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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 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

                    U.S. GOVERNMENT PRINTING OFFICE
68-872 DTP                  WASHINGTON : 2001 _______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Human Resources

                NANCY L. JOHNSON, Connecticut, Chairman

PHILIP S. ENGLISH, Pennsylvania      BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
RON LEWIS, Kentucky                  ROBERT T. MATSUI, California
MARK FOLEY, Florida                  WILLIAM J. COYNE, Pennsylvania
SCOTT McINNIS, Colorado              WILLIAM J. JEFFERSON, Louisiana
JIM McCRERY, Louisiana
DAVE CAMP, Michigan

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.

                            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

 
 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:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE

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 IV-B 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 IV-E 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 IV-B program 
where States would have more flexibility in using the funds for 
prevention and treatment. The third proposal would strengthen the 
current waiver authority 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 
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    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette WordPerfect 5.1 
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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 
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    3. A witness appearing at a public hearing, or submitting a 
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Committee, must include on his statement or submission a list of all 
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    4. A supplemental sheet must accompany each statement listing the 
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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 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 
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materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                

    Chairman Johnson. There is a certain fundamental 
irrationality about Federal policy around our child protective 
and foster care 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 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 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 
Income 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.
    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-of-home 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 unknown. 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 
Income 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 poorly integrated patchwork of services for children 
and families accompanied by escalating costs. As we reported to 
this Subcommittee in October 1998, a number of states have 
incorporated or are considering incorporating some of the 
principles of managed care into their family preservation, 
foster care, and adoption programs.\1\ Under a managed care 
approach, states and localities prospectively pay fixed, 
capitated amounts to providers to coordinate and meet all the 
service needs of referred children and families. The officials 
responsible for these new managed care initiatives saw this 
approach as a strategy both to improve the quality of care 
children and families in the child welfare system received and 
to control the rising costs of delivering services while 
holding all the partners in the system accountable.
---------------------------------------------------------------------------
    \1\ Child Welfare: Early Experiences Implementing a Managed Care 
Approach (GAO/HEHS-99-8, Oct. 21, 1998.)
---------------------------------------------------------------------------
    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 
associated with these initiatives can be attributed to the new 
strategies is still largely unknown because they have not been 
rigorously evaluated. Planned evaluations under the federal 
waiver demonstration program will--in the future--yield 
additional information about the effectiveness of child welfare 
managed care arrangements.

                               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 
regulations, providing technical assistance to states, and 
supporting research and evaluation efforts. In 1994, the 
Congress gave HHS the authority to establish up to 10 child 
welfare demonstrations that waive certain restrictions in title 
IV-E--the federal foster care program--and allow broader use of 
federal foster care funds. The Adoption and Safe Families Act 
of 1997 (P.L. 105-89) expanded HHS' authority to approve up to 
10 states' waiver demonstrations in each of the 5 fiscal years 
1998 through 2002. The purpose for granting waivers is to test 
a variety of innovations, including but not limited to managed 
care. Of the 21 states that have federally approved waivers, 12 
states have waivers to test managed care or capitated payment 
systems.\2\
---------------------------------------------------------------------------
    \2\ None of the 27 initiatives included in this study were 
implemented with a title IV-E waiver.
---------------------------------------------------------------------------
    In our 1998 report, we concluded that initiatives in which 
principles of managed care were being implemented were still in 
the early stages of program development and, as a result, were 
largely untested. We found that, for these initiatives to 
mature and meet officials' program expectations, state and 
local agencies needed to resolve three important issues. The 
first was to address cash flow problems in a new environment 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 service-
delivery arrangements into their child welfare systems. By 
1999, according to the Child Welfare League of America, 29 
states had one or more initiatives to change management, 
financing, or service-delivery practices by adopting some 
principles of managed care.\3\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    Managed care arrangements in child welfare have two primary 
elements. The first is a financing system whereby the state or 
locality makes prospective, fixed or capitated payments to one 
or more service providers rather than traditional fee-for-
service reimbursement payments. The second element is that, 
under this new payment method, a single entity is responsible 
for ensuring that children and families receive appropriate and 
quality services.

