still largely unVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
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1 Child Welfare: Early Experiences Implementing a Managed Care Approach (GAO/HEHS–99–

8, Oct. 21, 1998.)

known. To date, few rigorous evaluations of the 27 initiatives have

occurred. Those comparison studies that have been completed had

serious design and data comparability problems and were inconclusive in their findings. While the 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. According to HHS, evaluations for the 12 waiver

states that are testing managed care principles for child welfare

services should be completed within the next 5 years. This concludes my oral statement. I’d be happy to answer any questions you may have. And I have with me Mr. David Bellis and

Ms. Karen Lyons who are experts in this area. Thank you. [The prepared statement follows:]

Statement of Cynthia M. Fagnoni, Director, Education, Workforce, and In- come Security Issues, Health, Education, and Human Services Division,

U.S. General Accounting Office

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 mid–1980s, child welfare agencies faced a poor- ly 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 results-oriented 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’ 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 associVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
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2 None of the 27 initiatives included in this study were implemented with a title IV-E waiver.

3 Charlotte 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).

ated 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 in- formation about the effectiveness of child welfare managed care arrangements.

BACKGROUND

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 regu- lations, 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 re- solve three important issues. The first was to address cash flow problems in a new

environment 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.

STATES AND LOCALITIES IMPLEMENT NEW FINANCING AND SERVICE-DELIVERY

STRATEGIES

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 servicedelivery 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-forservice 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.

Capitated Payments Provide Flexibility

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 services. In their managed

care initiatives, states and localities—often for the first time—are making prospec- tive, capitated payments to providers to serve a defined group of children and famiVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
11

lies. 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 chil- dren 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-forservice system states and localities have used to pay service providers. Under a feefor-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. Boul- der 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.

Service-Delivery Changes Are Designed to Improve Access to Care

States and localities are trying to improve access to services for children and fami- lies 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 localities have contracted with experienced private nonprofit, community-based 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 inVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00015 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
12

4 National 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).

vestigating 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 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.

STATES AND LOCALITIES ARE TAKING STEPS TOWARD A MORE PERFORMANCE-BASED

AND RESULTS-ORIENTED APPROACH

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.

Agencies Are Beginning to Identify Various Child and Family Outcome Measures

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

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 populat

Recurrence of abuse or neglect while children are receiving inservices.Reports of abuse or neglect while the children are in out-of-hoRecurrence of physical abuse, sexual abuse, or neglect after chhave left care.

Permanency Children are placed in a permanent home in a timely manner ............. Children who are returned to their parents or relatives within 

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 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 hospita

police calls.Children’s behaviors related to sexual misconduct, running awsuicide.Children’s scores on standardized tests of childhood functioninChildren’s movement to less restrictive placement settings ....Youths discharged from care who have completed high school, obtained a general equivalency diploma, or are participating ieducational 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 b

Client Satisfaction Survey.Children who reported satisfaction with their foster care placebased on an exit interview.Families who reported that the initiative provided them a valservice.

Source: GAO analysis of interview data.

14

We also found that states and localities are measuring different outcomes, de- pending 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 residen- tial 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 out-of-home care.

Agencies Are Attempting to Hold Service Providers Accountable

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 perform- ance 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 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 Needed to Manage Information on Outcomes

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 process-monitoring 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.

15

5The Congress had authorized enhanced funding to states under the Omnibus Budget Rec- onciliation 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 wel- fare managed care initiatives; the remaining 23 states were not yet operational, and 1 state had

elected not to pursue a statewide SACWIS.

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. 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.

EFFECTIVENESS OF MANAGED CARE INITIATIVES IS LARGELY UNKNOWN

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 well-being. 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.

Officials Report Improved Child and Family Outcomes

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 well-being, and less maltreatment recurring. For most of the 27 initiatives, available data reflected results encompassing outcome

measures in three 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 wellbeing 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

16

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, 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.

Lack of Rigorous Evaluation Leaves Initiatives’ Effects Unknown

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.

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.

17

GAO CONTACT AND ACKNOWLEDGMENTS

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.

APPENDIX

CHILD WELFARE MANAGED CARE INITIATIVES’ OUTCOMES TO DATE

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 model a and project description Child and family outcomes

State-level initiatives:GeorgiaMulti-Agency Team forChildren (MATCH)

Public model ........................................................................................statewide residential treatment services for severely emotionallydisturbed children.

Fiscal year 1998–99 results ................................................• Children’s behavior improved

—incidents of negative be

such as aggression, self abuse, and property damage, decr21 percent between the 6-month and 12-month evaluationchildren admitted during 1998, and decreased 35 percentbetween the 6-month and discharge evaluations for childrdischarged during 1998.• 41 percent of the children were either discharged from project or stepped down to a less restrictive setting durin• 66 percent of the children who were discharged from thproject were still in a less restrictive setting 6 months aftdischarge during 1999.• 42 percent of the children who had progressed to a lessrestrictive setting were still in a less restrictive setting 6 after their transfer in 1999.• All children were placed within the state during 1999.

IllinoisPerformance Contracting

Public model ........................................................................................Relative and traditional foster care statewide .................................

1998–99 results ....................................................................• Permanency rate in 1999 increased 149 percent over thprevious year in Cook County’s Home of Relative Foster Cprogram.• Number of 1999 adoptions increased 70 percent over 19228 percent over 1997.• 3,660 children achieved permanency through subsidizedguardianship between 1997 and 1999.• Number of reunited families increased 12 percent betw1997 and 1999.• Movement of children to more restrictive placement setfell by more than half statewide.

IndianaThe 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 monthsand involved with multiple service systems in Marion County.

Outcomes were not provided.

KansasFoster 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 nwhile in out-of-home placement (consistent with years 1 a• 97 percent of the children did not experience abuse or nwithin 12 months of reuniting with their families (same a2).• 27 percent of the children placed in out-of-home care wreturned to their families within 6 months (consistent wit2; decrease of 49 percent from year 1).• 41 percent of the children placed in out-of-home care wreturned to their families or achieved other permanency w12 months (increase of 24 percent from year 2).• 74 percent of the children who returned to their familienot reenter out-of-home care within 12 months of returni(increase of 9 percent from year 2).• 81 percent of youths, who were aged 16 and over and rfrom the state’s custody, had completed high school, obtaigeneral equivalency diploma, or were participating in aneducational or job training program (increase of 8 percent year 2 and 53 percent from year 1).• 99 percent of the children experienced no more than thplacement moves while in out-of-home care (consistent wi1 and 2).• 71 percent of all children were placed with at least one (decrease of 9 percent from year 2; consistent with year 1• 78 percent of the children were placed within their regiboundaries (consistent with year 2; decrease of 9 percent year 1).• 47 percent of the adults and 70 percent of the youths (aand over) reported satisfaction with services (decrease of percent for the adults and consistent for the youth from y

Table 3: Child and Family Outcomes for 27 Ongoing Child Welfare Managed Care Initiatives, as of April 2000—Continued

Location and project name Managed care model a and project description Child and family outcomes

MassachusettsCommonworks

Administrative services organization with lead agency model .......Statewide foster care for adolescents needing group care orresidential treatment.

Administrative services organization report, 1999 ...........• More children moved from residential treatment to lessrestrictive settings

—the use of group homes, specialized f

care, and independent living increased 73 percent from Juto June 1999.• Children’s placement in less restrictive settings was su

by increased provision of aftercare services

—expenditures 

aftercare services increased 80 percent, and the monthly number of clients receiving aftercare services increased 5percent over 1998.• Recidivism rate of 6 percent for youths who had a plandischarge, such as return to home; 17 percent for all youtdischarged, including unplanned discharges such as runnaway from foster care placement (Jan. 1997-Sept. 1998).• Savings achieved for out-of-home and aftercare services (excludes administrative costs associated with the adminiservice organization, lead contractors’ management of pronetworks, and state oversight)

—lead contractors’ monthly 

placement costs averaged 3 percent less than the capitaterate.

MichiganInteragency Family Preservation Initiative (MIFPI)

Lead agency model .............................................................................Wraparound services for seriously emotionally disturbed childreninvolved with multiple service systems at selected sites.

Descriptive evaluation results, 1998 ..................................• Child abuse and neglect rate of 9 percent during familiinvolvement in MIFPI (compared with the rate for all chithe state of 8.4 per 1,000 in 1996).• Child abuse and neglect rate of 2 percent after familiesinvolvement in MIFPI.• Out-of-home placement rate decreased 38 percent durininvolvement with MIFPI for children who were in a placesetting at the time they entered the project; decrease of 3percent for children who were not in a placement setting time they entered the project.• Children and families improved, on average, on all scalwell-being and functioning, such as family and peer relatcommunity involvement, behavior, school experiences, anfamily’s adaptation to caregiving, with the greatest impro

in lowering detentions and increasing the family’s adapta

caregiving.• 94 percent of the parents involved in MIFPI reportedsatisfaction with the services they received.

TennesseeContinuum of Care Contracts

Public model ........................................................................................Statewide foster care for older children with moderate to severeemotional and behavioral problems.

Annual report, July 1998-June 1999 .................................• 59 percent of the children discharged were discharged town family, an adoptive family, or a less restrictive settin

WisconsinSafety Services Program

Lead agency model .............................................................................Family preservation services for noncourt families in MilwaukeeCounty.

Outcomes were not provided.

Local-level initiatives:

Table 3: Child and Family Outcomes for 27 Ongoing Child Welfare Managed Care Initiatives, as of April 2000—Continued

Location and project name Managed care model a and project description Child and family outcomes

Alameda County, Calif.Project Destiny

Lead agency model .............................................................................Foster care for seriously emotionally disturbed children inresidential treatment in the county.

Evaluation results, 1999 .....................................................• Project children were at least as safe as children in thecomparison group on risk indexes such as alcohol and druabuse against other children, medical emergencies, and raway.• 75 percent of the project children were residing in a lesrestrictive setting; 25 percent of the children could not bemaintained in less restrictive settings (comparison data wavailable).• No significant difference in improvement in children’s mhealth between the project and comparison groups.• Academic performance of project children was comparathe comparison group on three measures

—school attenda

conduct reports, and academic improvement; however, prchildren’s academic performance relative to grade level designificantly over time while the comparison group improthis measure.• Reduced levels of placement were not stable for a majothe project children

—60 percent of the children experienc

to eight additional changes in placement (comparison datnot available).• Project very nearly reached its goal of revenue neutralithe end of the second year; between 1997 and 1999, the prealized a net gain of 2 percent of its capitated rate.

Boulder County, Colo.Integrated Managed Partnership for AdolescentCommunity Treatment (IMPACT)

Public model ........................................................................................Foster care for adolescents needing group care or residentialtreatment in the county.

State managed care report, 1999 .......................................• Confirmed reports of abuse and neglect decreased 23 peover 1998 baseline.• Finalized adoptions increased 13 percent over 1998 bas• Savings were reinvested in child welfare services

—the 

realized a savings of less than 1 percent of its capped allofrom the state in 1998; the dollar amount of savings incre128 percent in 1999.

El Paso County, Colo.Child Placement AgencyPilot

Administrative services organization with lead agency model .......Foster care for children placed by Child Placement Agencies inthe county.

State managed care report, 1999 .......................................• Confirmed reports of abuse and neglect decreased 19 peover 1998 baseline.• Finalized adoptions increased 84 percent over 1998 bas• Savings were reinvested in child welfare services

—the 

realized $1.3 million in savings in 1999.

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 peover 1998 baseline.• Finalized adoptions decreased 23 percent and familyreunification increased 21 percent over 1998 baseline.• Savings were reinvested in child welfare services

—the 

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 peover 1998 baseline.• Finalized adoptions increased 118 percent over 1998 ba• Savings were placed in a reserve account in 1998 andreinvested in child welfare services in 1999—the dollar amsavings to the county increased 50 percent between 1998 1999.

District 4, Fla.Privatization Pilot

Administrative services ......................................................................organization with lead agency model ................................................Foster care and independent living services for adolescents in thedistrict.

Outcome evaluation report covering all Florida initiatives99.• Placement rate was 69 percent more than the comparis(specific to District 4).• Length of stay was 66 percent less than the comparison (specific to District 4).• 73 percent of the families served in Districts 4, 8, and combined were satisfied with the care they received (simicomparison sites).

Table 3: Child and Family Outcomes for 27 Ongoing Child Welfare Managed Care Initiatives, as of April 2000—Continued

Location and project name Managed care model a and project description Child and family outcomes

District 8, Fla.Sarasota County Privatization Pilot

Lead agency model .............................................................................All children needing protective services, foster care, and adoptionservices in Sarasota and Manatee Counties.

Outcome evaluation report covering all Florida initiatives99.• 86 percent of the cases in Districts 8 and 13 combined wclosed in 1997–98 without reported recurrence of abuse owithin 1 year of case closure (similar to statewide rate).• Placement rate in Districts 8 and 13 combined was 29 less than the comparison sites.• Cases were closed at a faster rate than the public agenbefore the initiative (specific to District 8).• Average length of stay in Districts 8 and 13 combined wdays (similar to comparison sites).• 20 percent of the children in Districts 8 and 13 combineplaced with a parent, guardian, or relative within 15 monthe date of removal from their home (43 percent less than comparison sites).• 40 percent or more of the children legally available for were adopted (specific to District 8).• 77 percent of the children in Districts 8 and 13 combinestill in foster care 15 months after removal from their hompercent more than the comparison sites).• 73 percent of the families served in Districts 4, 8, and combined were satisfied with the care they received (simicomparison sites).• Average case cost in 1997–98 was about 10 percent less what the public agency spent before the initiative (specifiDistrict 8).

District 13, Fla.Bridges Program

Lead agency model .............................................................................Children needing foster care and adoption services in Lake andSumter Counties.

Outcome evaluation report covering all Florida initiatives99.• 86 percent of the cases in Districts 8 and 13 combined wclosed in 1997–98 without reported recurrence of abuse owithin 1 year of case closure (similar to the statewide rat• Placement rate in Districts 8 and 13 combined was 29 less than the comparison sites.• Average length of stay in Districts 8 and 13 combined wdays (similar to comparison sites).• 20 percent of the children in Districts 8 and 13 combineplaced with a parent, guardian, or relative within 15 monthe date of removal from their homes (43 percent less thacomparison site).• 77 percent of the children in Districts 8 and 13 combinestill in foster care 15 months after removal from their hompercent more than the comparison sites).• 73 percent of the families served in Districts 4, 8, and combined were satisfied with the care they received (simicomparison 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, andindependent living services at one site.

Outcomes were not available. The pilot project has beendiscontinued because of problems with implementing newfinancial and service-delivery arrangements in accordancfederal and state regulations..

Oneida County, N. Y.Kids Oneida

Lead agency model .............................................................................Wraparound services for seriously emotionally disturbed childrenin the county in or at risk of out-of-home placement.

Outcomes were not available.

Table 3: Child and Family Outcomes for 27 Ongoing Child Welfare Managed Care Initiatives, as of April 2000—Continued

Location and project name Managed care model a and project description Child and family outcomes

Onondaga County, N. Y.Family Support Center Program

Public model ........................................................................................Children needing emergency foster care services in the county .....

Outcome data, 1994–98 .......................................................• Foster care days were reduced

—children admitted and

discharged from the program avoided staying in foster ca246,834 days since 1994.• Children were discharged from foster care more quicklypercent of the children were discharged from foster care; children who were placed in foster care since 1994 weredischarged in 79 days (decrease of 77 percent from 1992, percent from 1991, and 75 percent from 1990).• 56 percent of the children who were discharged returnetheir parents and 33 percent were released to relatives.• Children had early contact with their families, whereappropriate

—70 percent of the children visited with a fam

member within 72 hours of placement and 41 percent viswithin 24 hours.• 88 percent of the children with siblings were initially pwith their siblings.• 20 percent of the children discharged from foster care wreadmitted (14 percent less than the overall county rate).• Educational continuity was maintained

—all school-age

children attended their home schools.

Tompkins County, N. Y.Youth Advocate Program

Lead agency .........................................................................................Wraparound services for youth in residential or institutionalplacements in the county.

Program review, 1997 .........................................................• 86 percent of the youths were free of legal involvementarrests.• All families improved their functioning, such as parentskills.• All youths improved their ability to control violent andimpulsive behaviors both inside and outside the home.• Little effect in reducing youths’ involvement with drugs alcohol

—17 percent of the youths improved on this measu

• School performance varied among participants but impfor 55 percent of the youths.• 60 percent of the youths had successful reports from themployers.• 88 percent of the youths improved in their communityinvolvement.

Champaign County, OhioHuman Services/AdrielSchool

Public model ........................................................................................Foster care for children needing out-of-home placement with anonrelative in the county.

Outcomes report covering Champaign and Madison Coun1999.• All children discharged from managed care in ChampaiMadison Counties were discharged to a less restrictive se• In 1999, 63 percent of the children who were placed thrmanaged care did not reenter a managed care placement 12 months.

Crawford County, OhioOut-of-County Placement

Lead agency model .............................................................................Foster care for children placed outside the county in therapeuticfamily foster home, group care, or residential treatment.

Outcomes were not available.

Hamilton County, OhioTrueCare Partnership

Managed care organization model .....................................................Foster care and independent living services for children inoutpatient mental health and therapeutic placements..

Managed care entity report, 1998 ......................................• 62 percent of the children who had been in a more restsetting—such as residential treatment, group home, treatfoster care, or day treatment

—were able to remain in a s

less restrictive setting after 6 months.

Madison County, OhioAdriel Out-of-Home CarePlacements

Lead agency model .............................................................................Foster care for children in the county needing nonrelative, out-ofhome placement.

Outcomes report covering Champaign and Madison Coun1999.• All children discharged from managed care in ChampaiMadison Counties were discharged to a less restrictive se• In 1999, 63 percent of the children who were placed thrmanaged care did not reenter a managed care placement 12 months.

Table 3: Child and Family Outcomes for 27 Ongoing Child Welfare Managed Care Initiatives, as of April 2000—Continued

Location and project name Managed care model a and project description Child and family outcomes

Dodge County, Wis.bFamily Partnership Initiative

Lead agency model .............................................................................Wraparound services for adolescents in child care institutions orjuvenile corrections in 10 counties.

Outcome report, Aug. 1997-Aug. 1999 ...............................• Status offenders

—youths with delinquent behaviors su

disorderly conduct, fighting, truancy, possession of marijuand curfew violation

—had fewer contacts with the courts 

participating in the initiative: 70 percent of the youths hacontact, 25 percent had one to five contacts, and 5 percensix or more contacts compared with before the initiative, percent had no contact, 44 percent had one to five contact14 percent had six or more contacts.• Criminal offenders

—those youths with delinquent beha

such as theft, criminal damage to property, burglary, bomthreat, battery, sexual assault, receiving stolen property,possession of a firearm, and auto theft

—similarly had few

contacts with the courts: 75 percent had no contact and 2percent had up to five contacts compared with before theinitiative, when 72 percent had no contact, 43 percent hafive contacts, and 15 percent had six or more contacts.• Truancy rate improved from 25 percent before the initi15 percent after the initiative.

Milwaukee County, Wis.Wraparound Milwaukee

Public model ........................................................................................Wraparound services for children in the county in or at risk ofresidential treatment.

Quality assurance/improvement and utilization review resecond quarter of 1999.• Youths spent less time in residential care during their year in the program—the percentage of days youths were residential care decreased 29 percent.• Youths spent more time with their parent

—the percent

days youths were with their biological parent increased 3percent.• Children experienced an overall improvement of 21 permeasures of behavioral change

—such as symptoms of dep

anxiety, withdrawal, social problems, delinquency, and agbehavior

—at 12 months after entry into the program.

• Children experienced an overall improvement of 34 perscales of child-adolescent functioning, such as their ability function adequately at home, in the community, and at sctheir behavior toward others; emotional problems; self-habehavior; and substance abuse, at 12 months after entry program.• Average monthly cost of providing services decreased 8 between the first and second quarters of 1999.

aOrganizational arrangements among public and private entities generally fell into one of the following managed care models: (1) public model, which maintains the traditiona

ment and service-delivery structure while the public agency incorporates managed care elements into its own practices and existing contracts with service providers; (2) lead agenwhere 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 

of service providers

—for a defined population of children and families; (3) administrative services organization model, where the public agency contracts with a private organizati

ministrative 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 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 provide direct services. bTen-county initiative includes Columbia, Dodge, Green Lake, Jefferson, Manitowoc, Ozaukee, Sauk, Sheboygan, Washington, and Winnebago Counties.

f30

Chairman JOHNSON. Thank you very much for your testimony.