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 prospective, capitated payments to 
providers to serve a defined group of children and families. A 
capitated payment is a fixed fee that a provider receives 
either for each eligible client--that is, a single rate for 
each referred child or family--or for members of a pool of 
potential service users--such as a single rate to serve all 
eligible children and families in one county. The service 
provider must then manage clients' care within the fixed fee. 
This approach is a departure from the traditional fee-for-
service system states and localities have used to pay service 
providers. Under a fee-for-service arrangement, providers are 
reimbursed for the number and types of services delivered. Such 
a payment approach offers few incentives for service providers 
to control costs by considering the most suitable arrays of 
services for children and families or more quickly returning 
children to their biological parent or seeking other permanent 
placements such as adoption.
    To further increase service flexibility, some states and 
localities are funding capitated payment arrangements by 
pooling individual state funding streams that support different 
services that children and families in the child welfare system 
need. Because of restrictions on eligibility and prohibitions 
on certain uses of funds, public and private child welfare 
caseworkers often encounter problems accessing needed services 
for clients. By pooling or blending funds from various sources, 
these states and localities seek to reduce service access 
problems sometimes associated with categorical programs and 
increase flexibility in the use of funds. In Colorado, for 
example, the state blended funds from several child welfare and 
child care budget line items and allocated a fixed level of 
funding--equivalent to a block grant--to its counties. Block-
granting state dollars in this way loosened the restrictions on 
the use of these typically categorical funds and increased 
counties' flexibility. Boulder County further pooled its child 
welfare block grant with funding from the mental health agency 
and youth corrections agency to finance its Integrated Managed 
Partnership for Adolescent Community Treatment (IMPACT) 
initiative, serving adolescents at imminent risk of placement 
in group or residential care.

Service-Delivery Changes Are Designed to Improve Access to Care

    States and localities are trying to improve access to 
services for children and families by charging a single entity 
with the responsibility of identifying and providing all 
appropriate services. This approach is designed to reduce the 
need for families to navigate--often with little or no 
assistance--a maze of community services, as well as increase 
the likelihood that the service needs of children and families 
match the services they receive. In most of the 27 initiatives 
we studied, states and 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 investigating reports 
of child maltreatment and recommending to the courts whether a 
child needs to enter the child welfare system for protective or 
any other services. A child enters the managed care system on 
the basis of a referral from the state or locality to the 
managed care entity. In some initiatives, the state or locality 
also maintains its presence by retaining the authority 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.
---------------------------------------------------------------------------
    \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).

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 population
                                                                   Recurrence of abuse or neglect while children
                                                                               are receiving in-home services
                                                                        Reports of abuse or neglect while the
                                                                             children are in out-of-home care
                                                                   Recurrence of physical abuse, sexual abuse,
                                                                     or neglect after children have left care
    Permanency     Children are placed in a permanent home in a    Children who are returned to their parents or
                                                 timely manner              relatives within a specified time
                                                                                          Finalized adoptions
                                                                     Children who achieve permanency within a
                                                                                               specified time
                                                                   Average length of stay in out-of-home care
                                                                   Children who are maintained in their home and
                                                                                do not enter out-of-home care
                     Children maintain the permanent placement     Children who reenter care within a specified
                                                                                                         time
    Well-being     Children function adequately in their families  Children's emotional and behavior crises that
                                               and communities         result in hospital use or police calls
                                                                       Children's behaviors related to sexual
                                                                        misconduct, running away, and suicide
                                                                   Children's scores on standardized tests of
                                                                                        childhood functioning
                                                                      Children's movement to less restrictive
                                                                                           placement settings
                                                                         Youths discharged from care who have
                                                                       completed high school, have obtained a
                                                                          general equivalency diploma, or are
                                                                       participating in an educational or job
                                                                                             training program
                         Families function adequately in their             Families' adaptation to caregiving
                                                   communities
     Stability         Children experience a minimum number of      Number of placements while in out-of-home
                                                    placements                                           care
                   Children maintain contact with their family      Children placed with at least one sibling
                                                 and community           Children placed within their home or
                                                                                            contiguous county
                                                                                 Children placed out-of-state
  Satisfaction             Clients are satisfied with services          Youths who reported satisfaction with
                                                                          services, as measured by the Client
                                                                                          Satisfaction Survey
                                                                   Children who reported satisfaction with their
                                                                      foster care placement, based on an exit
                                                                                                    interview
                                                                    Families who reported that the initiative
                                                                             provided them a valuable service
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of interview data.

    We also found that states and localities are measuring 
different outcomes, depending on the population served by the 
initiative and the states' or localities' goals. For example, 
El Paso County's initiative in Colorado encompasses all 
children and services in the county's child welfare system; as 
a result, the county established a broad safety outcome and is 
measuring child abuse and neglect rates among the general 
population. In contrast, Massachusetts targets older children 
in residential care for its Commonworks initiative in which the 
lead contractors only serve children, while the state serves 
the family and decides when a child can return home. Instead of 
monitoring the recurrence of maltreatment, the state measures 
outcomes related to children's movement to less restrictive 
settings and reentry into residential care. One of Illinois' 
goals for its performance contracting initiative is to find 
foster children a permanent home in a timely manner while 
minimizing multiple out-of-home placements. To monitor progress 
toward this goal, the state established several outcome 
measures, including average length of stay and the number of 
placements in different foster homes while children are in 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 performance and achieving desired results is to link 
financial rewards and penalties to outcomes. In some 
initiatives, the state or local agency offers bonuses as a 
financial incentive for the managed care entity to meet 
performance standards and penalties for poor performance. In 
the TrueCare partnership initiative in Hamilton County, Ohio, 
for example, the managed care contractor can earn bonuses when 
it meets individual performance indicators related to (1) child 
and family outcomes, such as ensuring children's safety and 
reducing the risk of harm, and (2) management services, 
including maintaining a competent provider network and 
maximizing revenues. Similarly, the contractor can incur 
financial penalties when it fails to meet the performance 
indicators. Massachusetts offers bonuses to the lead 
contractors for achieving interim or successful outcomes. In 
Massachusetts' Commonworks initiative, a lead contractor can 
earn bonuses at three different intervals--when a child 
transitions to a less costly level of care, when a child leaves 
placement, and when a child does not re-enter the lead 
contractor's care within 6 months of discharge. In addition, in 
the Massachusetts initiative as well as 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.
    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.
---------------------------------------------------------------------------
    \5\ The Congress had authorized enhanced funding to states under 
the Omnibus Budget Reconciliation Act of 1993 for the development and 
implementation of Statewide Automated Child Welfare Information Systems 
(SACWIS) amid concerns about the lack of information on children in the 
child welfare system and their families. As of May 2000, HHS reported 
that 27 states' systems were fully or partially operational--including 
some of the states with ongoing child welfare managed care initiatives; 
the remaining 23 states were not yet operational, and 1 state had 
elected not to pursue a statewide SACWIS.
---------------------------------------------------------------------------

      Effectiveness of Managed Care Initiatives is Largely Unknown

    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 well-being in such areas 
as their involvement in the community, the family's 
relationships with one another, parenting skills, and 
children's school performance. For example, Tompkins County in 
New York reported in 1997 that its youth advocate program 
resulted in all families improving parenting skills, all the 
youths improving their ability to control violent and impulsive 
behaviors, and 55 percent of the youths improving their school 
performance. Lastly, Colorado reported in 1999 a decrease in 
the incidence of abuse and neglect ranging from 18 to 23 
percent compared with the previous year in the four counties 
with ongoing initiatives. (See appendix for a summary of the 
reported outcomes for the 27 initiatives.)
    State and local agencies used their outcome measures to 
track their initiatives' progress in several ways. For some 
initiatives, outcomes were reported as change that occurred 
during the initiative. The Colorado example on the reduced 
incidence of abuse and neglect used the previous year as a 
comparison. For other initiatives, agencies reported outcomes 
without any indication of change--sometimes because comparisons 
had not been made. Initiatives that targeted the hard to serve 
and most costly children--those in need of placement in 
residential treatment centers--were considered to have had a 
positive outcome when children successfully transitioned to 
less restrictive, less costly placement settings. For Georgia's 
MATCH initiative, for example, officials reported that 41 
percent of the program participants improved functioning and 
were discharged from a more restrictive residential setting to 
a less restrictive placement, such as a group home, treatment 
foster home, or their own home.
    While the potential to control costs attracted state and 
local child welfare agencies to managed care, their primary 
objective was not necessarily to reduce spending. Instead, some 
officials expressed a desire to reduce certain types of costs--
such as the living expenses for out-of-home placements--or to 
use existing funds more efficiently and reinvest any savings 
into services. For some initiatives, officials reported that 
overall spending has actually increased as a result of 
additional administrative costs associated with private 
entities assuming responsibility for managing clients' care and 
the state or locality overseeing contracts. For example, 
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.