The title of your testimony is ‘‘New Financing and Service Strategies Hold Promise, but the Effects are Unknown’’. You did address

this some, but could you enlarge a little bit on what is known and

what are the likely positives of a more integrated approach and

what are the most likely negative consequences of this more flexible funding, and how much of the unknown is just neutral, you

know, what are the positives, what are the negatives?

Ms. FAGNONI. Well, the main reason we say the effects are unknown, because as I mentioned at the end of my oral statement,

there have been few rigorous evaluations. So, while a number of

initiatives are tracking over time what happens to children and

families, what hasn’t been done—what is underway but hasn’t been

completed in some cases—is an effort to determine to what extent

the particular service delivery and financing mechanism made a

difference in the outcome. So, we do have data, and I think we

have provided some in the back of our testimony, the written

version of our testimony, that shows for those initiatives where

they are tracking what’s happened to children and families, we

have seen some positive outcomes for children over time. Again,

whether or not we can attribute those to the specific initiatives is

largely unknown. But we have seen things like children more

quickly being either returned to their parents or to a more permanent setting. In some cases, initiatives are measuring to what extent children are in a stable placement if they are placed outside

their homes so they’re not being, you know, measuring the extent

to which they are staying in one place as opposed to being moved

around while they’re trying to find a more permanent place. So,

those are examples of the types of measurements. They’re also

measuring if a child is returned to the parent, looking for a 6 to

12 month time period, do they have to reenter that system because

of further neglect or abuse. So, those are some examples of what’s

being measured. In some—and one of the things some of the initiatives are doing, as you can imagine, some efforts to return children

to a more permanent—either to their parents or a more permanent

setting could have unintended negative effects if they are done too

quickly or without proper attention, for example, with the parents

to ensure they have improved their parenting skills. So, a number

of the measures try to balance the goal of moving children more

quickly into permanent settings against the concern that moving

them too quickly could return them to the system with further

abuse.

Chairman JOHNSON. I would certainly hope that all projects

would try to balance those two goals.

Ms. FAGNONI. Right.

Chairman JOHNSON. But if you saw—what I hear you saying is

that while you’re not satisfied with the rigorousness of the evaluations and you can’t necessarily tie the funding mechanism to the

outcome, that you are seeing positive results. I haven’t heard you

mention any negative results.

31

Ms. FAGNONI. Right. For those initiatives that are tracking results, particularly there are a couple cases where the localities

tried to make some comparison with other localities that were similar. And in those cases, some of the outcomes did—the comparisons

did not look as favorable in terms of how quickly children were

moved to a more permanent setting, for example. But we also noted

that there were some problems with how those studies were done.

So, it’s not clear how reliable those data were.

Chairman JOHNSON. Did you look also at—did they look also at

the complex of services? I mean, time is not the only factor. If they

were returned in the same amount of time but they got better services and the family got better services, you know, was that component looked at separately? What was the service complex that

emerged under a more integrated system versus the service complex that was.

Ms. FAGNONI. I don’t think we have examples of those measures.

They do measure—a number of initiatives measure individual’s satisfaction with the services they receive, which might capture some

of that. But I think in these measures we’re talking about, they’re

looking really more at the safety, and permanency, and well-being

sorts of outcomes.

Chairman JOHNSON. So, you didn’t look at the specific services

that the families were given or the child was given?

Ms. FAGNONI. No. Although in these initiatives I know the way

they are set up, often the effort is as children are moved to more

family like settings, the goal is that because those are less costly

settings, the entity overseeing the arrangements is expected to

move funding in a way that provides in-home services, after-care

types of services. So, that is a goal of that kind of shifting of resources from the out-of-home placement to supportive services.

Chairman JOHNSON. Yes. That certainly is the goal. I’d just like

to see if that’s the reality.

Ms. FAGNONI. That’s not something we specifically looked at.

Chairman JOHNSON. Mr. Cardin.

Mr. CARDIN. Thank you, Madam Chair. I’m trying to figure out

how the states financially deal with a managed care arrangement

considering that the Federal funding source is for specific services.

Now as I understand, some of the states that have developed a

managed care type model are waiver states, some are not waiver

states. So, how does that work? How can they make an arrangement for basically a lump sum payment whereas the Federal funding flow is directed toward specific services?

Ms. FAGNONI. What we found is that states and localities are

using the state and local funding sources to pay up front and then

using that—they do have a challenge with the cash flow given that

the IV-E portion of funding comes for out-of-home services after

they’re provided. So, what states and localities are doing is up front

funding the state and local moneys and then factoring in the reimbursement that will come later from the Federal IV-E. They also

look to try to package funding, their own funding with other

sources of funding where they might be able to use those funds in

advance. So, that’s—but that—we identified—we did a report a

couple years ago where we looked in depth at a number of these

32

initiatives. And we did find that that cash flow issue was a challenge for states.

Mr. CARDIN. Is it different if it’s a waiver, if they have a waiver?

Ms. FAGNONI. I think under the waiver scenario they have more

of an ability, more flexibility even with the IV-E funding.

Mr. CARDIN. So, I take it that one of the things we want to learn

from what you’re doing is what model works best in this regard.

Obviously we want to protect the entitlement of the funds, but we

want to give flexibility to the states. I guess my question is does

the current system allow the states adequate flexibility to go into

this type of arrangement? They’re doing it now. Is there inefficiencies because of the way we set the funding systems up or is this

just a minor inconvenience?

Ms. FAGNONI. You probably will hear from other state officials

who could talk directly to this. But I do think that they—they did

identify the cash flow, the reimbursement after the fact, and the

fact that the reimbursement is only for out-of-home placements as

being pretty significant challenges. And as we found in looking at

these initiatives, there are very few that are statewide. They are

mostly very localized efforts to try to serve the target populations

of children in the child welfare system. There are only a few that

try to serve all children in the child welfare system. So, part of, I

think, how they’ve handled this so far is to have a fairly targeted

approach that doesn’t cover a huge proportion of child welfare children.

Mr. CARDIN. Have you found that the capitated amount varies

widely among those states that are doing this?

Ms. FAGNONI. I believe so. They have different arrangements for

how they decide on a capitated rate. They have—some have, in essence, block granted a number of funding sources and provided

them to child welfare entities. Some have actually negotiated with

a contracting agency to come up with a reimbursement rate. Some

have looked at historical cost data to try to estimate what a reasonable reimbursement rate might be. So, there have been some different approaches to that and some lessons learned, I think, in

some states from some early attempts to do that.

Mr. CARDIN. I hope that information is being shared.

Ms. FAGNONI. Well, I think there is at least one state, I think

the state of Kansas, which initially came in with a capitated rate

that wasn’t based on historical information, I think, has learned

from that. Massachusetts, as you’ll hear later as a different example, did look to historical information and took a couple of years before they could both be comfortable with the rate as well as comfortable with some of the performance standards they were establishing. So as I said, there have been some different approaches to

this.

Mr. CARDIN. And if I understand from your testimony, you’re not

prepared to make any evaluation as far as the outcomes being better or worse based upon these arrangements?

Ms. FAGNONI. Well, I should—in response to that and Ms. Johnson’s question, I should reiterate that under the waiver program

there are a number of rigorous evaluations that are currently being

conducted. So, we will have some of that information in the future.

Just at this point in time, those results aren’t available.

33

Mr. CARDIN. For those states that are under the waiver.

Ms. FAGNONI. Right.

Mr. CARDIN. If they’re not under the waiver, we won’t have that?

Ms. FAGNONI. Well, there aren’t as many states—state initiatives

that are trying to do those sorts of rigorous evaluations. They’re

not easy to do. And I think what you see instead are states at least

tracking over time what the outcomes look like for child welfare

children.

Mr. CARDIN. In that evaluation will we have any information between the relationship on substance abuse and child abuse?

Ms. FAGNONI. Not to my knowledge. I think that’s a very difficult

correlation to come to. Although, we did write a report a couple of

years ago where we talked about the widespread problem of substance abuse in the child welfare population. Anywhere from 60 to

80% of the parents are substance abusers of children who enter

into the child welfare system. And it’s a real challenge for states

and localities to figure out how to work with those families and develop more permanent settings for the children.

Mr. CARDIN. That’s not built into the evaluation process of the

waiver?

Ms. FAGNONI. Not to my—we’re not sure. I mean, not to my

knowledge.

Mr. CARDIN. Thank you, Madam Chair.

Chairman JOHNSON. Let me just clarify something for my own

purposes and for the rest of the panel. These 27 initiatives that you

have referred to, none of them are statewide, correct, none of them

have waivers?

Ms. FAGNONI. None have waivers. That’s correct.

Chairman JOHNSON. These are state initiatives within current

law to try to implement a managed care approach...

Ms. FAGNONI. That’s correct.

Chairman JOHNSON. Through contracts? There are 12 statewide

waiver projects where states—12 states have waivers or statewide

programs. They carry their own evaluation.

Ms. FAGNONI. Right.

Chairman JOHNSON. And it’s that series of evaluations that will

be completed in a year and from which we will get much broader

information?

Ms. FAGNONI. That’s right.

Chairman JOHNSON. I just wanted to clarify that because I didn’t

start out with exactly the right understanding myself. Mr.

McCrery.

Mr. MCCRERY. Thank you. I just have one question concerning

the statewide data systems that we pay 75% of the cost. Why

haven’t states—why haven’t more states embraced that?

Ms. FAGNONI. Our understanding is that for these managed care

initiatives, those state data systems were not providing them the

kind of information they needed to both manage their contracts as

well as track child outcomes. So, they were—I mean, we have one

example from Florida where states were having to piece together

multiple systems—multiple data systems to try to get the information they needed. And we had a caseworker who had three different

computers on her desk with multiple entries of information to have

the information they needed to know what services children were

34

being provided and what the outcomes were for those children and

their families.

Mr. MCCRERY. So, are you saying that the program that we funded is basically worthless?

Ms. FAGNONI. No. It’s—and in fact, what states told us, that they

hope over time that they will develop more compatibility between

the specifics they need for these managed care initiatives and what

they can obtain quickly from, say, the SACWIS or AFCARS— SACWIS system, I should say. So, no. They certainly are useful

systems. But states recognize that they need some more flexibility

in their data information ability.

Mr. MCCRERY. OK. Thank you. Madam Chair, that’s all I have.

Chairman JOHNSON. Thank you, Mr. McCrery. Mr. Camp.

Mr. CAMP. Thank you, Madam Chairman. I’d like to pursue this

computer system that apparently nobody is using. If they’re finding

it to be useful, why are not more states using it and in what ways

are they useful?

Mr. BELLIS. We really have not done an in depth look at the

state data systems. In the managed care initiatives that we looked

at, many of them were small and were basically working off pilot

data systems or were having data systems developed specifically

for those initiatives. Recent information from HHS says that a

large number of states have implemented their SACWIS system

and continue to make progress. But there is still a number of

states who have yet come up to speed with it. When we first reported about these managed care projects 2 years ago, we identified

data systems as an ongoing challenge. I think states are slowly getting the capacity and the experience to develop these systems. But

it has been a continual problem. Some states are making more

progress than others.

Mr. CAMP. How many states have fully implemented, do you

know?

Mr. BELLIS. 27 States are fully or partially operational.

Mr. CAMP. Do they tend to be larger or smaller states or isn’t

there any pattern there?

Mr. BELLIS. I think it’s a mix.

Mr. CAMP. It’s a mix.

Mr. BELLIS. Yes.

Mr. CAMP. All right. Evaluating the managed care initiatives, the

flexible funding proposals, I mean, what would be the key features

of any evaluation requirement that would give us the accountability to really try to see the impact these proposals have on services for children?

Ms. FAGNONI. Well, the difference between simply tracking, I

shouldn’t say simply because that in itself is a challenge. To track

what are the outcomes for children and families, how those have

changed over time, the difference between that and being able to

say, and this particular approach made a difference in a positive

difference, is to have some way to compare what would have happened without that approach. There are different ways that can be

achieved. One can actually have—what’s the most reasonable way,

I think, in some cases is to find what they call a comparison group,

children who look similar to the children that are being served in

terms of their characteristics and look to see what, you know, what

35

the difference was there. There are also some approaches that are

called random assignment, which simply is you take the same pool

of children and some get a certain approach to their services and

others don’t. So, there are some different ways. But the main thing

is a way to compare against an alternative approach.

Mr. CAMP. OK. Thank you very much. Thank you, Madam Chairman.

Chairman JOHNSON. Thank you, Mr. Camp. Mr. Watkins.

Mr. WATKINS. Thank you, Madam Chair. Page 10 on the lack of

rigorous evaluations leaves initiatives’ effects unknown, which

leaves the impression that we may not have a lot of answers yet.

And you said to date few rigorous evaluations of the 27 initiatives

that we’ve stated have occurred. Why haven’t, you know—my question is why haven’t we had more of them and also I’d like to know

how many of these studies are, you know, targeted toward rural

areas, not just metropolitan?

Mr. BELLIS. We’re aware of a couple of locations that were in our

study group that are currently doing controlled studies that have

comparison groups, and if I understood your question, do include

both urban and rural places. Unfortunately, many of these initiatives don’t have the resources nor the expertise to design the types

of studies that I think we feel would be rigorous enough to attribute the changes to the changes in the program. I think that’s

the one reason why we believe that the current 12 managed care

initiatives, specifically under the waivers, with the evaluation requirements will give us a wealth of information about the reasons

for changes.

Mr. WATKINS. Well, you beat around the bush on it pretty good

there, I guess. But let me say, most of the time I find these studies

never get into the rural areas lots of times. And there’s usually

never any comparison with that and urban areas. And I made that

fact known to, I think, Chair here. And we—the rural areas are

discriminated against. They’re not brought in. They’re not—and I

think there’s some possibilities of comparisons that might show

that a lot of things can be done to help a lot of these young people

and others in the rural areas at a lot less cost, a lot more personal

identity, more self esteem, all these things. And but yet it has been

ignored in many cases. And that’s something I’d just like to see us

make sure we have equity out there. And I think you might find

some unbelievable positive results more so in the rural areas than

in the urban. You know, I think, you know, our education system,

you know, we always say, well, we’ve got to have small classes.

And I agree. But yet we’re closing down the small schools out

across rural America because of all the things we’re putting on

them. You know, if we—but at the same time, we shove them into

a larger situation which then comes right back and feeds the purpose of what they were all about doing. And so, I’d just like to see

some evaluation with the rural areas in mind and how it may even

compare as we look at it. And that’s all I have. I apologize for being

so late. I missed most of the testimony. But I’ve read most of it

since I’ve been sitting here. Thank you.

Chairman JOHNSON. Mr. English.

Mr. ENGLISH. Thank you, Madam Chair. Ms. Fagnoni, good to

see you again. And how do the outcomes that states have incorVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
36

porated into their performance-based contracts compare with the

outcomes that have just been developed in the child and family

services review? For example, is there an emerging consensus on

how to define and measure performance based on child safety, permanency, and well-being?

Ms. LYONS. When we looked at these initiatives, we didn’t necessarily try to correlate the kinds of measures they were looking

at with the outcome measures that the department is also tracking.

But we did try to look at them. And we found that they were tracking across the same kinds of outcome categories; safety, permanency, well-being, stability, and client satisfaction. What our work

did show as well is that they’re measuring these outcomes in lots

of different ways and not always in consistent ways. And as I said,

we didn’t try to track to see how the outcomes in these initiatives

might have affected the states’ outcomes that the department is

going to report on soon.

Mr. ENGLISH. Thank you, Madam Chair. I have no further questions.

Chairman JOHNSON. On that point, did you note the inconsistencies among—in other words, did you summarize any of that information? Because I think the fact that they’re measuring the

same outcomes in lots of different ways matters. And if you drew

any conclusions about which seemed to be better or consistent, that

probably would be useful for us to know.

Ms. FAGNONI. We cite in our appendix—we do cite the ways in

which each initiative our measuring and at least reporting outcomes. But we did not look—we did not go the next step of saying

which seemed to be better than others. But that does show examples of within the same broad categories of outcomes in different

ways of measurement.

Chairman JOHNSON. Is HHS aware of the fact that you did find

quite differing methods as they go about writing—trying to put in

place measurements of the same kinds of outcomes?

Mr. BELLIS. We have fully briefed and worked with the department in this work that we have done and shared that with them.

One point about the development of outcome measures, in some

ways it’s a new experience for many of these agencies. And over

time, they are getting better and better at it. It is a system that

is in some ways new to performance monitoring. And it’s an evolving issue. It’s not a stationary target. One of the things that we’ve

observed over time is that states are getting better at identifying

the appropriate outcome categories and the measures to go along

with it.

Chairman JOHNSON. It is difficult. That’s why I thought those

regulations were a little advanced. So, I’m very interested that you

did talk to them. It’s going to be hard to get in place. One last

question. In these 12 waiver review evaluations that are going on,

are you satisfied that those evaluation structures are solid? Are

they what we need? Are we going to be able to use them or are

we going to be able to look back and say, well, they didn’t do this,

they didn’t do that, so we can’t really use the information?

Ms. FAGNONI. We haven’t examined them in depth. But our understanding is that they do exemplify the kinds of rigorous evaluations one needs to get to really get impact information.

37

Chairman JOHNSON. Thank you very much. I appreciate you

being with us.

Ms. FAGNONI. Thank you.

Chairman JOHNSON. I’m going to call both of the panels up next

so that members will have the maximum opportunity to hear

everybody’s testimony. And then if they get called away, they will

at least have heard the testimony if they can’t stay for the questioning. Bill Waldman, the Executive Director of the American Public Human Services Association, Charlotte McCullough, the Child

Welfare Consultant for Chevy Chase, Maryland, Hon. Kathleen

Kearney, the Secretary of the Florida Department of Children and

Families, Robert Wentworth, the Director of Residential Services

for the Massachusetts Department of Social Services, MaryLee

Allen, the Director of Child Welfare Division of the Children’s Defense Fund, Robert Geen, Senior Research Associate for the Urban

Institute. Welcome. Thank you all for coming. And thank you for

participating together. And as soon as Mr. Waldman sits down, he

may start.

STATEMENT OF WILLIAM WALDMAN, EXECUTIVE DIRECTOR,

AMERICAN PUBLIC HUMAN SERVICES ASSOCIATION

Mr. WALDMAN. Good afternoon, Madam Chair, Members of the

Committee. It’s a delight to see you again and be here with you.

I’m Bill Waldman. I’m Executive Director of the American Public

Human Services Association. My association represents all of the

states, the U.S. territories, many localities, and many individual

members all engaged in the public human services. In addition for

purposes today, one of our key affiliate organizations, The National

Association of Public Child Welfare Administrators, they’re the

group in the state and local executive branch of government that

have the responsibility for implementing these many, many important programs.

Madam Chair, I wanted to thank you for three things as we

start. One, of course, for the opportunity to be here to testify today

to provide the opinion of the states and localities that run these

programs. Second is for the bill that’s been introduced today that

we really appreciate. And the third is for the historic concern that

you have expressed in recognition of the fact that the current system of financing we have is deeply flawed.

I recall at a previous hearing in this room, I don’t know if I’m

quoting you correctly, but you astutely observed in the event that

the states and localities did everything we wanted them to do

under the adoption of Safe Families Act, it would basically dramatically reduce the amount of funding and support that they

have. And that really encapsulates the issue that we’re struggling

with.

Our association has done a lot of work on this issue. And I want

give a thumbnail sketch of it. Two years ago, we recognized this

was a very serious problem, particularly as the Adoption and Safe

Families Act went into effect. We formed a broadly representative

bipartisan working group of states to study the issue. We retained

some of the foremost national experts in the field. We worked with

our members and these experts and we did come up with a paper

38

that came up with some of the recommendations that I’m pleased

to say are touched on and incorporated in the bill.