                    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:
            Georgia                                  Public model                  Fiscal year 1998-99 results
Multi-Agency Team for  statewide residential treatment services for     Children's behavior improved--
    Children (MATCH)      severely emotionally disturbed children      incidents of negative behavior, such as
                                                                          aggression, self abuse, and property
                                                                     damage, decreased 21 percent between the 6-
                                                                     month and 12-month evaluations for children
                                                                        admitted during 1998, and decreased 35
                                                                     percent between the 6-month and discharge
                                                                     evaluations for children discharged during
                                                                                                          1998
                                                                       41 percent of the children were
                                                                         either discharged from the project or
                                                                     stepped down to a less restrictive setting
                                                                                                   during 1999
                                                                        66 percent of the children who
                                                                     were discharged from the project were still
                                                                        in a less restrictive setting 6 months
                                                                                   after discharge during 1999
                                                                      42 percent of the children who had
                                                                      progressed to a less restrictive setting
                                                                     were still in a less restrictive setting 6
                                                                           months after their transfer in 1999
                                                                       All children were placed within
                                                                                         the state during 1999
           Illinois                                  Public model                              1998-99 results
        Performance          Relative and traditional foster care     Permanency rate in 1999 increased
         Contracting                                    statewide    149 percent over the previous year in Cook
                                                                         County's Home of Relative Foster Care
                                                                                                       program
                                                                      Number of 1999 adoptions increased
                                                                     70 percent over 1998 and 228 percent over
                                                                                                          1997
                                                                      3,660 children achieved permanency
                                                                       through subsidized guardianship between
                                                                                                 1997 and 1999
                                                                           Number of reunited families
                                                                     increased 12 percent between 1997 and 1999
                                                                          Movement of children to more
                                                                     restrictive placement settings fell by more
                                                                                           than half statewide
            Indiana               Managed care organization model                   Outcomes were not provided
   The Dawn Project             Wraparound services for seriously
                        emotionally disturbed children, aged 5 to
                       17, who have been impaired for more than 6
                        months and involved with multiple service
                                         systems in Marion County
             Kansas                                              LeadYear 3 evaluation results, Jan.-Sept. 1999
        Foster Care    Statewide foster care services to children     99 percent of the children did not
       Privatization                             in state custody    experience abuse or neglect while in out-of-
                                                                     home placement (consistent with years 1 and
                                                                                                            2)
                                                                      97 percent of the children did not
                                                                         experience abuse or neglect within 12
                                                                       months of reuniting with their families
                                                                                              (same as year 2)
                                                                      27 percent of the children placed
                                                                     in out-of-home care were returned to their
                                                                     families within 6 months (consistent with
                                                                     year 2; decrease of 49 percent from year 1)
                                                                      41 percent of the children placed
                                                                     in out-of-home care were returned to their
                                                                         families or achieved other permanency
                                                                      within 12 months (increase of 24 percent
                                                                                                  from year 2)
                                                                        74 percent of the children who
                                                                     returned to their families did not reenter
                                                                          out-of-home care within 12 months of
                                                                     returning home (increase of 9 percent from
                                                                                                       year 2)
                                                                        81 percent of youths, who were
                                                                        aged 16 and over and released from the
                                                                     state's custody, had completed high school,
                                                                     obtained a general equivalency diploma, or
                                                                     were participating in an educational or job
                                                                       training program (increase of 8 percent
                                                                       from year 2 and 53 percent from year 1)
                                                                            99 percent of the children
                                                                      experienced no more than three placement
                                                                     moves while in out-of-home care (consistent
                                                                                           with years 1 and 2)
                                                                       71 percent of all children were
                                                                     placed with at least one sibling (decrease
                                                                     of 9 percent from year 2; consistent with
                                                                                                       year 1)
                                                                       78 percent of the children were
                                                                       placed within their regional boundaries
                                                                        (consistent with year 2; decrease of 9
                                                                                          percent from year 1)
                                                                       47 percent of the adults and 70
                                                                      percent of the youths (aged 14 and over)
                                                                           reported satisfaction with services
                                                                     (decrease of 6 percent for the adults and
                                                                         consistent for the youth from year 2)
      Massachusetts     Administrative services organization with         Administrative services organization
        Commonworks                             lead agency model                                 report, 1999