Since we have done that and we have also taken the opportunity

to share that paper with many, many stakeholders, some key advocacy groups, and others to get their input as well, as that of some

other national experts. We were very proud to cosponsor with your

Subcommittee a special hearing and meeting in May here on the

Hill where we had again that broad bipartisan representation of

many groups and organizations, both in the public and private sector very much concerned with that—this issue. All of that work

that we have done for these past 2 years and my own 35 year career in the Public Human Services as a state cabinet officer and

as a child welfare director, leads us all to a fundamental, several

fundamental conclusions that I wanted to share with you today

that I think are appropriate to the discussion.

First is we really believed, I think it is fair to say, there’s a broad

consensus that the way in which IV-E maintenance, for example,

the IV-E program is operated does not support the outcomes we’re

all trying to achieve. And it does not minimize the out-of-home

care. It does support unfortunately—it pays funds for what are impermanent situations, the exact opposite of what we want to

achieve. It does not specifically reward safety. it does not truly reward permanency. It does not foster innovation or creativity. It

does not permit reinvestments of funds available into early intervention or prevention activities. The waiver process that’s currently

there has serious limitations and constraints and has, I would say,

too broad and too onerous research requirements. We would like to

see rigorous research of some of these innovations. If you look at,

for example, the Medicaid and other programs, there is a way in

which to take these off. And I believe your bill does address that

part.

Further is that the current method has a look-back provision, I

know you’re familiar with, where we still use the old AFDC standard of 1996. I don’t believe, and I think you’d agree, that is good

public policy. There isn’t an inflationary amount that adjusts as the

cost of living and the cost of the services go up. And it does present

quite an onerous administrative burden on the state to look back,

as we say.

Also, the states have made some very significant progress in the

implementation of the Adoption and Safe Families Act. And as you

know and with your help and leadership in the Committee, and I

appreciate that, many of the states were successful in winning bonuses. If you remember, more states won than we had money for.

And you helped go back and get us additional funds. And we would

ask for your help again when that comes up. But we want to be

able—I’m concerned that the states won’t be able to maintain, sustain, and expand that improvements without this kind of flexibility

that you’re attempting to address in the Act.

Also, in the discussion it became very clear that in the states,

there is broad and deep support among the states for additional options for both flexibility and accountability. And with respect to

Congressman Cardin’s good point, I think I could fairly say the

states understand and recognize a need to accept accountability as

to the outcomes of performance in the same breath that they ask

39

for flexibility. And I think that’s been a very significant and commendable change that would be very important.

I believe that the concepts that you address in the bill, in fact,

address some of the issues that we came across as we studied this

issue nationally. I think they will permit, in fact, a far greater

flexibility. They will retain accountability. And they will simplify

the waiver process. And we’ll see good things.

There are three concerns about the bill as drafted now that I

want to express today that I hope we’ll have the opportunity to continue to work with you on. One of them is—although I understand

and I was a little disappointed, but I understand, and that’s the

limitations on the number of states. And I suspect that the cost of

these bills were scored by the Congressional Budget Office. In all

sincerity, I am puzzled that why they were scored for additional

funds since we want to have a baseline that’s fairly negotiated, we

don’t want to spend more than a state spent in the previous year.

So, why these are scored and therefore the limits occur is a question we would hope the opportunity to work with you and perhaps

the CBO to look at this in what we think is the right perspective.

The second issue is that the language seems to preclude those

states that are not in conformance with the children and family

services review from participating. And clearly I understand the

thought that you want states to be at a certain performance level

before they could take advantage. But the point is, I would suggest

to you, that many states really require the flexibility to be able to

fix problems that have been identified. And I would say that if that

were afforded in the legislation, then their plan as to how to us the

money flexibly would have to be addressed to fix the problems identified. So, I would say if you’d make that change, you could make

another way of fixing those states that have not done well or as

well in the first review.

And finally, and I’ll wrap up, is I think there is some clarification

that’s required in the maintenance effort section. I think and I

agree with other statements that have been made that this field

does require more investments. And there’s only two ways you get

them. One is with new funds. And the second is the opportunity

to redirect or spend better, as your bill addresses, the existing

funds that are here. And I think there’s a recognition that one has

to maintain these level investments. We certainly don’t want to

lose funds. On the other hand, I think the way the language is

crafted would make it not desirable for states to participate in this.

It would appear to include a broader scope of services and expenditures that Governors and treasurers would probably not want to go

forward with it as written. And I would offer to work with you on

it. We just recently received the bill. We would like to review it further.

But on balance, we really do appreciate your attention, your

leadership, the Committee’s interest and work on what we believe

is a vital and important issue in the human services having directly to do with the outcomes and well-beings for children and

families. Thank you.

[The prepared statement and an attachment follow:]

40

Statement of William Waldman, Executive Director, American Public

Human Services Association

Chairman Johnson, Congressman Cardin, Members of the Subcommittee, I am

William Waldman, Executive Director of the American Public Human Services Association (APHSA). I am pleased to have the opportunity to testify today about child

welfare financing reform. As the national organization representing state and local

agencies responsible for the operation and administration of public human service

programs, including child protection, foster care and adoption, APHSA has a longstanding interest in developing policies and practices that promote improved performance by states in operating these programs for our nation’s most vulnerable

children and families.

On behalf of state human service administrators and child welfare directors, I

want to applaud you, Madam Chairman, for your commitment to developing legislation to realign the current method of federal financing child welfare services with

the desired outcomes of safety and permanency. Your leadership and concern for

this issue have been outstanding and we know how passionate you feel about ensuring that states have the needed flexibility to enable them to make continuous improvements to the system, while remaining accountable for the outcomes we all

want.

We have seen tremendous strides taking place in the states resulting from the

Adoption and Safe Families Act (ASFA) and state reform initiatives and innovations. For example, statistics have demonstrated significant state successes in increasing the number of adoptions of children from foster care—with increases in

nearly every state, in many cases rising by 50 percent or more in less than two

years. Agencies are employing a number of promising practices such as subsidized

guardianship, performance-based contracting, family group decision making, crosssystem collaborative efforts with substance abuse agencies and juvenile courts—all

of which are promoting more safe, stable and timely permanent arrangements for

children, whether they be adoptions, reunifications or guardianships.

In order to ensure that this improvement and innovation is sustained and expanded, we must remove barriers to optimal performance. As you have recognized,

one of the most serious constraints for states is a federal financing structure for

child welfare that is constrained by fiscal incentives that do not necessarily reward

the desired outcomes for children. The current federal financing system disproportionately funds the deepest and often least desired end of the system—out of home

care—that we are all striving to minimize in terms of lengths of stay and numbers

of children, while funding directed at activities to achieve permanency, safety, prevention and early intervention are comparatively limited.

Although we do not support a block grant for child welfare funding, we do strongly urge that additional flexibility in the use of Title IV–E dollars be afforded to

states so that they can invest these dollars in the kinds of activities that are yielding success and test innovative ideas to generate new programs that work. Flexibility is also critical to enabling states to develop comprehensive approaches and a

broad array of tailored interventions to address the complex and individual needs

of children and families rather than encouraging responses that are driven by categorical programs that deal with only part of the system.

APHSA has a longstanding commitment to working on this issue. We convened

a special task force in early 1998 to develop recommendations on restructuring child

welfare financing. In July 1999, our National Council of State Human Service Administrators adopted a policy resolution supporting two proposals—transferability

and delinking. Transferability allows states the option to reinvest IV–E funding into

IV–B services, while retaining both state accountability and the entitlement structure. Delinking eliminates the IV–E eligibility link to the old AFDC program, enabling a federal commitment to all children in foster care as well as eliminating a

complex outdated eligibility determination process that is a costly and onerous administrative burden on states. A copy of our recommendations is attached.

We were pleased to have the opportunity to co-host the meeting you sponsored

in May, Madam Chairman, which brought together a diverse and bipartisan group

of key stakeholders, including congressional staff, the Administration, state and

local agency directors, researchers, advocates and private agencies, to initiate a dialogue on the three options that are reflected in your legislative draft—one of which

is the transferability concept proposed by our association.

I drew two important conclusions from the deliberations. The first is that a broadbased recognition exists that the current system of financing is broken, self-defeating, and does not support the outcomes for children and families embraced in statute, regulation, and general public policy and practice. The second conclusion is that

there is broad and deep support among the states for the kinds of solutions we jointVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00044 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
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1On July 20, 1999, the APHSA National Council of State Human Service Administrators

adopted a resolution in support of the concepts of delinking and transferability which are discussed in this proposal. However, the details of this proposal do not represent official APHSA

policy and should be considered a working draft.

ly presented that would provide greater flexibility in how Federal funds are used,

but at the same time maintain accountability for outcomes and key protections for

children. In addition, there appeared to be consensus on support for the concept of

delinking IV–E eligibility from AFDC and extending a federal commitment to all children in care.

Since we only received a draft of the bill days ago and are still conducting a thor- ough review and analysis, I will speak in only the broadest terms with respect to

the legislation and will follow up with your staff on the more technical, drafting

issues.

While we very much appreciate your including the concept of transferability in your legislation, we were disappointed that this option is not available to all states.

We feel strongly that the magnitude of the financing dilemma requires a more comprehensive, systemic solution than just a handful of demonstrations. The waiver

modifications in Title II are very positive and will make great strides towards ensuring that the promise of innovation and flexibility agreed to in ASFA is not limited by overly prescriptive and rigid federal implementation. We understand that

the more limited approach to the flexible funding demonstrations was a result of

Congressional Budget Office (CBO) scoring, but given our intent to make the transferability option cost neutral, we seriously question the CBO’s rationale and methodology, and would like to explore with you ways in which the legislation could take

a more expansive approach. In addition, we would like to work on fine tuning the

language that represents our transferability proposal to ensure that it is clarified

to match the intent of our proposal.

Maintaining of collective federal and state effort is an important concept in fi- nancing national child welfare services, but the way the maintenance of effort provision is crafted in the draft legislation is highly complicated and contrary to a flexible

system that will better help to serve children and families. Our early review indicates that the restrictions and penalty provisions would further complicate the good

efforts you are trying to achieve. We believe in its current form it will discourage

states to take these financing options which are seriously needed for improving the

system and serving children and families. We appreciate the opportunity to provide input into this important process. As it moves forward we want to work with you to suggest technical changes to ensure

your good intent is realized. As a long-term administrator of public human services, and child welfare in par- ticular, I am convinced that the system needs additional investments in child welfare services. These investments come in two ways. The first is new investments,

for example, in substance abuse services for children who come to the attention of

child welfare, resources for the courts to meet the ASFA timeframes and reduce

backlogs of pending cases, and training resources for judges and private agency

service providers. The second is better spending of existing revenues. Both are needed if we want to meet the increased demands and capacity needs these systems are

facing. Your bill, Madam Chairman, helps with this second approach. We thank you

for taking the lead and we appreciate the opportunity to work with you. Working

Draft: May 4, 2000

APHSA DRAFT PROPOSAL TO RESTRUCTURE FEDERAL CHILD WELFARE

FINANCING 1

Background

In July of 1997, state reinvigorated their ongoing interest in advancing a national

effort to address concerns about federal child welfare financing and its inherent barriers and disincentives to achieving positive outcomes for children and families. The

National Association of Public Child Welfare Administrators (NAPCWA), APHSA’s

child welfare affiliate, dedicated its forum that summer to child welfare financing

issues, and discussions culminated in a resolution adopted by APHSA’s National

Council of State Human Service Administrators that laid out guiding principles for

federal child welfare financing restructuring. A major provision of the resolution

was APHSA’s opposition to a block grant, but support of increased flexibility within

an entitlement structure.

As the Adoption and Safe Families Act (ASFA) was debated and enacted in November of 1997, states were continually criticized for their failures in child welfare,

particularly as they related to foster care lengths of stay and lack of timely permaVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
42

nency—the results being more federal mandates as Congress’ means to achieving improved state performance. Partly in response to APHSA’s efforts to dissuade the

mandate approach to child welfare reform and educate Congress on the links between financing and performance during that debate, ASFA included a directive to

HHS to consult with states and others to develop a performance-based incentive system to finance federal child welfare programs, with the option to make other recommendations regarding federal finance restructuring. Building on the work initiated in July of 1997 and in order to be most effective in shaping the HHS process,

the APHSA Child Welfare Financing Workgroup was established in January 1998

to develop recommendations on child welfare financing and outcomes to advance as

part of the HHS process but also directly to Congress. The workgroup devised a three-pronged approach: 1) identify outcome measures; 2) consider the capacity necessary to achieve those measures; and 3) develop a financing approach that supports achievement of those outcomes.

Since ASFA’s enactment, states have demonstrated significant progress resulting from the new law and state initiatives in place prior to the law. In order to meet

current challenges, the additional requirements posed by the law, the increased expectations of state performance, as well as to sustain and expand the significant

progress that has been made, states will require greater flexibility in the use of federal dollars. Although there is no consensus on the Hill as to whether or how to

change child welfare financing, it seems imperative that states take a leadership

role now to move this debate forward because time is not in the favor of the states.

As states achieve greater performance, they are in effect ‘‘penalized’’ financially whenever they successfully reduce foster care. More importantly, valuable resources

are lost that could be invested in activities that produce outcomes. In order to capture this funding and redirect it to other parts of the system (e.g. prevention, intervention, reunification, adoption, guardianship, and services such as substance abuse

treatment) before it is lost from the system, these changes must be made soon. The

proposal that follows seeks to provide states the flexibility to reinvest federal funding into activities that achieve positive outcomes and to eliminate the administratively burdensome reliance on now-defunct AFDC standards for eligibility determination that has been of concern to states for several years.

Statement of the Problem

The current structure of federal child welfare funding does not adequately support the outcomes for the children and families that public child welfare agencies, Congress, the federal government, child advocates and the public seek to achieve. The

bulk of federal funding is disproportionately directed toward funding out-of-home

care—the very part of the system that agencies are seeking to minimize in order to achieve greater permanency for children. At the same time, services that protect

child safety and promote reunification are underfunded by the federal government.

When the Title IV–E financing structure was created 20 years ago, the assumption was that Title IV–B funding would grow—a promise unfulfilled. The reality is that Title IV–B funding has not grown commensurate with practice needs. The financing structures established in 1980 are no longer workable today. Furthermore, a provision in the P.L. 96–272 as originally passed had allowed Title IV–E foster care

funds to be transferred to Title IV–B to be used for services, but it is no longer in effect. Unfortunately, the conditions required for activating the transfer provision

were subject to increased IV–B appropriations that never materialized.

Most observers of the child welfare system are in agreement that the system does not have the necessary resources, and therefore, there must either be new investments in funding made or the redirection of existing funds. Given the reality of the

budgetary environment in Congress, increases in funding are unlikely or often come

at the expense of cuts in other human service programs. Therefore, we believe the

most effective approach is one of redirection or reinvestment.

Proposal

The proposal contains two main features—transferability and delinking: • Transferability proposal would give states the ability to redirect federal revenue for Title IV–E maintenance payments into their Title IV–B programs, thereby pro- viding to states the flexibility to reinvest federal revenue into other child welfare

services whenever the utilization of foster care is reduced.

This provision addresses states’ criticism of the federal incentive toward out-ofhome placement and their need for increased capacity in prevention, early intervention and services to families to promote permanency (reunification and adoption).

• Policy Objectives of Transferability:

• Preserve the basic federal Title IV–E entitlement, while enhancing flexibility.

43

• Connect federal child welfare policy objectives, federal fiscal participation

in state and local child welfare programs, and outcomes for children and

families within a single overarching framework.

• Enhance or otherwise redirect the flow of federal revenue to activities

and services that expand the capacity of public child welfare programs and

improve outcomes for children and families.

• Link increases in federal spending over time to the changing needs of

children and families.

• Preserve overall cost neutrality against the CBO baseline.

• Delinking proposal would eliminate income eligibility (AFDC-eligible as of July

16, 1996) as a criteria to determine who among the children placed in foster care

or subsidized adoption is eligible for federally reimbursed foster care and adoption

assistance under Title IV–E. Instead, all children in care would be IV–E eligible

(provided they met the other IV–E eligibility requirements—reasonable efforts, contrary to the welfare, eligible provider). In order to offset increased costs to the federal government for covering all children in foster care, the federal reimbursement

rate would be adjusted proportionately in each state.

The purpose of the delinking provision is to eliminate the burdensome ‘‘look-back’’

requirement and promote administrative simplicity. It also provides equity for all

children in foster care, making them all eligible for federal reimbursement regardless of the income of their birth family. Under current law, states must provide protections for all children in foster care and their performance is assessed with respect

to all children in foster care. It is only reasonable that federal funds be provided

for the care of all children in foster care. Because the law does not allow the income

standards, in effect on July 16, 1996, to grow with inflation, eligibility for federal

reimbursement will continue to decrease over time unless the problem of the ‘‘look

back’’ is addressed.

Policy Objectives of Delinking:

• Expand the federal commitment to all children in foster care, regardless

of the income level of their birth family, by eliminating income eligibility

as a condition of federal participation.

• Streamline the eligibility determination process by eliminating the link

to old AFDC standards, while preserving the basic Title IV–E entitlement.

These two features of the proposal—transferability and delinking—are

not interdependent and do not necessarily have to be adopted as a package.

In developing the recommendations, we have tried to emphasize themes that have

been articulated by workgroup members at the various meetings. Specifically, we

have sought to preserve as much flexibility for states as possible while providing

a link to outcomes. We have also sought to devise strategies that preserve the level

of federal revenue flowing to each state to what it would have been in the absence

of proposed changes.

Nothing in the proposal should be construed to mean that APHSA either opposes

proposals that would increase federal funding levels in any one of the federal child

welfare programs or that the recommendations developed herein are in any way inconsistent with such efforts.

BASIC ELEMENTS OF TRANSFERABILITY

• Transferability

Basic Policy

States that successfully reduce the utilization of foster care, as measured against

an approved state baseline may transfer ‘‘unused’’ foster care funds into their federal Title IV–B allocation. Alternatively, states could establish a separate account

for these funds, so long as the funds from that account are used for child welfare

purposes, broadly defined. Transferred funds can not be used to offset state and/or

local match.

The essential idea is that meeting the desired outcomes reduces foster care usage.

For example, keeping children out of foster care, reducing their lengths of stay, or

speeding reunifications and adoptions all lead to a reduction in foster care utilization or care days. A reduction in care days translates to a reduction in expenditures.

It is these expenditures we are talking about as the funds to be transferred. It is

important to note that the goal is not an isolated reduction of expenditures, but

rather increasing the realization of outcomes which in turn leads to a reduction in

care days which in turn results in reduced expenditures available for reinvestment.

44

Prospective Versus Retrospective Transferability

States could opt to undertake either a prospective transferability agreement or a

retrospective transferability agreement.

• Prospective transferability means that states get the transfer funds up front to

use for services and then must ensure that anticipated savings are realized that

same year to make sure they come in at or below the projected baseline. If they exceed the baseline, the state is at risk for the match on the transferred amount,

which must be repaid by the states if they do not achieve the targeted savings. The

state can still claim reimbursement for all foster care costs above the baseline.

• Retrospective transferability requires that states invest their state dollars up

front and at the end of that fiscal year, it would be determined if costs came in

below baseline. If states exceed the baseline then the amount above baseline is paid

as usual. Any amount below the baseline is transferred to the states as part of their

IVB allocation the next year. There is no risk of having to payback unearned transfer amounts.

Mechanisms

At state option, transferability agreements can be proposed on a statewide basis

or for sub-populations where sub-populations can be defined geographically or on

the basis of some other target group of children and families. Target groups of children and families can be defined on the basis of service needs, age group, type of

service, or other common distinguishing features.

Transferability agreements are activated at state option in the context of their

Title IV–E and IV–B plans. Elements of the plan for purposes of the transferability

agreement would include: a state specific foster care baseline (based on assumptions

covering admission rates, placement duration, unit cost, and casemix); specifications

related to target population(s), program models and interventions, geographic areas;

projected impact of the plan measured in terms of safety, permanency and wellbeing; the planned duration of the agreement; provisions for outcome monitoring;

and an ‘‘exit’’ plan describing the terms and conditions leading to the termination

of the agreement.

HHS Approval

Approval of the transferability agreement would be the responsibility of HHS. Approvals would be granted based on a mutually agreed upon baseline and a federal

determination that all proposed services are IV–B eligible. The mix of IV–B services

would be solely within the purview of the state.