                            Statewide foster care for adolescents             More children moved from
                       needing group care or residential treatment   residential treatment to less restrictive
                                                                             settings--the use of group homes,
                                                                      specialized foster care, and independent
                                                                     living increased 73 percent from July 1997
                                                                                                  to June 1999
                                                                          Children's placement in less
                                                                         restrictive settings was supported by
                                                                     increased provision of aftercare services--
                                                                           expenditures for aftercare services
                                                                         increased 80 percent, and the monthly
                                                                           average number of clients receiving
                                                                       aftercare services increased 51 percent
                                                                                                     over 1998
                                                                      Recidivism rate of 6 percent for
                                                                     youths who had a planned discharge, such as
                                                                     return to home; 17 percent for all youths
                                                                     discharged, including unplanned discharges
                                                                         such as running away from foster care
                                                                              placement (Jan. 1997-Sept. 1998)
                                                                      Savings achieved for out-of-home
                                                                      and aftercare services in 1999 (excludes
                                                                      administrative costs associated with the
                                                                     administrative service organization, lead
                                                                           contractors' management of provider
                                                                          networks, and state oversight)--lead
                                                                     contractors' monthly client placement costs
                                                                     averaged 3 percent less than the capitated
                                                                                                     case rate
           Michigan                                              Lead agenDescriptive evaluation results, 1998
 Interagency Family             Wraparound services for seriously     Child abuse and neglect rate of 9
        Preservation   emotionally disturbed children involved with    percent during families' involvement in
  Initiative (MIFPI)   multiple service systems at selected sites        MIFPI (compared with the rate for all
                                                                     children in the state of 8.4 per 1,000 in
                                                                                                         1996)
                                                                      Child abuse and neglect rate of 2
                                                                        percent after families' involvement in
                                                                                                         MIFPI
                                                                            Out-of-home placement rate
                                                                       decreased 38 percent during involvement
                                                                         with MIFPI for children who were in a
                                                                     placement setting at the time they entered
                                                                       the project; decrease of 39 percent for
                                                                          children who were not in a placement
                                                                          setting at the time they entered the
                                                                                                       project
                                                                      Children and families improved, on
                                                                      average, on all scales of well-being and
                                                                          functioning, such as family and peer
                                                                         relationships, community involvement,
                                                                     behavior, school experiences, and family's
                                                                     adaptation to caregiving, with the greatest
                                                                        improvement in lowering detentions and
                                                                         increasing the family's adaptation to
                                                                                                    caregiving
                                                                      94 percent of the parents involved
                                                                       in MIFPI reported satisfaction with the
                                                                                        services they received
          Tennessee                                  Public model           Annual report, July 1998-June 1999
  Continuum of Care      Statewide foster care for older children           59 percent of the children
           Contracts        with moderate to severe emotional and      discharged were discharged to their own
                                              behavioral problems        family, an adoptive family, or a less
                                                                                           restrictive setting
          Wisconsin                                              Lead agency model  Outcomes were not provided
    Safety Services     Family preservation services for noncourt
             Program                 families in Milwaukee County
Local-level
 initiatives:
    Alameda County,                                              Lead agency model    Evaluation results, 1999
              Calif.        Foster care for seriously emotionally     Project children were at least as
    Project Destiny    disturbed children in residential treatment   safe as children in the comparison group on
                                                    in the county    risk indexes such as alcohol and drug use,
                                                                         abuse against other children, medical
                                                                                 emergencies, and running away
                                                                      75 percent of the project children
                                                                           were residing in a less restrictive
                                                                     setting; 25 percent of the children could
                                                                         not be maintained in less restrictive
                                                                            settings (comparison data were not
                                                                                                    available)
                                                                          No significant difference in
                                                                       improvement in children's mental health
                                                                     between the project and comparison groups
                                                                       Academic performance of project
                                                                     children was comparable to the comparison
                                                                     group on three measures--school attendance,
                                                                     conduct reports, and academic improvement;
                                                                          however, project children's academic
                                                                           performance relative to grade level
                                                                     declined significantly over time while the
                                                                     comparison group improved on this measure
                                                                      Reduced levels of placement were
                                                                      not stable for a majority of the project
                                                                          children--60 percent of the children
                                                                     experienced two to eight additional changes
                                                                        in placement (comparison data were not