As envisioned, the approval process and level of scrutiny by HHS would be based

on a state’s performance review. For states in substantial conformity with the federal performance review, approval would be dependent on the submission of a suitable plan as determined by HHS. For example, states in substantial conformity may

propose a statewide program, would be subjected to regular, but less frequent outcome reviews, and would have greater discretion over the allocation of federal revenue for programmatic purposes. States that are not in substantial conformity with

the performance review could enter into transferability agreements as well. However, in addition to submitting a suitable plan as determined by HHS, states would

be required to link their transferability plan to their program improvement plan required by the performance review. HHS would have the authority to limit the geographic scope of states not in substantial conformity, and could institute a more

stringent schedule of outcome reviews.

States that fall out of conformance with the federal performance standards would

be subjected to a full, mandatory review of their transfer agreement. If the transfer

agreement were continued, continuation would be subject to the same stipulations

that would have been applicable had the state been out of conformity at the time

the transfer agreement was reached.

In addition, HHS would have the authority to amend or terminate the agreement

in the event there is other demonstrable evidence indicating that child safety, permanence, or well-being was being adversely affected by the transfer agreement.

The link to the performance review would ensure accountability and strengthen

the connection to outcomes. It also provides states with needed resources to direct

to program improvement—the foundation of the new outcomes-based performance

review.

Cash Flow

Cash flow to states would be specified in the plan. By agreement with HHS,

states could adopt either a ‘‘retrospective claims’’ approach or a ‘‘prospective claims’’

approach. Under a retrospective claims approach, states would submit claims to

45

HHS as they normally would. The difference between the amount claimed for foster

care and the amount projected in the approved baseline would be made available

to the state in the next fiscal year. Under a prospective approach, states in conjunction with HHS would project total revenue for the fiscal year. In turn, HHS would

make quarterly payments to states.

Risk Sharing

Risk sharing refers to how differences between the baseline and actual foster care

utilization are resolved. When states spend less revenue on foster care than anticipated in the baseline, states will retain the revenue as part of their transferability

agreement. When foster care utilization and expenditures exceed the baseline, states

can continue to claim reimbursement from the federal government for foster care

in the usual way. However, they are at risk for the dollars subject to the transferability agreement.

In the event that foster care utilization climbs above the level specified in the

baseline and approved in the plan, the state in conjunction with HHS would activate stop-loss provisions. These provisions include the following features:

• A state’s ability to make foster care claims on behalf of children not covered by

the transferability agreement is unaffected.

• Costs up to the baseline are eligible for federal reimbursement at the applicable

match rate.

• Costs related to changes in the utilization of foster care above the baseline, on

the part of children covered in the transferability agreement, that are due to rising

admission levels would be shared with the federal government at the existing rate

of federal participation (please see the effective rate of federal participation in the

‘‘delinking’’ section below).

• Costs related to changes in the utilization of foster care above the baseline that

are due to slower than projected rates of discharge would be shared with the federal

government at the existing rate of federal participation (please see the effective rate

of federal participation in the ‘‘delinking’’ section below).

If foster care costs exceed projections, states are at risk for the full cost of the

IV–B services up to the amount advanced prospectively to the state under a transfer

agreement.

Further Explication and Examples of Reinvestment

For purposes of clarity, examples shown are for a one-year time period,

but most likely these would be multi-year agreements and baselines.

• Prospective Transferability Example

State X has pioneered a flexible, individually tailored, case management linked

array of in-home parent education, teaching homemaker and family preservation

services, known as the ABC Program (for purposes of this example). The State,

through experience and analysis has determined that investment in these IVB type

services prevents the need for out of home care in many situations and reduces the

time necessary for out of home care in others. They have concluded that such investments will achieve directly at least dollar for dollar offset in IVE type expenditures

for out of home care.

State X, which has a 50% FMAP, reflects IVE expenditures for 1999 as follows:

Figure 1

State Federal Total

$100M $100M $200M

For the Year 2000, the state and the federal government negotiate a baseline for

State X reflecting a 5% increase in expenditures so that IVE outlays are projected

to be as follows:

Figure 2

State Federal Total

$105M $105M $210M

State X opts to enter into a transferability agreement and proposes to reinvest

the amount that would be otherwise required to finance the growth in IVE costs

46

of $10 million ($5million State and $5 million Federal) into expanding their new

array of IVB like services. They further agree to meet all statutory and regulatory

outcome measures. They fully expect, and are willing to risk the following outcome.

Figure 3

State Federal Total

IVE $100M $100M $200M

ABC Program $5M $5M $10M

Total $105M $105M $210M

The net effect on this proposal and its successful implementation would be to enable states to use funds that would otherwise be required to finance out of home

placement to underwrite preventive services that would avoid and/or shorten out of

home stays for children. It would achieve the important public policy goals of

strengthening and preserving families in a manner that is cost neutral to the Federal and State governments while at the same time preserving the basic entitlement

program for children.

EXPLICATION OF RISK

As with any responsible strategy of this nature, there are certain risks to be considered. There is the possibility that the proposal of State X, when implemented,

will bring even superior programmatic and financial benefits than expected. Conversely, there is also the ‘‘risk’’ that State X’s proposal will not achieve any of the

anticipated benefits.

The following two (2) figures explicate the consequences of these two scenarios.

However, there could be other examples where caseload trends are not as stark as

these examples.

State X has reduced the year 2000 out of home placement costs further

than anticipated while at the same time met all specified child welfare outcomes. Figure 4 demonstrates the results and consequences.

Figure 4

State Federal Total

IVE $95M $95M $190M

ABC Program $5M $5M $10M

*Available for Additional Investment In Year 2001$5M $5M $10M

Total $105M $105M $210M

In the event that none of the desired effects of the reinvestment strategy materialized, the results and consequences of this are reflected in Figure 5. Basically

what has occurred in this scenario is that upon approval of the reinvestment strategy outlined in Figure 3, State X at the beginning of the Year 2000 enters into obligations totaling $10 million in the form of contracts with community-based organizations and hires staff for expanding their array of IVB type services. At the end

of the year, however, the State has expended $210 million on IVE type services and

an additional $10 million on the IV–B services indicated above.

Figure 5

State Federal Total

IVE $105 million $105 million $210 million

ABC Program $10 million $0 $10 million

Total $115 million $105 million $220 million

Federal government continues to match IVE growth at any level.

47

SUMMARY OF RISK

1. There is no risk to the federal government (other than its continuing obligation

tofinance growth under an existing entitlement program) beyond the baseline established for a particular state in a given year.

2. States are at risk to lose federal matching funds on reinvested or transferred

amounts (and be liable for the full amount of contractual or other funds invested

in the IVB like services) in the event and to the extent IVE expenditures exceed

expectations.

3. The entitlement remains intact and the federal government’s obligation to reimburse states for qualified IVE expenditures at the established State FMAP rate remains.

OTHER CONSIDERATIONS AND OPTIONS

1. The basis for the reinvestment or transfer plan may be on other than general

projected growth in total expenditures. The plan may be targeted to special populations, cover some fraction of growth, or existing expenditures or even some combination of the preceding.

2. States can clearly take steps to mitigate risk by modulating, sequencing and

carefully monitoring the rate of expenditures of reinvested funds while at the same

time tracking expenditure patterns for IVE services.

3. Nothing in this proposal detracts from the oversight and regulatory authority

of the Federal Government and its ability to require a plan of correction, or terminate an agreement for cause, in the event that a State fails to achieve specified outcomes during the course of implementing a transfer agreement.

• Retrospective Transferability Example

State Y thinks it knows how to reduce the rate of entry into foster care and reduce its length of stay, without compromising child safety. Its transferability plan

is based on tested practice and sound planning.

State Y which has a 50 % FMAP reflects IV–E expenditures for 1999 as follows:

Figure 1

State Federal Total

$100M $100M $200M

For fiscal year 2000, the federal government and the state negotiate a baseline

reflecting a 5% increase in expenditures so that IV–E outlays are projected as follows:

Figure 2

State Federal Total

$105M $105M $210M

State Y decides to front the money necessary to produce a reduction in foster care

caseload and related cost. At the end of fiscal year 2000, the state has achieved actual foster care costs as follows:

Figure 3

State Federal Total

$100M $100M $200M

In fiscal year 2001, the state receives an additional $5 million in Title IV–B funding, representing the difference between the federal share baseline of $105 million

and the actual federal share of $100 million. This amount (plus the equivalent state

savings—available in 2001) can then be used to invest in strategies and services designed to produce further savings and better outcomes for children.

If the state fails to achieve federal costs below baseline then the federal government pays its usual 50 % share of the full amount, including any overage.

48

Other Points on Transferability

• Issues for the Out Years

The intent of both the prospective and retrospective transferability approaches is

to allow states to maintain their reinvested funds in the baseline and to continue

to use them in the out years.

• Adoption Assistance

Adoption assistance payments are outside any transferability agreement and

would be reimbursed as per existing rules, notwithstanding changes in the rates of

reimbursement that arise as part of the delinking provisions of this proposal if

adopted (see delinking below).

• Training and Administration

Title IV–E reimbursements for Administration and Training are outside the

transferability agreement. That is, reimbursements for those activities would continue on an open-ended basis, notwithstanding changes in the reimbursement rates

tied to the delinking provisions, if adopted (see delinking below).

BASIC ELEMENTS OF DELINKING

• Delinking

Basic Policy

Eliminate income eligibility as a condition of receiving federally financed foster

care and adoption assistance. Consequently, all children served by the state in foster

care or subsidized adoptive placements would be Title IV–E eligible and states could

claim federal reimbursement on their behalf. This policy would eliminate state and

federal costs associated with eligibility determination.

Establishing the Rate of Federal Participation

A new federal participation or match rate would need to be established as the

basis for determining the federal share of costs. APHSA is in the process of developing options on how to determine the new match rate in an equitable manner.

Training and Administration

Since states claim for training and administrative costs based on Title IV–E eligibility, the delinking provisions would have an impact on how federal participation

is carried out in the future. For training and administrative expenditures, a new

match would need to be established.

Subsidized Guardianship

APHSA currently has policy adopted in July of 1997 advocating for the authorization of federal participation in a state option to fund private guardianship or other

legal permanency arrangements with kin for children who otherwise would have remained in long-term foster care. The rate of federal participation would be equivaon those things. The maintenance of effort issue is extremely imlent to the rate established for the adoption assistance program.

Chairman JOHNSON. Thank you. We certainly will work with you

f portant to write correctly. Ultimately, we need more money. And

we certainly can’t afford to create seepage. Ms. McCullough.

STATEMENT OF CHARLOTTE MCCULLOUGH, CHILD WELFARE

CONSULTANT, CHEVY CHASE, MARYLAND

Ms. MCCULLOUGH. Madam Chairman and Members of the Committee, I appreciate the opportunity to be with you today. Until

very recently, I was a senior member of the Child Welfare League

of America. And for the last 5 years, my job was director of the

Managed Care Institute. In that capacity I was able to track, and

analyze, and sometimes shape some of the managed care privatization and child welfare initiatives across the country.

Some of what I am going to talk about today is going to be overlapping with what the discussion from the GAO. But I think it’s

49

important because we looked at different initiatives and found

similar complimentary findings in the various studies. I believe

there are lessons learned from the state and local experiences that

can be helpful in guiding this discussion.

It’s important to also point out that not only is it hard to track

these initiatives, it’s hard to even know what to call them. In many

of these tracking projects, they’re called privatizations, sometimes

managed care, sometimes performance-based contracting. So, we’re

going to look at the challenges, what’s going on currently, and how

that might impact our discussion about future Federal finance

flexibility.

According to all of the studies that have been done, over half of

the states currently have one or more of these initiatives under

way. I looked at 47 initiatives that were developed in 29 states. In

most of those initiatives, the public agency was partnering in new

ways with the not-for-profit agency. Often they were sharing financial risks with that agency and allowing them to manage and deliver the services. The goal there was to use the dollars flexibly to

be able to get better outcomes for kids and families.

There was great variability in the scope of the initiatives that I

tracked, just as there is in the GAO report. All toll, we counted approximately 115,000 children currently in the child welfare system

that are affected by these plans. There is also great variability in

the financial risk share arrangement and in how that rate was determined. Over half of the states that we tracked are participating

in the Title IV-E waiver and are using that as a backdrop for their

finance reform.

While some of the results of these initiatives appear to be very

promising, I think there were some challenges that we can also

learn from that were not addressed by these states simply by the

introduction of financial flexibility. First and foremost among

those, and we heard this earlier, is the lack of data at the state

level to currently plan and price these initiatives, to track outcomes, to track utilization, and most importantly, to see how much

it costs linked with outcomes and utilization. I agree that a lot of

attention needs to be placed on improving the states’ capacity to

track those outcomes. And one option might be to enhance the

SACWIS match back to 75% to allow states the opportunity to add

the features they can not currently use in their systems.

The second challenge, states have found they can’t predict utilization with any degree of certainty. In fact, it’s not just bad news

that drives up child welfare utilization. In many states, improving

the service system, increasing flexibility, making it more friendly,

they found an unpredicatible increase in utilization. That uncertainty that states face would be one issue that would have to be

addressed as they move toward embracing any of the flexible funding proposals under consideration.

Third, the state can lose revenue under these models, Federal

revenue, just like they can in the current system. If their plans

succeed, then the Federal share diminishes the state’s role, increases in terms of the percent of the case rate or capitated amount

that the state is responsible for.

Fourth, until very recently, states were not able to access the

training dollars needed to ensure a skilled work force. While we are

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turning over many of the public agency functions to private agency

staff, they found it very difficult to access those training dollars.

And here I want to really thank the Committee. I understand that

last night the bill that was being marked up by the Full Committee, you addressed the training issue. And I really appreciate

that. And I know the states will.

And fifth, many of these managed-carelike initiatives in child

welfare still had to contend with duplicative inefficient eligibility

and reporting requirements that increased their administrative

costs and reduced the amount of dollars available on the street.

So, what should we do? I think there are a number of options.

I think it is time for us to take some steps to make the system

more efficient, more effective, and more accountable. I believe that

one of the options that we should seriously look at is improving and

modifying the current IV-E waiver. I agree totally that the existing

waiver is tightly controlled. Experimental design needs to be replaced by a more effective system. The application process needs to

be streamlined. States should not be discouraged from proposing

broad scope initiatives. And there should be no restrictions on replicating waivers. They should be allowed to propose a prospective

payment methodology once approved for a waiver, which would address some of the cash flow problems that are striking in these initiatives. It also allows them front-end funding to be able to develop

new initiatives. The Children’s Bureau should work with the states

to reduce the duplicative reporting requirements that currently

exist. And I believe the gateway—the waivers should be a gateway

to ongoing flexibility once you have demonstrated good outcomes

and cost-effective models.

I am not clear why the proposal under consideration could not

be just one waiver option, and by doing that, being able to include

some of the futures of the previous APHS, a proposal on the transferability. It seems as if that could be a waiver option.

Finally, I think we just need to be aware that the fiscal restructuring in any one system, including child welfare, is a necessary

step. But it’s not a sufficient step to protect children to ensure permanency. What more and more states are doing is looking for integrated systems of care that cut across behavioral health. They’re

using their Medicaid and mental health dollars. We need to be able

to support those efforts. The biggest gap is currently in not addressing the SED needs, a population which may be a small child

welfare population, but with incredible needs in cost. And finally,

the substance abuse treatment needs of parents of kids in care, I

would urge Congress to certainly invest in and act to support the

Child Protection and AOD Partnership Act of 2000.

And beyond that, I concur with what previous people have said.

We still do not know with any great degree of certainty what’s

working. I believe additional research is needed to tease out those

elements under the existing financing contract proposals that are

under way to see what is actually working well and holds the most

promise for future. Thank you.

[The prepared statement follows:]

51

Statement of Charlotte McCullough, Child Welfare Consultant, Chevy

Chase, Maryland

My name is Charlotte McCullough and, for nearly fourteen years, I had the privilege of serving as a senior staff member of the Child Welfare League of America

(CWLA), the oldest and largest child welfare membership association in the country.

For the last five years I was director of CWLA’s Managed Care Institute. In that

capacity I had the opportunity to shape, track, and report on state efforts to change

financing and service delivery to get better results for children and families. From

that experience and from listening to hundreds of public and private agencies describe their successes and challenges, I believe there are certain lessons learned at

the state level that can help inform the discussion about federal finance reform. I

am now an independent child welfare consultant working with a number of states,

private agencies, universities, and CWLA.

My testimony today is intended to describe the changes that are currently occurring at the state or local level and to place some of the challenges found in these

new initiatives in the context of the broader discussion about federal finance reform

for child welfare. I applaud the Committee for addressing this critical issue and, like

most child advocates, I agree it is time for thoughtful finance reform.

As a backdrop for today’s discussion, it is important to remember there are four

principal ways that child welfare administrators can manipulate and manage their

resources to get better results for the children and families they serve. They can:

• Prevent the escalation of problems that cause initial entry into the foster care

system;

• effectively and efficiently manage the care when children enter foster care to

ensure that children and their families get the services they need, when they need

them, no more and no less;

• achieve permanency sooner; and,

• prevent re-abuse and re-entry.

Many states are now testing new methods of financing, managing and delivering

child welfare services with those four approaches in mind. They are:

1) Introducing new financial incentives and managed-care principles into their

contracts with nonprofit providers—often sharing financial risks;

2) Using Medicaid and other funds in combination with child welfare funds to

stretch limited prevention and therapeutic dollars; and,

3) Choosing to participate in the Title IV-E waiver program.

None of these single approaches, or the combination of them, will end the discussion about the need for broader reform in the financing of child welfare and related

children’s services. But each of them could provide valuable insights into what is

working and not working in the current system. I will highlight challenges and opportunities in each of those three areas.

I. New Finance and Service Delivery Models Being Tested in Child Welfare

There have been three national efforts to track and describe the various child welfare managed care or privatization initiatives across the county. The CWLA Managed Care Institute’s (MCI) Tracking Project has been collecting, analyzing, and reporting national data since 1996, describing various child welfare management, finance, and delivery changes. In addition, in 1998, the GAO completed a managed

care in child welfare survey of state child welfare directors and 43 local directors.

Site visits in four locations—Kansas, Massachusetts, Boulder County, Colorado, and

Sarasota County, Florida were conducted. Georgetown University conducted the

third study of child welfare managed care efforts as part of a broader 5-year Health

Care Reform Tracking Project (HCRTP), funded by the Center for Mental Health

Services (CMHS). The last HCRTP child welfare survey occurred in 1997–1998.

Despite the fact that each project counted different initiatives and gathered different data to describe the efforts, there is a striking degree of consensus on broad

findings across the projects and on what the findings mean.

Trends in Child Welfare Finance & Management Reform

• Managed care or privatization efforts continue to increase in number in the

child welfare field. In all of the separate national surveys at least half of the states

have one or more such initiatives underway. (CWLA reported on 47 initiatives in

29 states; the GAO reported on 27 initiatives in 13 states, and the Georgetown

project identified 25 state and community child welfare managed care initiatives.)

• Public purchasers in most of the current initiatives increasingly rely upon private contractors to manage and deliver child welfare services and share in financial

risks and rewards. The most common arrangement is a case rate. Under a case rate,

a contractor is given a sum of money for each case referred. Those funds are then

52

used flexibly by the contractor to pay for all services included in the plan. Risk is

currently being shared with nonprofit agencies, for-profit agencies, and local public

entities. • In the privatized risk-sharing arrangements, it appears that contractors are often expected to supplement the contract rate with funds from other sources. In

some instances, financial bonuses and penalties are being linked to performance in

key outcome areas. Often the contract does contain one or more risk-adjustment

mechanisms to protect the contractor from catastrophic losses. • Various funding sources are used to support the initiatives with the core fund- ing coming from child welfare. Many initiatives also use some Medicaid, mental

health and substance abuse block grant funds, TANF, and some education and juvenile justice funds. • There is great variability in the scope of the initiatives. Overall, it is estimated that nationwide between 10–15 % of the children and families served by child wel- fare are currently affected by these managed care or privatized models. For example, in the CWLA survey, 42 of the 47 initiatives provided estimates of the number

of children to be served annually; the total in 1998 was 114,243. • There are many different structural designs for the initiatives and many initia- tives have multiple different design elements. However, it appears that the dominant model is a nonprofit lead agency operating under a risk-sharing contract with

a state or local public agency.

What Are the Results to Date?

Since the majority of initiatives had been underway less than 12 months at the time of the last surveys, it is too soon to determine long term results for the children and families served, or to determine which of the various models holds the

most promise for child welfare. Despite the lack of definitive data, many of these

initiatives do show promise. State administrators cite the following benefits of the

new contracting practices: 1) True public/private partnerships are created where the safety and well-being of children and the stability of families is a shared responsibility. 2) The whole system becomes more accountable and outcome-driven.

3) Creativity and innovation at the local level and community ownership is stimu- lated.

4) Financial incentives are aligned for the first time with programmatic goals.

What Are Greatest Challenges?

Despite the potential of these new methods of contracting for services, all of the national tracking efforts have also identified many challenges for both public agencies and their new private partners. I would like to summarize a few of the major

barriers that should be addressed by any of the proposals under consideration.

1. Lack of data to plan new approaches, monitor costs, track outcomes, and manage

risks

In order to plan a new finance system and develop at-risk contract arrangements,

states and contractors need to analyze accurate fiscal data that show what it costs

to deliver a unit of service and what it costs over the life of a case in the current

system. Without data on current utilization and outcomes linked to cost, it is very

difficult to design and price a managed care or privatized reform initiative. Yet,

most states simply do not have the capacity to track the services used, the outcomes, and the costs to serve an individual child and family over an episode of care.

Many states cannot even track and report accurate aggregate costs that are linked

to utilization and outcomes.

The lack of data and technology to support it becomes more acute during implementation. Quality systems must be data-driven. Public child welfare agencies and

private contractors must have access to real-time, client-level data to adjust, and

monitor at-risk contracts, track service use, and effectively monitor fiscal performance and child and family outcomes. According to GAO findings, public child welfare

officials overwhelmingly agreed that the inadequacy of their current management

information system was one of the biggest challenges—if not the biggest challenge—

they faced as they implemented and monitored their new at-risk finance initiatives.

Having access to accurate data is necessary not only to support current efforts but

also to support the states in collecting and managing their resources under any future child welfare finance arrangement. If states are hard pressed to gather data

today to design and price their contracts with providers, how can a state have confidence in the data used to establish the 5-year baseline called for under the proposed flexible funding proposals?Regardless of the flexible funding option decided

upon, new investments are needed to support data collection today and in the future.

53

To enable all states to begin to collect and manage utilization and cost information,

Congress and HHS should reinstate an enhanced match for SACWIS adaptation to

allow states to create added SACWIS capacity. When the service delivery system includes a greater role for private agencies in managing care and resources, it is reasonable to also allow them access to funds to support the development of their capacity to report quality, utilization, and fiscal data to state SACWIS systems.

2. Inadequate cash flow and lost revenues for states if plans succeed

Cash flow can become a problem for both the public agency and the nonprofit con- tractor under managed care financing arrangements. The question facing both public purchasers and providers is how can prospective payments—the best option for

front-end flexibility—be balanced with the retroactive service reimbursement methodology required by Title IV-E and often by state statutes? One mechanism states

have used is to have the state advance general revenue dollars and later replace

the advances with reimbursement from Title IV-E, Medicaid, or other sources. This

assumes a state has an adequate base of general revenue from which to draw. The

cash flow challenges could be better addressed under a modification of the Title IVE waiver program to allow states to propose prospective payments. In addition to the problems with cash flow, states can lose federal dollars if their

new initiatives succeed. Under the current system, the prohibitions against the use

of Title IV-E funds for services other than out-of-home care may increase the state’s liability for funding a greater share of any at-risk contracts. This risk increases over

time as the managed care effort improves performance. For example, if the contractor does succeed in reducing placement rates or shortening the length of stay

in foster care through a host of new service interventions, the state’s portion of the

contract rate will increase as the federal share decreases. When this happens, the

state may realize savings in its out-of-home care costs; however, these savings may

be more than offset by the state’s obligation to pay for non-federally reimbursable services under the contract rate. The American Public Human Services Association

(APHSA) and other past proposals for transferring unused IV-E funds into IV-B

could help to address the problem of being penalized for good performance.

3) Unpredictable utilization with the introduction of new approaches

We can’t just look to population and poverty trends in a community and forecast future patterns of child welfare utilization with a great degree of certainty. While

we know that factors in the economy may drive up demand, there are also other

problems outside the child welfare system—as the crack cocaine epidemic in the

1980s demonstrated—which cause less predictable but dramatic strains on the child

welfare system. And, as some states have discovered, improving practice and creating a friendlier child and family service system may also result in unanticipated

increases in the demand for services.

As states transition to ‘‘community-based’’ or privatized service delivery systems they must be prepared for these unexpected consequences. For example, in some

states, the public agency is separating child protective service (CPS) intake and investigations from the rest of the service system. Most of the responsibility for managing funds and services is being contracted to the private sector with the public

agency retaining control over CPS. Public agencies then focus their efforts on improving CPS—by lowering caseloads and improving assessments to better identify,

protect and serve at-risk children and families. As a result, they have found far

more children and families in need of services than in the previous system. During

the investigation, once a child and family is identified as needing ongoing services,

the case may be transferred to the private contractor to manage. This is a success

scenario—children and families are getting the services they need but didn’t previously receive—but it may result in added costs to the state or the contractor depending on the risk-sharing arrangement.

Over time if more and more states move to these new public/private risk-sharing

partnerships and split CPS from service delivery, it is hard to predict what the overall impact will be on child welfare utilization and costs. This very uncertainty is an

important factor to consider in the flexible funding proposals under consideration

today. Do we know how to calculate the potential impact of system changes—like

privatization or managed care or other reforms—on a state’s caseload and budget?

Would the state have the capacity to track utilization and costs ‘‘real-time’’ to see

an upward trend before it was too late? These would be important considerations

for states interested in participating in any proposed flexible funding demonstration.

4) An inadequately equipped workforce

Staff roles, in both public and private agencies, change dramatically under these

at-risk or privatized contracts. Most designers of current initiatives have failed to

54

build in adequate time or resources to ensure that all workers were prepared to succeed in their new roles prior to implementation. For example, under current

privatized, at-risk models, some public agency staff may step back from their traditional direct case management and service provision roles to contract monitoring

and quality oversight. They need training to develop the capacity to effectively monitor at-risk contracts and ensure that legal protections are maintained. Private

agency staff need training to develop the knowledge and skills to create and implement new case and utilization management protocols, begin assuming duties long

held by public caseworkers, and manage risks they barely comprehend. At a time

when some systems are being turned upside down and roles are dramatically shifting, training is essential.

Currently some states have experienced significant problems in accessing and

using IV-E training funds to provide private agency staff training. The problem appears to be related to federal regulations that have served to narrow the focus of

allowable activities, and limit the availability and accessibility of training resources

beyond what was intended by statute. States commonly confront differing interpretations of what is allowable, which entities are eligible, and at what level of reimbursement. Regardless of the flexible funding proposal chosen, Congress and HHS

should clarify language and provide access to training funds, at the enhanced 75%

match to ensure that both public and private workers are prepared for their new

roles and responsibilities.

5) Duplicative and inefficient eligibility and reporting requirements

States and providers operating under managed care financing arrangements still

must contend with federal eligibility rules and reporting requirements that are redundant, costly, and difficult to manage. The problem becomes even more acute

when states try to ‘‘blend’’ or pool funds across multiple funding streams. The magnitude of paperwork required for eligibility and encounter reporting—in the absence

of sophisticated technology—limits access to needed services. The result is higher

administrative costs and fewer resources available to invest in service improvements

or expansion.

APHSA and others have proposed a review of current IV-E rules and regulations

to make the program easier and more cost-effective to manage. Among the recommendations that merit a full discussion is the de-linking proposal that would

eliminate income eligibility as a criteria to determine who among the children in

the foster care system are eligible for federally reimbursed foster care and adoption

assistance under Title IV-E. Instead all foster care children would be Title IV-E eligible. In order to offset increased costs to the federal government for covering all

children the APHSA proposal calls for the federal reimbursement rate to be adjusted proportionately in each state. The challenge will be agreeing to the federal

reimbursement rate adjustment under such a proposal.

6) Lack of research and technical assistance to guide states in planning new approaches

While the federal role in tracking, supporting, and monitoring state managed

health care efforts has expanded in recent years, no comparable role has emerged

for these new managed care efforts in child welfare. According to the 1998 GAO report, the Administration for Children and Families (ACF) has had limited capacity

to provide formal guidance or technical assistance to states wanting to go in the direction of managed care financing in child welfare. Research is needed to determine

which elements, if any, of the new finance models currently being used in states and

local communities might be most promising in improving quality and cost-efficiency.

Building on the past and current efforts of the GAO and the work of national organizations, there should be a 5-year plan for tracking and analyzing child welfare managed care/privatization efforts, with a special emphasis on assessing outcomes under

at-risk contracts with those outcomes required under ASFA.

Before promoting any one approach as the solution to child welfare finance problems, it is important to proceed with caution and glean lessons from different state

and local experiences. The ‘‘demonstration’’ language in the proposal under discussion today is a step in the right direction. We need to demonstrate the effectiveness

of new strategies before embracing a new model. Likewise, there is wisdom in limiting the number of demonstrations to first determine whether the approach is getting the desired results.

II. Using Multiple Funding Streams to Enhance Child Welfare

Increasing flexible funding in the child welfare system is a necessary but insufficient step to ensure child safety, well-being and permanency. Managed care models

55

and other fiscal re-structuring simply will not guarantee access to all the services

needed by child welfare populations. The biggest gap lies in the behavioral health

area. To address this challenge, states need to be able to foster interagency and

inter-system collaboration between other adult and child-serving systems to increase

and enhance overall behavioral health capacity. States are increasingly trying to develop comprehensive programs and funding strategies that include accessing Medicaid, TANF, and other funds to supplement

their limited child welfare prevention and treatment dollars. This is often a monumental task—especially with the advent of managed care for behavioral health care. To date, we do not know the full impact managed behavioral health care on access

to appropriate mental health and substance abuse services by children and families

in the child welfare system. However, the national health care reform tracking

project (HCRTP) does shed light on some coordination and financing issues: 1) When the boundaries are not clear and coordination is lacking, there is a great potential for duplication of effort, fragmentation, service gaps, cost-shifting, and disagreement about payment responsibilities between the child welfare systems and

their behavioral health counterparts. 2) States are rarely able to track the impact of system reform efforts in one sys- tem on reform efforts in another system. Again, part of the problem is a lack of technology to track costs, utilization, and outcomes for individual children across multiple child-serving systems. Allegations of cost shifting abound. 3) Children in the child welfare system and their families have higher instances of mental health and substance abuse treatment needs than other children and families of similar socioeconomic backgrounds. However, the needs of this population

are not being adequately addressed in the design and pricing of most Medicaid managed care plans. These findings cause concern in light of the timeframes contained in ASFA for making decisions about a child’s permanent placement. The bottom line is that without adequate and appropriate behavioral health services to meet the needs of children and families served by child welfare, ASFA is not likely to promote, nor

achieve, safety and permanency for a large percent of the child welfare caseload.

States have to better understand and address the behavioral health care needs of

the children and families who come to their attention. Current challenges relate to

the following facts:

1. The substance abuse treatment needs of abused and neglected children and families are not being met.

Statistics regarding the impact of substance abuse on children and families are now well documented and staggering. A major factor in child abuse and neglect each

year, substance abuse is associated with the placement of at least half of the children in the custody of child welfare. It is also highly correlated with longer lengths

of stay once placed and with reduced reunification rates. Yet, less than one-third

of the nearly 67% of parent caregivers who require treatment currently receive it.

Congress should act to address the substance abuse treatment needs of child welfare

populations by passing and funding S.2435, the Child Protection/AOD Partnership

Act of 2000.

2. The mental health treatment needs of abused and neglected children and families

are not being met.

In contrast to what we know about the issue of substance abuse and its impact

on children and families and the systems that serve them, we have little empirical

knowledge about the scope, nature and treatment of mental health problems in child

welfare populations. However, it is estimated that it is children with serious emotional disturbance—an unknown but small percent of the overall foster care population—who may consume the vast majority of both child welfare and child mental

health resources. Even less systematic research has focused on the prevalence and

impact of parental mental illness on child abuse and neglect and placement in the

child welfare system.

Congress and HHS should support coordinated research on the mental health

needs of children and families served by child welfare. The findings should guide future policies and result in opportunities for demonstrations to test and promote model

approaches to cross-system child welfare and mental health policy, practice, and

funding.

3. Children are being placed in foster care solely for the purpose of accessing needed

treatment services (where no abuse or neglect is involved).

Although the actual numbers are elusive, it appears clear that some children are

placed in the custody of public child welfare agencies (in the absence of any finding

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of abuse and neglect) when parents can find no other means of accessing needed

treatment services. Some states have enacted legislation barring the child welfare

agency from seeking or accepting custody of children solely for the purpose of securing treatment services, but this is clearly not the case in all states. These practices,

regardless of the scale of the problem, must cease.

Congress and HHS should ensure the availability of services to children with mental health needs to prevent entry into the child welfare system. At a minimum, states

should be required to review policies and practices to ensure that children are not

entering foster care simply because it was the only means of accessing behavioral

health care services.

III. Challenges and Opportunities Under The Title IV-E Waiver

To date there are 30 waivers in nearly half of the states and the District of Columbia. Collectively these demonstration projects are aimed at reducing the number

of children in foster care and the length of stay, reducing the use of restrictive and

costly placement settings, and reducing re-abuse and neglect and re-entry into foster

care.

The Child Welfare Waiver Program has allowed participating state and local

agencies to use their federal resources differently and to test innovative ways to

both protect children and preserve families. However, many observers note that the

program has become more restrictive over time. There appears to be some federal

ambivalence about how the waivers are to be used and a narrowing of the purpose

and potential of the waiver. The different terms used to describe the waiver program are telling. Is it a ‘‘demonstration,’’ i.e. a five-year project intended to test,

under a rigidly controlled experimental design, innovations in a part of the service

array? Or can the waiver be a tool to test how financial flexibility could fundamentally change the system? Is it intended for practice innovation or a platform to support broad system and financial reform?

The waiver program, as currently developed, appears to be achieving some success

but there are critical issues that must be addressed if the program is to achieve

maximum benefit for participating states. Many of these issues are being raised in

the waiver modification proposal under discussion today.

I strongly support a modification of the waiver program and encourage Congress

to consider include the following points:

1) The tightly controlled experimental design requirements should be replaced by

less rigid but sound methods of ensuring effective evaluations.

2) The application process should be streamlined and states should be allowed to

broaden the size and scope.

There has been a stated preference for ‘‘small’’ demonstrations’’ in limited areas

of child welfare practice and states were strongly discouraged during the application

process from going statewide. Up to five states have withdrawn their waiver proposals because they determined the process was too complex, and time consuming

when balanced against potential benefits of a project with limited size and scope.

3) Existing waiver projects should be allowed to expand

Participating states should have the ability to expand their efforts to cover additional children and families or add geographic areas of the state during the waiver

period without having to go through a full application process and rigorous expansion of the evaluation.

4) The program application period should be extended beyond 2002

As the program goals are clarified and some of the current barriers removed, it

is likely that additional states will see the merits of the waiver. For those states

that have not yet applied and for existing waiver states to propose new projects, the

waiver application period should be extended beyond 2002.

5) There should be no restrictions on replicating all features of waivers found in

other states; and no limits on how many waivers a state may have.

6) The waivers should be a gateway to continuing flexibility.

Once a state has demonstrated improved outcomes and a cost-effective, cost neutral model, the state should not be required to return to business as usual after the

waiver demonstration period ends. Instead the state should be allowed to retain the

flexibility and expand the program, operating more like certain Medicaid waivers.

Chairman JOHNSON. Thank you very much. We

f ’re going to hear

from Kathleen Kearney, the Secretary of the Florida Department

of Children & Families. And then we’re going to go vote on one proVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00060 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
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cedural vote. We have only one vote. And then we’ll be back

promptly.

STATEMENT OF HON. KATHLEEN A. KEARNEY, SECRETARY,

FLORIDA DEPARTMENT OF CHILDREN AND FAMILIES, TALLAHASSEE, FLORIDA

Ms. KEARNEY. Good afternoon, Madam Chair and Members of

the Committee. It’s wonderful to be back with all of you again. I

would like to really limit my remarks, in light of your pending vote,

to the addendums, to the attachments, to my testimony.

And I’ll begin first with a real-life example that we see every

day, which is under a child’s journey through the child protection

system, an analysis of multiple funding streams. This example is

one that we see in about 80% of our cases that come in on our Florida Child Abuse Hotline. You will see that about 80% of our cases

are, in fact, substance abuse involved. And Jason’s case is no exception. You will see in this particular example, which is very typical,

Jason, a newborn, there is a call that comes in on the Child Abuse

Hotline that indicates that there are some concerns that a neighbor

has about this particular child. Mom is not really paying very adequate attention to the child. But there is not enough information

at that time for the Child Abuse Hotline to accept that case for further investigation. There are concerns. But it is not accepted and

actually investigated. Later on, a call comes through that indicates

that mom is, in fact, doing drugs. Mom is on the street. Mom is

running around. Mom is not taking care of the child. There is

enough information at that time for the case to be accepted. And

we do investigate. However, in our state, as in most states, that

would not be sufficient in and of itself to have the matter under

the jurisdiction of the court with the filing of a Dependency Petition. But preventative in-home services would be offered to the

family. You can see in Jason’s case that those services really were

not effective. Why? Because we don’t have enough of them. We

have long wait lists for those services that do exist for prevention

to keep a child in the home. And safety certainly was not ensured

in Jason’s case. Jason was ultimately removed when mom failed to

continue her treatment efforts. And if you follow the diagram

through, you will see next to all of the services that would have

been provided, the various Federal funding and state funding

streams that go into providing these specific services. We even

have, luckily in Florida, a Medicaid situation now where we can get

a comprehensive assessment for children that are brought into foster care. But you can see the complexity of all of this, especially

as it goes all the way through, Jason ultimately ending up in a termination of parental rights situation and adoption.

Imagine now that you are a 22-year-old caseworker and you

must now fill out all of the necessary paperwork in order to ensure

that those Federal funding sources are, in fact, covered so that you

are reimbursed for them. Now, also assume that you have a caseload of 65 cases, which is the average right now in Florida, rather

than 18. Shortly before I came here, I was beeped by my office to

be told that there was a child in Broward County, that’s Fort Lauderdale, that was tortured, and a foster care worker had not adequately done a reunification home study to return this child home.

58

And the child had unsupervised visits with mom. The worker didn’t

know that mom had a boyfriend. That boyfriend subsequently

abused that child. The excuse, the reason that was given, I have

too much paperwork, I can not afford to do direct services. And yet,

that is what you, as Members of Congress, that is certainly what

the public expect the money is being spent on, not on administration, but, in fact, on direct services. I can tell you that it concerns

me every night when I go to bed that that is not occurring.

You will see also in the graphs that I have provided to you, there

is a pie chart under Exhibit B that shows you the breakdown in

Florida of the funding sources. You will see in the purple the Title

IV-B and Title IV-B Prevention, which is exploded, meaning it

comes out. The Federal share for Florida for prevention under Title

IV-B is $1.7 million. You will note how much exists in Title IV-E,

out-of-home care.

Florida strongly would support the ability to have flexible funds.

We strongly support the transferability to be able to transfer. However, you will see in my detailed written testimony concerns that

I have about all of the proposals. We do feel that the first proposal,

the flexible funding, like Mr. Waldman, we wish would be extended

beyond just five states. We believe it’s an excellent proposal. And

you will see a full breakdown of those issues as I understand them

from the letter I received from the Chair.

The last comment I’d like to make is on Exhibit C, so that you

are aware, this is a breakdown of the calls that come into the Florida Child Abuse Hotline. The green are those where you would find

actual allegations of abuse and neglect where court involvement

could take place. In Jason’s case, that was the third call that came

into the hotline. The blue are cases not accepted for investigation,

approximately 24%. You will see that would be the first call into

the hotline on Jason. The area I’d like to highlight for you is red,

which is the area where there are findings but there may not be

enough evidence to go into court, there may not be enough evidence

for removal or evidence even to warrant services being put in place.