                                                                                                    available)
                                                                       Project very nearly reached its
                                                                      goal of revenue neutrality by the end of
                                                                     the second year; between 1997 and 1999, the
                                                                     project realized a net gain of 2 percent of
                                                                                            its capitated rate
Boulder County, Colo.                                Public model              State managed care report, 1999
 Integrated Managed     Foster care for adolescents needing group       Confirmed reports of abuse and
     Partnership for   care or residential treatment in the county      neglect decreased 23 percent over 1998
 Adolescent Community                                                                                 baseline
  Treatment (IMPACT)                                                  Finalized adoptions increased 13
                                                                                    percent over 1998 baseline
                                                                      Savings were reinvested in child
                                                                       welfare services--the county realized a
                                                                         savings of less than 1 percent of its
                                                                     capped allocation from the state in 1998;
                                                                     the dollar amount of savings increased 128
                                                                                               percent in 1999
El Paso County, Colo.   Administrative services organization with              State managed care report, 1999
    Child Placement                             lead agency model       Confirmed reports of abuse and
        Agency Pilot     Foster care for children placed by Child       neglect decreased 19 percent over 1998
                                 Placement Agencies in the county                                     baseline
                                                                      Finalized adoptions increased 84
                                                                                    percent over 1998 baseline
                                                                      Savings were reinvested in child
                                                                     welfare services--the county realized $1.3
                                                                                    million in savings in 1999
  Jefferson County,                                  Public model              State managed care report, 1999
               Colo.     All child welfare services in the county       Confirmed reports of abuse and
Child Welfare Pilot                                                     neglect decreased 18 percent over 1998
                                                                                                      baseline
                                                                      Finalized adoptions decreased 23
                                                                     percent and family reunification increased
                                                                                 21 percent over 1998 baseline
                                                                      Savings were reinvested in child
                                                                       welfare services--the county accrued no
                                                                          savings in 1998 and $175,000 in 1999
 Mesa County, Colo.                                  Public model              State managed care report, 1999
Child Welfare Pilot      All child welfare services in the county       Confirmed reports of abuse and
                                                                        neglect decreased 20 percent over 1998
                                                                                                      baseline
                                                                      Finalized adoptions increased 118
                                                                                    percent over 1998 baseline
                                                                      Savings were placed in a reserve
                                                                       account in 1998 and reinvested in child
                                                                     welfare services in 1999--the dollar amount
                                                                         of savings to the county increased 50
                                                                                 percent between 1998 and 1999
   District 4, Fla.                       Administrative services       Outcome evaluation report covering all
Privatization Pilot           organization with lead agency model                 Florida initiatives, 1998-99
                       Foster care and independent living services    Placement rate was 69 percent more
                                  for adolescents in the district        than the comparison site (specific to
                                                                                                   District 4)
                                                                                                      Length of stay was 66 percent less
                                                                         than the comparison site (specific to
                                                                                                   District 4)
                                                                      73 percent of the families served
                                                                       in Districts 4, 8, and 13 combined were
                                                                         satisfied with the care they received
                                                                                 (similar to comparison sites)
   District 8, Fla.                                              Lead agOutcome evaluation report covering all
    Sarasota County     All children needing protective services,                 Florida initiatives, 1998-99
 Privatization Pilot        foster care, and adoption services in           86 percent of the cases in
                                    Sarasota and Manatee Counties    Districts 8 and 13 combined were closed in
                                                                        1997-98 without reported recurrence of
                                                                        abuse or neglect within 1 year of case
                                                                           closure (similar to statewide rate)
                                                                      Placement rate in Districts 8 and
                                                                      13 combined was 29 percent less than the
                                                                                              comparison sites
                                                                      Cases were closed at a faster rate
                                                                         than the public agency had before the
                                                                           initiative (specific to District 8)
                                                                             Average length of stay in
                                                                      Districts 8 and 13 combined was 111 days
                                                                                 (similar to comparison sites)
                                                                         20 percent of the children in
                                                                       Districts 8 and 13 combined were placed
                                                                     with a parent, guardian, or relative within
                                                                     15 months of the date of removal from their
                                                                     home (43 percent less than the comparison
                                                                                                        sites)
                                                                      40 percent or more of the children
                                                                     legally available for adoption were adopted
                                                                                      (specific to District 8)
                                                                         77 percent of the children in
                                                                     Districts 8 and 13 combined were still in
                                                                      foster care 15 months after removal from
                                                                          their home (51 percent more than the
                                                                                             comparison sites)
                                                                      73 percent of the families served
                                                                       in Districts 4, 8, and 13 combined were
                                                                         satisfied with the care they received