Out of that red group, one half eventually will move into the green

group and will eventually have another call into the hotline just as

Jason did, ultimately resulting in his removal. It is a very serious

situation. And we thank the Committee for your attention to this

matter.

[The prepared statement and attachment follows:]

Statement of the Hon. Kathleen A. Kearney, Secretary, Florida Department

of Children and Families, Tallahassee, Florida

Good afternoon Madam Chair and members of the Human Resources Subcommittee. My name is Judge Kathleen A. Kearney, and I am the Secretary of the

Florida Department of Children and Families. It is a pleasure to be asked to testify

again before this Subcommittee about the need for flexibility in our Title IV–E federal funding program

The interest of this Subcommittee in these issues is deeply appreciated. Given

this Subcommittee’s leadership in developing the recent landmark child protection

reforms under the Adoption and Safe Families Act (ASFA), I have every confidence

that you will continue to ensure that child safety is always the priority consideration of states and the individual professionals who perform this work.

I would like to make some general comments as to why more state flexibility in

federal financing would produce:

• Better outcomes for children and families;

• A more ‘‘child focused’’ rather than ‘‘system focused’’ delivery of social services.

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I have brought a typical example here for you today of ‘‘A Child’s Journey

Through the Child Protection System,’’ (See Exhibit A). In every child protection

case, there are six different potential federal funding sources depending on the services and whether or not the child is IV–E eligible.

I have attached a second chart, ‘‘An Analysis of Federal Funding Sources,’’ (Exhibit B), which shows Florida’s federal funding, and the overall small percentage

that is actually available for prevention. It is our belief that the federal partnership

for protecting children needs to provide far greater opportunities and incentives to

support and preserve families, as long as it is safe for the child to remain in the

home. There must be clear options at the earliest possible stage of intervention for

assisting families when they are in crisis with the right supports and services.

There are current caps on Title IV–B funding for in-home services and a prohibition against using Title IV–E to fund in-home interventions. It is well known and

documented that the cost of out of home care will usually exceed the cost of in-home

interventions.

A third chart, ‘‘Calls to Hotline’’ (Exhibit C), has been submitted which reflects

the total number of calls to the Florida Child Abuse Hotline in State fiscal year July

1, 1998 though June 30, 1999. Florida received a total of 182,691 calls answered

by the Hotline alleging child abuse and/or neglect.

Findings were as follows:

• 24 percent of calls did not meet criteria for investigation; i.e. did not meet Florida’s statutory definition of abuse and/or neglect;

• 38 percent of calls were investigated, but found to have not enough evidence

to classify the behavior as abuse and/or neglect under Florida law;

• 38 percent were investigated and were found to meet these statutory criteria

for abuse and/or neglect.

It must be noted that of the 38 percent of calls investigated that initially are classified as having not met statutory criteria for abuse and/or neglect, approximately

one third are referred again for new allegations of abuse that were founded.

It is believed that had more effective front-end prevention services been in place,

there would have been fewer instances of abuse and neglect that would require the

removal of children from their homes.

The funding sources as currently framed are not child focused. They are skewed

toward placement of children in foster care. They are burdensome. Every specific

type of activity has to have an accounting code that tracks to the federal funding

source. To add to the complexity, there are different federal match rates, and some

activities will require documentation of local matching dollars. Simply stated, the

current patchwork of funding sources is a budgeting nightmare that impacts our

workforce at every level. Counselors are forced to sacrifice direct fieldwork with children and families in order to complete paperwork required by the federal government to ensure funding for the services they are attempting to provide. These efforts

and the rigid ‘‘siloed’’ funding streams divert attention and resources from the real

needs of children and families.

My comments on the three different options proposed in the draft legislation are

set forth as follows:

ANALYSIS OF PROPOSALS

Proposal 1: Optional Program to Create Flexible Funding

This proposal provides the most flexibility and includes built in incentives to invest funds in prevention services. Comments on the specific proposals are as follows:

a) Establishment of a three-year baseline and projection of estimated Title

IV–E spending in the next three-year period. States would draw down equal

quarterly payments each year and would not have to recalculate Title IV–

E eligibility.

Assuming that a reasonable population growth could be factored-in, this would

mitigate current concerns with respect to this option. If the out years did reflect a

growing population, the quarterly payments could not be ‘‘equal’’ over the entire

three-year period.

The elimination of the need for ongoing eligibility calculations would be very beneficial. This is a time consuming process.

There should be consistent performance expectations at the federal level that are

factored in to the three-year projection, particularly related to length of stay. A consistent approach at the federal level in terms of funding limitations for poor state

performance on foster care lengths-of-stay would potentially achieve more equity in

federal funding across states. Although Florida would hope not to be disadvantaged

by such provisions, we believe that Title IV–E funds should not continue to flow for

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length of stay averages that reflect poor state performance. Length of stay performance improvements should be factored into the projected expenditures. Selecting this

option should not inadvertently penalize states. A similar method for containing

Title IV–E payments related to average-length-of-stay would need to be developed for states that do not participate in this demonstration.

It is our assumption that this new federal payment option would allow the state the flexibility to establish case rate methods of reimbursement, which combine

maintenance and case management (administrative) costs. The current work effort

involved in documenting the six separate federal claims under title IV–E each quar- ter (maintenance, administrative, and training) is very complex and cumbersome.

The quarterly payment method would be a significant improvement in this program. States that currently have demonstration waivers should be allowed to dis- continue the waivers if selected for participation under this option.

b) States could renegotiate the baseline amount after the first year if they

demonstrate that estimation errors were made.

It would be beneficial to states to have an option for demonstrating the need to adjust the projections. There should be some standard factors that are used to allow

for adjustments, such as an increase in the state’s per capita reporting rate. Adjust- ments should not be allowed for increased number of children in care as the result

of increases in overall length of stay.

c) States would be required to sign a legally enforceable document obligating them to guarantee services for the same group for whom the state

was obligated to provide services before they embarked on the program.

This is a reasonable expectation. However, our experience with the documentation

effort for TANF funds regarding ‘‘maintenance of effort (MOE)’’ is not one that we

would want replicated. The TANF requirements for MOE are extremely cumbersome and complex.

d) With the exception of flexibility in spending, states would still be subject

to all provisions of the current Title IV–B and Title IV–E statutes, including the new accountability system recently established in federal regulations.

As Florida currently uses funds from the Title IV–B capped grant to fund the

maintenance payments for children who are not Title IV–E eligible, this provision

would be very beneficial. The flexible spending between these two federal programs

would afford states more opportunities to provide a continuum of services to children that, when appropriate, would allow more placement diversion services and options.

It is not clear how the current requirements of the IV–B grant in terms of 20%

of expenditures dedicated to prevention, 20% for family preservation, 20% for reunification services, 20% for post-adoption support, and 20% for other services would

be applied. This grant is currently very complex to administer and diminishes the

opportunities for demonstrating effective prevention and placement strategies.

The accountability system requirements appear to be based on good practice.

e) States would have the right to return to the open-ended entitlement system at the beginning of any fiscal year.

This is a good option for states to have, as long as it provides equal incentives/

disincentives for performance. For example, if a state’s length of stay were increasing, one method of reimbursement should not be advantageous to any state.

f) States could include in their flexible funding grant all three federal foster

case baseline streams under Title IV–E (maintenance payments, administrative, and training), all three adoption streams, or both.

This would be very beneficial to states. Florida is in the process of establishing

a community-based child protection system through the use of contracted service

providers. It is hoped that the matching rates for training would be equalized for

the training of private provider staff. Additionally, it would also be helpful to consolidate state match criteria for Title IV–E and Title IV–B. It would be difficult to

continue to account for different types of local match if these two federal programs

were combined.

g) During the fifth year, and near the end of all subsequent five-year periods, states would have the option of continuing to receive their federal

funds in a flexible grant. States would always be guaranteed the amount

of money in the baseline for five years. In each case, the baseline would be

proposed by the state and approved by HHS, with the Secretary having the

power to accept, reject, or propose modifications. Once the baseline was

agreed upon, states would have 5 years of guaranteed funding at a fixed

61

amount each year. States would always retain the option to return to the

open-ended entitlement system at the beginning of any fiscal year.

This provision was incorporated in the original position paper submitted to me

from the Subcommittee with my invitation to testify. This is a good provision. Given

the serious nature of the work required to protect children from abuse and neglect,

it is imperative that the states be allowed to retain the option to return to the openended entitlement program if such a system proves to be more effective in keeping

children safe from harm. This provision has subsequently been modified by the draft

legislation. It is my opinion that the time limitation imposed by the draft legislation

is unnecessary.

h) States would be required to maintain state and local funding at the current level.

It is unclear what is meant by this provision. If it is meant to establish a state

‘‘Maintenance of Effort’’ requirement, please see comments referring to same set

forth above.

Proposal 2: Transferring Funds to Achieve Flexibility

Florida strongly endorses the concept of transferability. However, it appears that

this proposal leaves intact the current Title IV–E entitlement structure and will not

provide the flexibility or incentives set forth in Proposal 1 described above. Florida

would need to conduct further analysis to determine if the transfer of funds option

would provide the desired outcomes anticipated.

Proposal 3: Waiver Modification

Florida was the recipient of a statewide demonstration waiver in late 1999, which

is designed to help implement community-based care. We are required to identify

matching control sites as part of the evaluation of this waiver. Extensive data collection and analysis will need to be conducted in non-waiver sites to document differences. We are strongly in favor of an evaluation component, however, the current

waiver requirements result in duplication of efforts and delay needed reform.

This proposal calls for several changes to Section 1130 of the Social Security Act:

• Eliminate all restrictions on the number of waivers;

• Reduce or eliminate the research and evaluation requirements;

• Eliminate the restriction on the number of states that can conduct waivers on

any given topic;

• Eliminate the limit on the number of waivers a given state could have;

• Allow states that have met the terms of their waiver agreement to extend them

indefinitely.

Florida strongly supports these changes and encourages Congress to, at a minimum, enact this legislation during this current session. It will be of great benefit

to all states if such action is taken. Furthermore, those states participating in a current demonstration waiver should be permitted to opt out of that waiver in favor

of the more flexible program envisioned by these proposals.

Thank you for providing me with the opportunity to offer comments to you on this

very important legislation. Florida would certainly compete for an opportunity to obtain more flexibility in this critically important federal program for abused and neglected children. You are to be commended for your continued efforts to protect the

most vulnerable among us -our nation’s children.

Respectfully submitted this 20th day of July 2000, in Washington, D.C.

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Exhibit A.

63

Exhibit B.

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Exhibit C.

briefly for the vote. It will take about 10 minutes. Thanks. UnfortuChairman JOHNSON. Thank you very much. We will adjourn

f nately, Mr. Cardin has a markup in another Subcommittee. Those

two votes, as it turned out, did delay us. Mr. Wentworth.

STATEMENT OF ROBERT WENTWORTH, SENIOR MANAGER,

MASSACHUSETTS DEPARTMENT OF SOCIAL SERVICES, BOSTON, MASSACHUSETTS

Mr. WENTWORTH. Madam Chair and Members of the Subcommittee, I am a senior manager at the Massachusetts Department of Social Services, the children’s protective services agency in

that state. My responsibilities include oversight of the residential

placement service system for over 2,100 children and adolescents in

the care or custody of the Department. I appreciate this opportunity to testify about proposals under consideration by this Committee to increase the amount of flexibility states have in using

their IV-E dollars. In my testimony I will focus on our experience

in implementing flexible funding mechanisms in the purchase of

residential and aftercare services for adolescents through the Massachusetts Commonworks Program.

The Massachusetts Commonworks Program provides a continuum of services for adolescents who require residential treatVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
65

ment. Currently serving about 55% of the total residential care

population, Commonworks provides an integrated, comprehensive

array of services for adolescents and their families through six networks of private providers, each under the management of a nonprofit Lead Agency. These are children with severe behavioral and

emotional problems, often complicated by other handicapping conditions, who can not be safely maintained in a less restrictive, family like setting. The key objective of the Commonworks Program is

to help these youth to achieve their permanent plan as quickly as

possible.

The Department’s goals are to improve access to necessary and

appropriate services, to ensure that services are consistently delivered according to the highest standards of quality, and to find cost

savings that can be reinvested in the system to serve more children

within budgetary constraints. Managed care mechanisms and processes are employed in this carve out to help us achieve these goals

through a funding structure that permits greater flexibility in purchasing services that best meet individual client needs.

The Department pays a monthly case rate to the Lead Agency for

each youth in placement, and a separate lesser monthly case rate

to support up to 6 months of aftercare services for youth who have

been discharged from placement. Incentive payments are provided

for successful outcomes, such as discharge from placement, and if

the youth does not return to placement within 6 months of discharge. The Lead Agency subcontracts with providers who operate

programs of varying levels of restrictiveness from staff secure residential schools to smaller community group homes and specialized

foster care. Youth enter the system at the highest level of care,

transition to less restrictive settings or return home as they

progress in treatment. During the transition and aftercare period,

family support and wraparound services are purchased to support

the discharge plan.

The Department pays a separate administrative fee to the Lead

Agencies for the employment of highly trained and experienced

care coordinators, educational coordinators, and support personnel.

Each Lead Agency has fiscal liability for up to 3% of costs that

exceed the case rate, and may retain as profit up to 3% of revenue

earned for costs that fall below the case rate. This risk corridor is

calculated annually. Earnings are achieved primarily by ensuring

youth are progressing in treatment and moving to less restrictive

and less costly placement settings. The Lead Agency can purchase

whatever additional services are needed to support the placement

by drawing on the funds that have accumulated in their service accounts. This model provides greater flexibility in the purchase of

services to meet the individual needs of youth than when the Department purchases placement services directly through unit rate

contracts with providers.

Savings accrued beyond the 3% are reinvested in program development to address service gaps in the regional systems of care.

Prior to the Commonworks Program, the Department never had access to reinvestment dollars. But over the past 2 years,

Commonworks has generated more than $2 million for Regional

program development initiatives.

66

Intensive case management coupled with funding mechanisms that incentivize positive outcomes and provide greater flexibility in

the purchase of services has resulted in a 6% recidivism rate for

planned discharges and a significant decrease in the percentage of

youth who are placed in the most restrictive settings. While the average case rate paid for service is substantially less than the average rate paid by the Department for nonCommonworks placements, when the administrative costs associated with delivering better outcomes are factored in,

Commonworks is not less expensive. Over time, however, it is anticipated that the cost per youth may actually decrease as a result

of continued shortened lengths of stay in high cost residential

placements and further use of wrap around and support alternatives to maintain youth in less restrictive, less costly, permanency placements in the community.

In order to move the system forward it is our intent to integrate

the currently bifurcated system of placement services and aftercare

community support services by developing a blending capitated

rate. This will provide even greater flexibility and an increased incentive to provide intensive wrap around and family support services early in the youth’s placement. The proposals under consideration by this Committee will provide Massachusetts with the tools

needed to promote further creativity and innovation in our system

and will result in earlier achievement of permanency for youth in

residential placement. Thank you, Madam Chair.

[The prepared statement follows:]

Statement of Robert Wentworth, Senior Manager, Massachusetts

Department of Social Services, Boston, Massachusetts

Members of the Subcommittee:

I am a senior manager at the Massachusetts Department of Social Services, the

children’s protective services agency in that state. My responsibilities include oversight of the residential placement service system for over 2100 children and adolescents in the care or custody of the Department. I appreciate this opportunity to testify about proposals under consideration by this committee to increase the amount

of flexibility States have in using their IV–E dollars. In my testimony I will focus

on our experience in implementing flexible funding mechanisms in the purchase of

residential and aftercare services for adolescents through the Massachusetts

Commonworks Program.

The Massachusetts Commonworks program provides a continuum of services for

adolescents who require residential treatment. Currently serving about 55% of the

total residential care population, Commonworks provides an integrated, comprehensive array of services for adolescents and their families through six networks of private providers, each under the management of a non-profit Lead Agency. These are

children with severe behavioral and / or emotional problems, often complicated by

other handicapping conditions, who can not be safely maintained in a less restrictive, family-like setting. The goal of the Commonworks Program is to help these

youth to achieve their permanent plan as quickly as possible.

The Department’s goals are to improve access to necessary and appropriate services, to ensure that services are consistently delivered according to the highest

standards of quality, and, to find cost savings that can be reinvested in the system

to serve more children within budgetary constraints. Managed care mechanisms and

processes are employed in this carve out to help us achieve these goals through a

funding structure that permits greater flexibility in purchasing services that best

meet individual client needs.

The Department pays a monthly case rate to the Lead Agency for each youth in

placement, and a separate lesser monthly case rate to support up to 6 months of

aftercare services for youth who have been discharged from placement. Incentive

payments are provided for successful outcomes, such as discharge from placement,

and if the youth does not return to placement within six months of discharge. The

Lead Agency sub-contracts with providers who operate programs of varying levels

67

of restrictiveness from staff secure residential schools to smaller community group

homes and specialized foster care. Youth enter the system at the highest level of

care, transition to less restrictive settings or return home as they progress in treatment. During the transition and aftercare period, family support and wraparound

services are purchased to support the discharge plan. The Department pays a separate administrative fee to the Lead Agencies for the employment of highly trained and experienced care coordinators, educational coordinators, and support personnel.

Each Lead Agency has fiscal liability for up to 3% of costs that exceed the case rate, and may retain as profit up to 3% of revenue earned for costs that fall below

the case rate. This risk corridor is calculated annually. Earnings are achieved primarily by ensuring youth are progressing in treatment and moving to less restrictive and less costly placement settings. The Lead Agency can purchase whatever additional services are needed to support the placement by drawing on the funds that

have accumulated in their service accounts. This model provides greater flexibility

in the purchase of services to meet the individual needs of youth than when the Department purchases placement services directly through unit rate contracts with

providers.

Savings accrued beyond the 3% are reinvested in program development to address service gaps in the regional systems of care. Prior to the Commonworks Program,

the Department never had access to reinvestment dollars. Over the past 2 years,

Commonworks has generated more than 2 million dollars for Regional program development initiatives.

Intensive case management coupled with funding mechanisms that incentivize

positive outcomes and provide greater flexibility in the purchase of services has resulted in a 6% recidivism rate for planned discharges and a significant decrease in

the percentage of youth who are placed in the most restrictive settings.

While the average case rate paid for services is substantially less than the average rate paid by the Department for non-Commonworks placements, when the administrative costs associated with delivering better outcomes are factored in

Commonworks is not less expensive. Over time, however, it is anticipated that the

cost per youth may actually decrease as a result of continued shortened lengths of

stay in high cost residential placements and further use of wrap around and support

alternatives to maintain youth in less restrictive, less costly, permanency placements in the community.

In order to move the system forward it is our intent to integrate the currently

bifurcated system of placement services and aftercare community support services

by developing a blended capitated rate. This will provide even greater flexibility and

an increased incentive to provide intensive wrap around and family support services

early in the youth’s placement. The proposals under consideration by this committee

will provide Massachusetts with the tools needed to promote further creativity and

innovation in our system and will result in earlier achievement of permanency for

Allen.

youth in residential placement.

Chairman JOHNSON. Thank you very much, Mr. Wentworth. Ms.

f STATEMENT OF MARYLEE ALLEN, DIRECTOR, CHILD

WELFARE AND MENTAL HEALTH, CHILDREN’S DEFENSE FUND

Ms. ALLEN. Good afternoon, Chairman Johnson. I am MaryLee

Allen, Director of Child Welfare and Mental Health at the Children’s Defense Fund. I really appreciate your invitation to testify

today on behalf of the Children’s Defense Fund.

I am particularly pleased to be here because of the leadership

that you personally have shown over almost two decades now in

advocating on behalf of the children in the child welfare system as

well as the children who are at risk of placement in the system.

Today, CDF certainly shares your commitment to find ways to increase investments in preventive, reunification, and post-adoption

and other post-permanency services for abused and neglected children. We also share your concern about the fact that the vast maVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
68

jority of Federal child welfare dollars are spent on the placement

of children outside of their families, without equivalent investments in services for children and families.