                                                                                 (similar to comparison sites)
                                                                      Average case cost in 1997-98 was
                                                                     about 10 percent less than what the public
                                                                            agency spent before the initiative
                                                                                      (specific to District 8)
  District 13, Fla.                                              Lead agOutcome evaluation report covering all
    Bridges Program     Children needing foster care and adoption                 Florida initiatives, 1998-99
                                                     services in Lake and S 86 percent of the cases in
                                                                     Districts 8 and 13 combined were closed in
                                                                        1997-98 without reported recurrence of
                                                                        abuse or neglect within 1 year of case
                                                                       closure (similar to the statewide rate)
                                                                      Placement rate in Districts 8 and
                                                                      13 combined was 29 percent less than the
                                                                                              comparison sites
                                                                             Average length of stay in
                                                                      Districts 8 and 13 combined was 111 days
                                                                                 (similar to comparison sites)
                                                                         20 percent of the children in
                                                                       Districts 8 and 13 combined were placed
                                                                     with a parent, guardian, or relative within
                                                                     15 months of the date of removal from their
                                                                     homes (43 percent less than the comparison
                                                                                                         site)
                                                                         77 percent of the children in
                                                                     Districts 8 and 13 combined were still in
                                                                      foster care 15 months after removal from
                                                                          their home (51 percent more than the
                                                                                             comparison sites)
                                                                      73 percent of the families served
                                                                       in Districts 4, 8, and 13 combined were
                                                                         satisfied with the care they received
                                                                                 (similar to comparison sites)
Albany County, N. Y.                                 Public model                  Outcomes were not available
Preventive Services    Children needing preventive services in the
                                                           county
Broome County, N. Y.                                             Lead agOutcomes were not available. The pilot
 Child Welfare Care    Children needing family preservation, foster   project has been discontinued because of
          Management   care, and independent living services at one   problems with implementing new financial
                                                             site         and service-delivery arrangements in
                                                                             accordance with federal and state
                                                                                                  regulations.
Oneida County, N. Y.                                             Lead agency model Outcomes were not available
        Kids Oneida             Wraparound services for seriously
                       emotionally disturbed children in the county
                           in or at risk of out-of-home placement
Onondaga County, N.                                  Public model                        Outcome data, 1994-98
                  Y.       Children needing emergency foster care      Foster care days were reduced--
Family Support Center                      services in the county    children admitted and discharged from the
             Program                                                    program avoided staying in foster care
                                                                                       246,834 days since 1994
                                                                         Children were discharged from
                                                                     foster care more quickly--76 percent of the
                                                                     children were discharged from foster care;
                                                                     half the children who were placed in foster
                                                                     care since 1994 were discharged in 79 days
                                                                         (decrease of 77 percent from 1992, 78
                                                                        percent from 1991, and 75 percent from
                                                                                                         1990)
                                                                        56 percent of the children who
                                                                     were discharged returned to their parents
                                                                     and 33 percent were released to relatives
                                                                       Children had early contact with
                                                                         their families, where appropriate--70
                                                                        percent of the children visited with a
                                                                     family member within 72 hours of placement
                                                                        and 41 percent visited within 24 hours
                                                                       88 percent of the children with
                                                                     siblings were initially placed with their
                                                                                                      siblings
                                                                            20 percent of the children
                                                                     discharged from foster care were readmitted
                                                                      (14 percent less than the overall county
                                                                                                         rate)
                                                                            Educational continuity was
                                                                          maintained--all school-aged children
                                                                                   attended their home schools
Tompkins County, N.                                              Lead agency              Program review, 1997
                  Y.   Wraparound services for youth in residential   86 percent of the youths were free
     Youth Advocate     or institutional placements in the county        of legal involvement, such as arrests
             Program                                                       All families improved their
                                                                         functioning, such as parenting skills
                                                                      All youths improved their ability
                                                                     to control violent and impulsive behaviors
                                                                              both inside and outside the home
                                                                                                      Little effect in reducing youths'
                                                                        involvement with drugs and alcohol--17
                                                                        percent of the youths improved on this
                                                                                                       measure
                                                                       School performance varied among
                                                                     participants but improved for 55 percent of
                                                                                                    the youths
                                                                          60 percent of the youths had
                                                                       successful reports from their employers
                                                                      88 percent of the youths improved
                                                                                in their community involvement