As you know, these are not new concerns for CDF. More than 20

years ago in Children Without Homes, CDF highlighted the fact

that Federal funding patterns in child welfare act as disincentives

to the development of strong family support programs. Many a

time since then, we have appeared before this Subcommittee to

make a case for increased investments in preventive and reunification services to put such funding at least on an equal par with

funding for out-of-home care. But as you well know, despite

progress in other areas, there has been relatively little progress in

this area.

Today, however, is a new day. I believe that we have an unprecedented opportunity. The Congressional Budget Office is projecting

a 10 year Federal on-budget surplus of $2.1 trillion, a $102 billion

on-budget surplus for next year alone. We can no longer ignore the

imbalance in funding or the needs of hundreds of thousands of our

country’s most vulnerable children. It’s time to make new investments in prevention, reunification, and post-permanency services.

You are proposing that this can best be done and best be

achieved by conditioning increased flexibility in funding on states

opting for a cap on foster care and/or adoption assistance funds.

As you know, CDF does have some serious questions about this

approach. We believe, however, that the best way to resolve a longstanding debate about the effectiveness of such an approach is to

proceed with the small number of flexible funding pilots that you

have proposed. They should teach us a lot about how such flexible

funding proposals will impact outcomes for children and families

and increase investments in services. To truly learn from the pilots,

planning and monitoring provisions need to be added to the draft

that’s in an initial stage now. We also want to continue to work

with the Subcommittee to make the pilots more workable and

somewhat simpler. CDF’s support for the pilots arises from our understanding that the individual entitlement to services and the individually enforceable protections in current law will be maintained

and that there will be a strong maintenance of effort provision.

We believe that a maintenance of effort requirement is essential,

as you have mentioned earlier today, to ensure that flexible dollars

are not used to reduce Federal, state, or local spending for child

welfare services. We are pleased that it’s included in the proposal.

Children need more, not less. We also are pleased that you have

attempted to address the income eligibility test in IV-E as well and

begun the process of trying to look at what might occur if, in fact,

we de-link income from funding in that particular area.

While we’re learning from the pilots, however, CDF recommends

that the Subcommittee also take a number of long and short-term

actions that are outlined in our written statement. I think in the

long term, as we continue the debate about some of the strategies

being proposed today, that we will be well served by stepping back

and putting aside the existing programs. We should consider starting fresh. We should ask what we would do if we were to design

a new system today. What would it look like in terms of the FedVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00072 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
69

eral Government’s obligations to some of our most vulnerable children and families?

In the short term, however, there are some very specific actions

that CDF believes can and should be taken to expand investments

up front immediately for prevention, reunification, and post-permanency services. They all would give states increased flexibility in

their use of funds and would also help ensure that the goals of the

Adoption and Safe Families Act (ASFA) were realized for children

and families. I’d like to mention quickly just three of them.

First, CDF recommends that the Title IV-E Foster Care Program

should be amended to allow, in addition to the current reimbursement for room and board payments, for reimbursement for services

for up to 15 months for families who come to the attention of the

child welfare system. States should be reimbursed for services to

children and families whether or not the children end up in foster

care. Certainly Judge Kearney talked earlier this afternoon about

the cases of calls coming into the hotline for whom there are often

no services with which to respond. These dollars could be used for

services in situations like those. This recommendation builds on

some of the same assumptions that underlie your flexible funding

proposal. If states make investments when problems first come to

the attention of the system, children will benefit and the need for

more costly out-of-home care may be able to be reduced over time.

Second, the Title IV-E Foster Care and Adoption Assistance Programs should be amended to allow states to claim reimbursement

in both programs for up to 18 months for post-permanency services.

These would help to ensure that children who are adopted, placed

permanently with kin, or are returned home, remain in those families—that those placements really are permanent. It’s very troubling when you consider that the reentry rates in many states for

children discharged from foster care are often 20 to 28% or higher.

We are not ensuring permanence for those children.

And one last example. We seriously urge the Subcommittee to

consider expanding treatment for families with alcohol and drug

problems. Judge Kearney mentioned, I think, that the percentages

are 70 or 80% in her state. And sadly in many other states you see

that same pattern. An estimated 75 to 85% of the families who

come to the attention of the child welfare system are facing challenges with substance abuse. We ask the Subcommittee to consider

action on the Senate’s bipartisan Child Protection and Alcohol and

Drug Partnership Act. S. 2345 would provide flexible funding to

states where the child protection and alcohol and drug agencies

apply together and commit to joint activities that will increase and

improve treatment services for these families.

We really appreciate the opportunity today to make recommendations to increase funding for preventive, reunification,

and post-permanency services and to increase flexibility in funding

as well. CDF looks forward to, and hopes that we’ll have the opportunity to, work with the Subcommittee on the flexible funding pilots and other short and long-term actions to increase states’ capacity to promote safety and permanence for children. Thank you.

[The prepared statement follows:]

70

Statement of MaryLee Allen, Director, Child Welfare and Mental Health,

Children’s Defense Fund

Good afternoon Madam Chairman, and other members of the Subcommittee on

Human Resources. I am MaryLee Allen, Director of Child Welfare and Mental

Health at the Children’s Defense Fund. The Children’s Defense Fund (CDF) is a privately funded public charity dedicated to providing a strong and effective voice for

all the children of America. As we seek to Leave No Child Behind, CDF pays particular attention to the needs of poor and minority children and children with disabilities. CDF has been working since the mid–1970’s on behalf of children who are

at risk of placement in the child welfare system or who are already in care. CDF

has never taken government funds.

I appreciate your invitation to testify today on behalf of CDF at the Subcommittee’s Hearing on Increasing State Flexibility in the Use of Federal Child Protection

Funds. I am particularly pleased to be here Madam Chairman because of the important leadership you have provided over almost two decades on behalf of children at

risk of placement in the child welfare system or who are already in care. You and

other members of the Subcommittee have worked diligently with CDF and others

to pursue reforms on behalf of older youths aging out of foster care, to increase services to promote safety and permanence for children, to improve data collection and

tracking, and to encourage states to demonstrate the types of reforms they want to

undertake with increased flexibility in federal funding.

I am here today because CDF shares your commitment to increase services to prevent children’s removal from their families, to encourage timely reunification in

cases where temporary removal is necessary, and to promote post-adoption services—all goals that you have stated are central to the flexible funding proposals you

are preparing to introduce. CDF also shares your concern that the vast majority of

state and federal child welfare dollars are provided for the placement of children

outside of their homes, without equivalent investments in alternative services.

Taking A Look Back in Time

As you know, these are not new concerns for CDF. More than 20 years ago, in

Children Without Homes: An Examination of Public Responsibility to Children in

Out-of-Home Care, we highlighted the fact that federal funding patterns act as disincentives to the development of strong family support programs. At that time there

was no federal child welfare money specifi+cally targeted to developing alternatives

to out-of-home placement for children.

From the very beginning of the debate on what became the Adoption Assistance

and Child Welfare Act of 1980 (P.L. 96–272), CDF testified about the need for funding for preventive and reunification services that was on an equal par with funding

for out-of-home care. We made the case for services to children and families to prevent crises from intensifying and requiring removal of children from their families

and to help children be reunified safely with their families. While the Ways and

Means Committee agreed to take some important first steps in that direction, the

Congress did not. Instead, CDF and others worked to include a stopgap measure

in the Adoption Assistance and Child Welfare Act. That measure provided for a cap

on foster care funding if funding for child welfare services grew to a certain level.

In such a case, states would be allowed to transfer funds under the cap that they

would not need for foster care to the Title IV–B Child Welfare Services Program.

States also had the option to use such a system even if child welfare services funding levels did not grow to the amount anticipated.

After enactment of the Adoption Assistance and Child Welfare Act, CDF returned

to Congress on numerous occasions to suggest other ways to increase resources

available to states for services to prevent placements, reunify children in foster care

with their families, and provide post-adoption services so children can remain with

permanent families. Yet here we are still discussing proposals similar to those first

introduced almost 20 years ago.

As you well know, little progress has been made in leveling the playing field between funding for prevention, reunification, and post-permanency services, and

funding for out-of-home care. The use of federal Title IV–E administrative funds for

numerous activities related to the placement of children in foster care and the ongoing monitoring of their cases has helped some. The Promoting Safe and Stable Families Program, first enacted in 1993 and expanded slightly in 1997, has stimulated

important innovations in states to increase family support services and to promote

reunification and adoption services, but its funding level of $295 million this year

is still only a very small piece of the total funding for child welfare. Some funds

from the Child Welfare Services Program also can be used for preventive services.

The program, however, currently funded at $292 million, still below its $325 million

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authorized funding level, has seen virtually no growth since 1981 when measured

in constant 1997 dollars. These dollars are supplemented by the very small Community-Based Family Resource Program and parts of the Child Abuse Prevention and

Treatment and Adoption Opportunities programs, all under the jurisdiction of the

House Education and Workforce Committee. These programs together total less

than $100 million and also have grown very little over the past decade. Unfortunately, this same pattern of inadequate funding for prevention is repeated in the states. In its 1999 report, The Cost of Protecting Vulnerable Children: Under- standing Federal, State, and Local Child Welfare Spending, the Urban Institute

noted that relatively little state money is being spent on prevention. In analyzing

state expenditures, it found that for every $1 states spend on prevention, child protective services, and case management services, states spend over $3 covering outof-home placements, adoption, and administrative costs.

There is clearly a need for new investments in prevention, reunification, and post- permanency services. The challenge is how best to make the greatest gains for children and families. In my time this afternoon, I would like to do three things. First,

review with you some core principles that CDF believes should be reflected in any

changes in federal law that are made to increase the capacity of state and local

agencies and the courts to improve child safety, permanence, and well-being. Second, outline several steps that CDF urges Congress to take to enhance services to

protect children, support families, and provide families (birth, kin, and adopted) the

post-permanency supports they need to remain together and to prevent children

from re-entering foster care. Third, I would like to raise several questions that CDF

hopes can be answered as states move forward with the flexible funding pilots that

are being proposed.

Promoting Child Welfare Reform Principles

As Congress continues working to find the best ways to ensure safety and perma- nence for children and to increase investments in prevention, reunification, and

post-permanency services, including post-adoption services, CDF believes that the

following principles should be reflected in any child welfare reforms: • A focus on child outcomes. The goals for any new child welfare reforms must be improved outcomes for children and families. It is risky to provide incentives to

states to reduce out-of-home care without also looking at what such reductions will

mean for children and families. We must always ask how proposed changes will result in improved outcomes for children. In assessing outcomes, it is important to recognize that in some cases the changes proposed may increase the likelihood of improved outcomes for children and families in the future even though they do not immediately result in improved outcomes. • An assurance of appropriate protections, services, and supports. Federal

leadership in promoting protections and accountability for children has been extremely important and must be maintained. It has prompted protections at the state

and local levels and provided opportunities to ensure that these protections were actually provided to children.

• An individual entitlement to services. Whatever the reforms proposed, it is

critically important that otherwise eligible children remain entitled to receive assistance under the Title IV–E Foster Care and Adoption Assistance Programs. When

child tragedies occur in states, economic conditions worsen, or other unpredictable

situations arise and caseloads grow, CDF believes that the assurance that these

children will be protected must be a shared federal and state responsibility.

• Increased capacity to promote safety and permanence. As I will discuss

further below, increased resources are needed to provide incentives to state and

local agencies and courts so that they can improve their capacity to provide adequate services, trained and committed staff, and efficient responses. This will require a range of strategies. While some states will move in these directions if they

are given increased flexibility, many more may not. Unless other types of incentives

are provided, the status quo will likely be maintained in these states.

• Up-front assistance to help increase capacity. States need expanded resources to increase the capacity of their systems to better meet the needs of children

and their families so safety can be paramount and timely permanency decisions

made. It is not sufficient to provide states with incentives only after progress is

achieved. Up-front investments are needed.

Increasing Investments to Enhance Capacity

In order to truly expand investments for prevention, reunification, and post-permanency services, CDF recommends that the Subcommittee take action on both

long-term and short-term strategies to improve the child welfare system’s treatment

of children.

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Over the long term, CDF believes that it is time to re-examine the basic structure of current federal child welfare financing provisions to determine the appropriate

role of the federal government on behalf of this especially vulnerable group of children and families. We urge the Subcommittee to replace the current system with

a comprehensive system that is consistent with the above principles. For too long,

despite broad dissatisfaction with the underlying premise of the funding system, reforms have tinkered around the edges. Any new broad reform should include the

elimination of the current link between Title IV–E and welfare (AFDC or TANF),

which certainly makes no sense from a child’s perspective or from the perspective

of those administering the system. The federal government’s support for abused and

neglected children should not be dependent on the income of the families where the

abuse occurred. The Congressional Research Service has estimated that delinking

foster care eligibility from AFDC would basically double the number of foster children nationwide who would be eligible for federal funds. In the short term, while comprehensive reforms are being examined, CDF rec- ommends that the Subcommittee proceed with the flexible funding pilots that Chairman Johnson has proposed, which are discussed more fully in the next section of

my testimony, and also consider investments like those described below. These

would help to increase the service, training, data, and tracking capacities of the

child welfare system to better keep children safe and in permanent families. CDF

believes that proposals like these will help states reduce appropriately the number

of children in foster care and allow states to continue to receive federal Title IV– E funds after reimbursement for room and board is no longer needed. At a minimum, capacity should be increased in the following ways.

EXPANDED SERVICES

Alcohol and drug treatment

An estimated 40 to 80 percent of the children in the child welfare system are from families with alcohol and drug problems. Virtually every state is struggling to find

appropriate treatment and services for this population. The bipartisan Child Protection and Alcohol and Drug Partnership Act of 2000 (S. 2345) would provide flexible

funding to states where the child protection and alcohol and drug agencies apply

together and commit to joint activities that will enhance alcohol and drug treatment

for families who come to the attention of the child welfare system. We urge the Subcommittee to seriously consider service expansions for children and families with alcohol and drug problems.

Post-permanency services

Title IV–E Foster Care and Adoption Assistance programs should be amended to allow states to claim reimbursement for up to 18 months of post-permanency services to ensure that children who are returned home, placed permanently with kin

caregivers, or are adopted do not re-enter the system. At the Working Conference

on Child Welfare Financing in February 1999, organized by the Chapin Hall Center

for Children at the University of Chicago, Child Welfare Commissioners from New

York City, Los Angeles County, and Illinois all spoke to the importance of funding

for after-care services to protect children and strengthen families of all types. In Illinois, some of the large increases in discharges from foster care were attributed to

a new per-family grant available for services to support reunification services.

Data from the Multi-State Foster Care Data Archive, maintained by the Chapin

Hall Center for Children, estimates that in 10 states (including California and New

York and some of the other largest states) an estimated 21 to 28 percent of the children who were discharged from foster care re-entered care. Children do not achieve

permanence when re-entry occurs at such a rate. There is also increasing concern

that, in the haste of implementing the Adoption and Safe Families Act (ASFA), children will be placed inappropriately with adoptive families who do not have the supports they need to care for children with special needs, resulting in an increase in

adoption disruptions. Post-permanency support in the Title IV–E Program would assist in all of these cases.

Preventive services

The Title IV–E Foster Care Program also should be amended to allow payment

for services for 15 months for families who come to the attention of the child welfare

system whose children are not in foster care and for families with children in foster

care. This recommendation builds on the same assumptions that underlie the flexible funding proposal. If states make investments earlier, children will benefit and

the need for more costly out-of-home care in the future should be reduced over time.

To enable the expansion of family support and permanency services, funding should

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be increased for the Promoting Safe and Stable Families Program, which must be

reauthorized next year.

SUPPORT FOR THE COURTS

Increased resources for tracking, data collection, and other court improvements

Permanency for children cannot be accomplished without making investments in

the work of the courts. States need continuing federal support for the State Court

Improvement Program, which must be re-authorized next year. These projects have

helped to improve the timeliness of court proceedings, the decisiveness of permanency hearings, and the preparation of attorneys. The bipartisan Strengthening

Abuse and Neglect Courts Act (S. 2272) and TAKE CARE Act (S. 2271) also would

make needed improvements in the courts by expanding funding for data collection,

tracking, and expansion of the Court Appointed Special Advocates (CASA) Program.

Representative Deborah Pryce, Senator Mike DeWine, and Mrs. Christine DeLay all

spoke to the importance of this legislation at the Subcommittee’s hearing in March

of this year.

TRAINING

Training of public and private agency and court staffs

The goals of safety and permanence for children will not be realized without a

skilled and qualified workforce. In some cases, specialized permanency units may

have to be developed to take on one-time challenges and cope with backlogs of children making their way to permanent families. To help improve staff quality, Title

IV–E training funds should be available at the 75 percent federal matching rate for

training staff across child-serving systems and from public and private agencies who

are working with families who have come to the attention of the child welfare system. It is not unusual in states for the majority of the foster care placements to be

handled by private agencies. We applaud the Subcommittee’s leadership in expanding training funds for court staff, a provision that was included in last year’s Fathers Count Act of 1999, and we look forward to working with you to try to ensure

passage of that provision in the Senate.

SPECIAL ATTENTION TO CHILDREN WHO ARE WAITING

Strategies to move children to permanent families

One time funding also should be provided to states that, following the mandates

in the Adoption and Safe Families Act (ASFA), have identified large numbers of

children as needing adoptive families or other permanent homes but do not have

the resources necessary to move these children to permanent families. If a state can

quantify how many children need help to get into specific types of permanent living

arrangements, what kind of help they need, and how much it would cost, Congress

should give the state a one-time grant to assist with the activities needed to move

these children to permanent families. Such a one-time grant award could be made

contingent upon the state providing some matching funds. These grants could help

move large numbers of children to permanent families and reduce the number of

children in care so that children entering the system in the future will be more likely to receive timely assistance and support.

PROMOTING INCREASED FLEXIBILITY IN CHILD PROTECTION FUNDING

CDF agrees that the flexible funding proposals being promoted should be tried on

a pilot basis with a small number of states. In our view, they are certainly preferable to the child protection block grant proposals of the past because they maintain the individual entitlement for children and the individual enforceable protections for children who are entering the system or already in foster care. As envisioned, they also are likely to result in additional dollars for the states as well as

additional flexibility.

We also believe that implementation of the pilots can help answer some of the

larger questions that were raised by Chairman Johnson’s April 2000 paper, ‘‘Promoting Flexible Funding in the Child Protection Program.’’ Some of these questions

also raise concerns that we urge the Subcommittee to address in the pilots as the

bill is being finalized. These questions, and related concerns, are listed below.

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1. What assurance is there that any new dollars will be invested in prevention, reunification, or post-permanency services?

While the rationale for increased flexibility is to increase funding for a range of

alternative services to foster care, there does not seem to be any assurance that

such investments would increase. States could use the dollars for any activities authorized under the Title IV–B and IV–E programs. For example, a state might decide to pay for foster care for more children from the juvenile justice system or to

pay for more placements with expensive for-profit providers, rather than increasing

investments in prevention or reunification services. There is not yet a provision in

the draft bill that requires states to report on how funds are used so that there

would be a way to determine what investments were made in prevention, reunification, and post-permanency services.

The current incentive in these proposals is for caseload reduction, rather than for

increased investments in prevention and reunification services. In fact, if states use

the dollars successfully for prevention, their base lines will decline and they are

likely to have fewer dollars to invest in these services in the future. CDF does not

believe that caseload reduction alone should be the goal of child welfare reform. An

incentive to lower caseloads, without similar incentives to increase investments in

prevention and reunification and post-permanency services, may likely place children at risk by returning them home prematurely or pushing them into the homes

of relatives or adoptive parents who are not yet ready for them.

2.What room will there be for states to negotiate meaningful three-or five-year funding base lines if Congress already has established an overall funding limit for the

new initiative?

This question encompasses two concerns. First, it was clear to us from the May

12 meeting held on the flexible funding proposals and subsequent conversations

with state officials, that there are very few, if any, states that have experience in

calculating multi-year funding base lines for child welfare programs that accurately

anticipate future needs. This was certainly true for the five-year base lines originally proposed, and I suspect it is true for three-year base lines as well. The complexities of making such projections are highlighted by graphs that demonstrate the

movement of children in and out of foster care and the unpredictability of the child

welfare system. There is often significant variation month by month and year to

year. In addition, specific events, such as the death of a child or other factors outside the control of the public system, can cause foster care caseloads suddenly to

increase dramatically. The Department of Health and Human Services (HHS) also

has limited expertise in computing such base lines.

Second, we do not understand how states that sit down with the Secretary of HHS

to develop their base lines will actually have the flexibility to negotiate necessary

base line increases. Congress will already have attached a price tag to this initiative, and the Secretary will be forced to keep the costs of the bill within those limits

rather than accommodating all the requested increases from the states.

3. How will Congress ensure that any funds resulting from the increased flexibility

will be used by states for the purpose of expanding services for children and families

either in or at risk of entering the child welfare system?

CDF believes that it is important for Congress to ensure in any flexibility proposal

that the increased flexibility actually results in increased expenditures and activities to assist children and families. There is a lot of consensus, we believe, that

those seeking new reforms do not want to see states reduce their own expenditures

in child welfare as increased flexibility of federal funds becomes available. A strong

maintenance of effort proposal will help to protect against this and also help to ensure that these federal funds are not spent for non-child welfare purposes. We are

pleased that the draft flexible funding pilots include a maintenance of effort provision and would like the opportunity to work with the Subcommittee staff to

strengthen it further.

4. What are the political and practical barriers that will make it difficult for a state

to revert to an open-ended entitlement if they experience unanticipated expenditures,

most likely due to unanticipated caseload growth?

States that do not correctly predict their foster care growth trends will have to

admit their errors in order to revert to the open-ended entitlement. They also will

have to find alternative ways to make up the shortfall in funding for the year they

were operating the pilot. How this is done could have serious implications for the

safety, permanence, and well-being of the children involved. There also will likely

be contracts with service providers that will have to be broken when services funded

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with IV–E flexible dollars can no longer be funded with IV–E dollars. Once the state

reverts back to the Title IV–E open-ended entitlement program, the use of federal Title IV–E funds will be limited to foster care or adoption assistance payments (room and board and related costs) only for certain eligible children. It is also important to flag the potential cost implications for such a proposal if all states decide

at once to revert to the open-ended entitlement program. CDF believes that the draft pilots will help answer many questions about the workability of the proposals, their costs, and the likelihood that they will result in

significant increases in preventive and reunification services. We support the concept of flexible funding pilots for up to five states each and look forward to working

with you and your staff to further strengthen the draft as you fully develop the proposal. For example, CDF believes that in both pilots states must be required to submit a plan for how flexible funds will be used and how these funds will increase

the capacity of the child welfare system to expand prevention, reunification, or postpermanency services, or new attention to special needs populations. States also

must have a system in place to track the progress made over time in expanding preventive, reunification, and post-permanency services.

MODIFYING THE NATURE OF THE DEMONSTRATION WAIVERS

The draft flexible funding proposal also makes several changes in the child welfare demonstration waivers that were championed by Chairman Johnson and other

members of the Subcommittee in 1993. CDF supports, at least in part, several of

the modifications proposed in the demonstration waivers.

We agree that HHS should not be allowed to impose arbitrary limits on the numbers of states that can conduct demonstrations on similar activities. Different adaptations of a similar activity in multiple states could be very helpful in documenting

the potential for expanding the demonstration nationwide. For similar reasons, we

also agree that there should be no limitation on the number of demonstrations that

may be awarded in a single state. In such cases, however, we believe that it is important for a state to specify in its application how the multiple demonstrations

within the state will complement each other. Similarly, states should be allowed to

expand their demonstrations to reach additional children or additional parts of the

state without having to submit full waiver requests.

Finally, we agree that the waiver provision should specifically allow states to extend the five-year waivers for additional periods of time. However, we do not believe

that states should be allowed to do so if the demonstrations have harmed or had

no benefit for children and families. We are concerned that the language in the draft

flexible funding bill seems to allow unconditional extensions provided that the demonstration is being conducted in accordance with the waiver authority provided in

law. We recommend that the extension not be for the indefinite period specified in

the draft bill but instead be for two additional three-year periods. In some cases extensions will be necessary because five years is too short of a time in which to fully

recognize the benefits of what is being demonstrated. In other cases, the extension

may be important because the demonstration clearly yielded important benefits, and

there is a legitimate desire to continue to allow children to benefit from these same

activities in the future. We recommend a maximum of 11 years for the waivers because we believe that the regular renewals will keep the pressure on the federal

government to determine whether the demonstration outcomes warrant changes in

federal law that would extend similar activities to all states. If states can continue

to implement their waivers indefinitely, with little subsequent review by HHS, HHS

is apt to lose track of the benefits achieved, and these benefits will not then be extended to additional sites and additional children and families.

We also are very interested in learning more about the Subcommittee’s plans to

propose changes in the research and evaluation requirements for the child welfare

demonstration waiver program. We agree that there are some adjustments that

need to be made, but we also believe that it is essential to be able to document the

impact of the changes in policy and practice that are being implemented in the demonstrations. We look forward to working with the Subcommittee more on this feature and other aspects of the modifications in the demonstration waivers.

Thank you for the opportunity to make recommendations as the Subcommittee examines ways to increase funding for preventive, reunification, and post-permanency

services and to promote increased flexibility in funding. The Children’s Defense

Fund looks forward to continuing to work with the Subcommittee on both shortterm and long-term child welfare reforms. We would like the opportunity to meet

with Subcommittee staff to talk in more detail as they finalize language for the two

five state flexible funding pilots and modifications in the child welfare demonstration waiver program. We also ask that you consider seriously additional investments

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to increase capacity in the states to better promote safety and permanence for children.

Chairman J

STATEMENT OF ROBERT GEEN, SENIOR RESEARCH

OHNSON. Thank you very much. Mr. Geen.

fASSOCIATE, URBAN INSTITUTE

Mr. GEEN. Madam Chair, thank you very much for the oppor- tunity to testify this afternoon. I am Robert Geen, a senior research associate at the Urban Institute. I’d like to draw your attention to three critical issues facing the flexible funding demonstrations based on our past 4 years of research with the Urban Institute on child welfare financing. First, as you have noted and many on the panel, the existing Federal child welfare financing structure is fundamentally flawed.

The flexible funding proposals correct some but not all of the weaknesses of the current structure.

Second, enforcing a maintenance of effort requirement will be very difficult given the variety of Federal funds states use and the

variety of agencies that provide child welfare services. Third, the flexible funding demonstrations would likely alter

states’ use and support of relative or kinship foster care.

Let me elaborate on these issues. The most basic shortcoming of the present financing structure is that states have little financial

incentive to reinforce child welfare goals as has been mentioned. If

a state saves Federal dollars by shortening the time a child spends

in foster care, the saving is returned to the Federal Government.

The flexible funding demonstrations address this problem by allowing states to reinvest IV-E savings from shorter foster care stays

into other parts of the child welfare system. The Consolidation of Grants demonstrations would allow states

to receive a block grant for foster care funds, adoption funds, or

both. By permitting states to receive a block grant for foster care

while leaving adoption and open-ended entitlement, the legislation

may have an unintended consequence. States may have the financial incentive to make adoptive placements before making reasonable efforts to reunify children with their families. A second shortcoming of the current system is that states must spend inordinate amounts of time and money determining what

they can claim for Federal reimbursement. Currently, IV-E, as you

know, is based on the eligibility of the child’s prior care giver for Aid to Families with Dependent Children. In our research, one

child welfare agency reported that it spent $4 million a year to

claim $26 million in Federal funds. Another child welfare agency

noted that they have 600 eligibility staff.

While the five states approved for the Consolidation of Grants

demonstrations will receive relief from eligibility determination,

other states will not. The historical reasons for linking IV-E eligibility to AFDC are no longer valid. The Federal Government has

an interest in all foster children, not just those from impoverished

homes. The Committee could provide relief for all states by providing Federal reimbursement for all children in state custody and

reducing Federal matching rates accordingly.

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Expanding on the second point about the variety of Federal funds

used for child welfare, a flexible funding demonstrations could encourage states to shift child welfare spending to remaining entitlements such as Medicaid or Supplemental Security Income. After

all, IV-E represents less than half of the total funds that states expend on child welfare services. States always have the incentive to

first seek out entitlement funding before expending block grant

funds or state funds.

Multiple agencies provide a variety of service and interventions

that may be considered child welfare. States use a variety of Federal funds to support child welfare. Thus, it is difficult to define

what actually constitutes a child welfare budget for a state. And it

will be even more difficult to ensure that a state maintains its historical investment. States could shift funding from child welfare

agencies to other agencies that provide similar services and would

likely appear to meet MOE requirements. I want to be clear, however, that this does not negate the need for an MOE requirement.

Rather it argues for HHS to develop very specific and comprehensive regulations that include a non-supplantation provision.

On the third point about block granting IV-E would likely alter

states’ use and support of relative foster care. In January, HHS

issued regulations requiring states to license relative foster parents

based on the same licensing criteria used for non-relatives in order

to receive IV-E reimbursements. Currently, based on a 1999 survey

by the Urban Institute, 31 states and the District of Columbia use

different licensing standards to improve at least some of their relative foster parents. This would no longer be possible under the

flexible funding demonstrations which would award all IV-E protections to both IV-E and non-IV-E eligible children. States then

would have two options under the flexible demonstrations. They

could provide foster payments to all relative foster parents, which

could significantly increase IV-E expenditures, or they could not

maintain protective custody of children placed with relatives, which

would make it difficult to ensure the safety of these kids.

In conclusion, despite its clear improvements over the current

Federal financing system, implementing flexible funding for child

welfare is not without risk. The main benefit of an entitlement is

that states are protected from sudden increases in their caseload

for issues beyond their control.

While the Consolidation of Grants demonstrations provide some

protection for such a scenario by allowing states to opt out of the

block grant in future periods, exiting the demonstration will entail

both economic and political costs. In comparison, the Transfer of

Funds demonstrations provide greater protection for sudden

changes in caseloads since this proposal allows flexible funding but

also maintains the IV-E entitlement.

Thank you. And I’ll be happy to answer any questions you may

have.

[The prepared statement follows:]

Statement of Robert Geen, Senior Research Associate, Urban Institute

Madam Chair, members of the Subcommittee, thank you very much for the opportunity to testify this afternoon.

I am Robert Geen, a senior research associate at the Urban Institute, where my

research focuses on child welfare issues. Based on our past four years of research

78

1Geen, R., Boots, S., and Tumlin, K. The Cost of Protecting Vulnerable Children: Understanding Federal, State, and Local Child Welfare Spending. The Urban Institute, January 1999.

on child welfare financing, I would like to draw your attention to three critical

issues facing the flexible funding demonstrations that have been proposed to this

Committee.

First: The existing federal child welfare financing structure is fundamentally flawed. It provides financial incentives that run counter to the goals of the child

welfare system and requires states to invest considerable time and money to claim

federal reimbursement. The flexible funding proposals correct some but not all of

the weakness of the current structure.

Second: Enforcing a maintenance of effort requirement and non-supplantation provision will be very difficult given the variety of federal funding streams states

use and the variety of agencies that provide child welfare services. Third: The flexible funding demonstrations would likely alter states’ use and support of relative foster care, or kinship care—a growing source of care for children in the child welfare system. Let me elaborate on these issues.

Legislation addresses some but not all shortcomings of the current system.

The most basic shortcoming of the present federal child welfare financing struc- ture is that states have little financial incentive to reinforce child welfare goals. For

example, if a state saves federal dollars by shortening the time a child spends in

foster care, the savings return to the federal government. Both the flexible funding

demonstrations and the IV–E waivers address this problem by allowing states to reinvest IV–E savings from shorter foster care stays in other parts of the child welfare system, such as prevention or aftercare services. The Consolidation of Grants demonstrations would allow states to receive a block

grant for foster care funds, adoption funds, or both. By permitting states to receive

a block grant for federal foster care funds while leaving adoption an open-ended entitlement, the legislation may have an unintended consequence. States may have a

financial incentive to make adoptive placements before making reasonable efforts to

reunify children with their families. A second shortcoming of the current system is that states must spend inordinate amounts of time and money determining what they can claim for federal reimbursement. Currently, IV–E eligibility is based on the eligibility of the child’s prior caregiver for Aid to Families with Dependent Children. In our research, one child welfare agency reported that it spent $4 million a year to claim $26 million in federal

funds. Another agency reported that they have a staff of 600 to determine eligibility. While the five states approved for the Consolidation of Grants demonstrations will

receive relief from IV–E eligibility determination, states implementing the Transfer of Funds demonstrations or the waivers will not. The historical reasons for linking

IV–E eligibility to AFDC are no longer valid. The federal government has an inter- est in all foster children, not just those from impoverished homes. This Committee

could provide relief from IV–E eligibility determination for all states by providing federal reimbursement for all children in state custody and reducing federal matching rates accordingly.

The variety of federal funds used for child welfare makes the maintenance of effort

(MOE) requirement problematic.

The flexible funding demonstrations could encourage states to shift child welfare spending to remaining federal entitlements like Medicaid or Supplemental Security

Income. After all, IV–E represents less than half of the total federal funds that

states expend on child welfare services.1 States always have the incentive to first seek out entitlement funding before expending block grant funds. Multiple agencies provide a wide variety of services and interventions that may be considered child welfare. In addition, states use a variety of federal funds to support child welfare services. Thus, it is difficult to define what constitutes a state’s child welfare budget and even more difficult to ensure that a state maintains its

historical investment. States could shift funding from child welfare agencies to other

agencies that provide similar services and would likely appear to meet MOE requirements. I want to be clear, however, that this does not negate the need for a

MOE requirement. Rather it argues for HHS to develop specific and comprehensive

regulations that include a non-supplantation provision.

Block Granting IV–E would likely alter states’ use and support of relative foster care.

Approximately 200,000 foster children are in relative foster care and this number is growing due in part to the declining number of nonrelative foster parents. In JanVerDate 20-JUL-2000 11:50 Mar 20, 2001 Jkt 060010 PO 00000 Frm 00082 Fmt 6633 Sfmt 6602 K:\HEARINGS\68872.TXT WAYS3 PsN: WAYS3
79

2Leos-Urbel, J., Bess, R., and Geen, R. State Policies for Assessing and Supporting Kinship

Foster Parents. The Urban Institute, (In Press).

uary, HHS issued regulations for states to implement the Adoption and Safe Families Act. The regulations require states to license relative foster parents based on

the same licensing criteria used for nonrelatives in order to receive IV–E reimbursements. Based on an 1999 Urban Institute survey, 31 states and the District of Columbia use different licensing standards to approve at least some relative foster parents.2 Most states provide those relative foster parents with Temporary Assistance for Needy Families grants instead of foster care payments. This would no longer be

possible under the flexible funding demonstrations, which would award IV–E protections to both IV–E and non-IV–E eligible children. States that implement flexible funding demonstrations will have two choices: (1) provide foster payments to all relative foster parents, which could significantly

increase IV–E expenditures and/or cut the supply of relative foster parents since not all may be able to meet licensing requirements, or (2) not maintain protective custody of children placed with relatives, which could make it difficult to ensure the safety of those children. It is also important to note that states’ decisions on whether to include kinship

care placements in their IV–E caseloads could significantly affect their baselines. States, at least initially, will have the incentive to move all kinship care placements

into their caseloads to increase the size of their block grant. In conclusion, despite its clear improvements over the current federal financing system for child welfare services, implementing flexible funding for child welfare is

not without risk. The main benefit of an entitlement is that states are protected

from sudden caseload increases due to factors beyond their control, for example a

drug epidemic or a sharp downturn in the economy. While the Consolidation of Grants demonstrations provide some protection for

such a scenario by allowing states to opt out of the block grant in future periods,

exiting the demonstration will entail both economic and political costs. In comparison, the Transfer of Funds demonstrations provide greater protection for sudden

changes in caseloads since they provide funding flexibility but also maintain the IV– E entitlement.

Thank you again for this opportunity to testify and I am happy to answer any questions you may have. The views expressed are those of the author and do not necessarily reflect those

you have mentioned the complexity of the current system. And

of the Urban Institute, its trustees, or its sponsors.

Chairman JOHNSON. I’d like to start by saying that a number of

f Judge Kearney, you gave a very good chart that shows how many

sources have to be tapped. And I assume that for every source, a

different set of papers has to be filled out. You know, I don’t know

why you’re not up in arms. I read a memo from this little group in my hometown and a few adjoining towns that have a waiver and

they are trying to do this and it described the number of problems

they’re having to deal with from the micro-level up. Why aren’t you outraged? I mean, we desperately need the money for services. We

all know that. We’re squandering it at the administrative costs level. And we have a chance to make change. Now, I don’t think

my proposal goes far enough in making change, and particularly

administrative change. I mean, we have got to do better than this.

I think your testimony demonstrates that we’ve got to do some- thing. And I appreciate some of the detailed comments made about

the legislation, that is, you know, we always do work with you. But I was very interested in Ms. McCullough’s testimony where you testify that states were discouraged during the application

process from going statewide. Now, in the eighties, I personally on

this Committee put demonstration projects in place for statewide

demonstrations. But I mean, what was the point? Why did you

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want micro demonstrations? How much can be learned from micro

demonstrations? How much do state reimbursement policies change

when you have a micro demonstration? And all of these poor little

notes that I was reading was all about this little thing, and that

little thing, and this little funding, and that little funding. Can’t

you think bigger? You know, I need help now. And we ought to be

able to do this in a way that both parties—that we can all agree

on because so much of it isn’t about children. So much of it is about

government. And for a worker to have to do all that, boy, I don’t

blame her. I mean, at what point do you stop filling out papers for

one child and move on to the next case?

So, you know, I’m sorry that more members weren’t able to stay

for all of the comments of the panelists because you all have a lot

of experience. Although I certainly appreciate the concerns of the

Children’s Defense Fund, you know, I think we’ve got to be bolder.

Ms. ALLEN. I agree with that.

Chairman JOHNSON. You know, we’ve got to be much bolder than

this bill. And one of the things that strikes me is the very, very

conservative implementation of past authorities. And the implementation has been so conservative that the underlying problems

don’t get moved. So, you’re always, you know, pressing against the

same walls. And you’re just, you know, stirring this chocolate syrup

in the white milk in the small glass. You know, we’ve just got to

find a way to at least force—allow states to merge funds, to strip

out reports, and so on and so forth. We have an example in the regulations that the Department just proposed that were very forward

looking on outcomes, very thoughtful. You know, why can’t we use

that work? So, I’m not smart enough to be able to ask the level of

questions that I really need to be able to ask without more reflection when I hear so many comments. But I would just urge you to

take back what you’ve heard from one another and the proposal as

it now lies and really help us. We really have got to do better. If

we just do this, we’ll just have another series of demonstration

projects. The fact that we aren’t going to have good information

from the bigger demonstration projects for 5 years—but on the

other hand, we have so much micro evidence. I mean, there is no

question but that we need to turn around the service preference

here. So, you know, while GAO were sort of neutral about this,

they’re neutral because they’re sort of research design people and

there wasn’t the proper design. I have never, ever run into anyone

who has had experience with integrating services and trying to prevent and be more holistic and move kids through more rapidly that

says that it was better the old way. So, we may not know exactly—

have exactly the data to document. But have we ever? No. We have

never even gotten a data system nationwide, you know, after 10

years. So, let’s stop kidding ourselves and thinking that we can do

this like you might do, you know, like you might be able to oversee

the technology in our air traffic control towers, in which we have

done a markedly terrible job, markedly terrible. But at least you

can take an inventory and see it, you know. We don’t fund it. We

don’t keep up with the pace of change. But at least you can see

what you’re doing. You can’t do that. You’ll never have that luxury

here. But we do know that it is outright absurd, outright absurd.

And furthermore, how can we afford 38% of the calls having to be

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remade if we have any concern about our children? So, I think we

just have to sort of take another stab. And we’ll look forward to

your help. We’ll certainly take seriously some of the concerns that

you had about this particular piece of legislation. But we do need

to think much bigger. And we will have to have those ideas

promptly. Thank you. I appreciate your participation.

[Whereupon, at 3 p.m., the hearing was adjourned.]

[A submission for the record follows:]

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