  Champaign County,                                  Public model       Outcomes report covering Champaign and
                Ohio   Foster care for children needing out-of-home                     Madison Counties, 1999
Human Services/Adriel  placement with a nonrelative in the county         All children discharged from
              School                                                     managed care in Champaign and Madison
                                                                            Counties were discharged to a less
                                                                                           restrictive setting
                                                                            In 1999, 63 percent of the
                                                                      children who were placed through managed
                                                                           care did not reenter a managed care
                                                                                    placement within 12 months
Crawford County, Ohio                                            Lead agency model Outcomes were not available
      Out-of-County    Foster care for children placed outside the
           Placement    county in therapeutic family foster home,
                             group care, or residential treatment
Hamilton County, Ohio             Managed care organization model             Managed care entity report, 1998
TrueCare Partnership   Foster care and independent living services    62 percent of the children who had
                       for children in outpatient mental health and  been in a more restrictive setting--such as
                                          therapeutic placements.           residential treatment, group home,
                                                                     treatment foster care, or day treatment--
                                                                         were able to remain in a stable, less
                                                                            restrictive setting after 6 months
Madison County, Ohio                                             Lead agOutcomes report covering Champaign and
 Adriel Out-of-Home        Foster care for children in the county                       Madison Counties, 1999
     Care Placements   needing nonrelative, out-of-home placement         All children discharged from
                                                                         managed care in Champaign and Madison
                                                                            Counties were discharged to a less
                                                                                           restrictive setting
                                                                            In 1999, 63 percent of the
                                                                      children who were placed through managed
                                                                           care did not reenter a managed care
                                                                                    placement within 12 months
Dodge County, Wis.b                                              Lead agencOutcome report, Aug. 1997-Aug. 1999
 Family Partnership    Wraparound services for adolescents in child      Status offenders--youths with
          Initiative   care institutions or juvenile corrections in    delinquent behaviors such as disorderly
                                                      10 counties    conduct, fighting, truancy, possession of
                                                                     marijuana, and curfew violation--had fewer
                                                                                contacts with the courts after
                                                                     participating in the initiative: 70 percent
                                                                      of the youths had no contact, 25 percent
                                                                     had one to five contacts, and 5 percent had
                                                                     six or more contacts compared with before
                                                                        the initiative, when 42 percent had no
                                                                           contact, 44 percent had one to five
                                                                      contacts, and 14 percent had six or more
                                                                                                      contacts
                                                                      Criminal offenders--those youths
                                                                      with delinquent behaviors such as theft,
                                                                     criminal damage to property, burglary, bomb
                                                                     threat, battery, sexual assault, receiving
                                                                     stolen property, possession of a firearm,
                                                                           and auto theft--similarly had fewer
                                                                     contacts with the courts: 75 percent had no
                                                                         contact and 25 percent had up to five
                                                                             contacts compared with before the
                                                                     initiative, when 72 percent had no contact,
                                                                     43 percent had up to five contacts, and 15
                                                                              percent had six or more contacts
                                                                         Truancy rate improved from 25
                                                                     percent before the initiative to 15 percent
                                                                                          after the initiative
  Milwaukee County,                                  Public model            Quality assurance/improvement and
                Wis.      Wraparound services for children in the    utilization review report, second quarter
Wraparound Milwaukee          county in or at risk of residential                                      of 1999
                                                        treatment            Youths spent less time in
                                                                     residential care during their first year in
                                                                     the program--the percentage of days youths
                                                                         were in residential care decreased 29
                                                                                                       percent
                                                                      Youths spent more time with their
                                                                     parent--the percentage of days youths were
                                                                     with their biological parent increased 32
                                                                                                       percent
                                                                       Children experienced an overall
                                                                      improvement of 21 percent on measures of
                                                                        behavioral change--such as symptoms of
                                                                       depression, anxiety, withdrawal, social
                                                                         problems, delinquency, and aggressive
                                                                     behavior--at 12 months after entry into the
                                                                                                       program
                                                                       Children experienced an overall
                                                                        improvement of 34 percent on scales of
                                                                     child-adolescent functioning, such as their
                                                                     ability to function adequately at home, in
                                                                           the community, and at school; their
                                                                     behavior toward others; emotional problems;
                                                                     self-harmful behavior; and substance abuse,
                                                                     at 12 months after entry into the program
                                                                      Average monthly cost of providing
                                                                      services decreased 8 percent between the
                                                                             first and second quarters of 1999
----------------------------------------------------------------------------------------------------------------
a Organizational arrangements among public and private entities generally fell into one of the following managed
  care models: (1) public model, which maintains the traditional management and service-delivery structure while
  the public agency incorporates managed care elements into its own practices and existing contracts with
  service providers; (2) lead agency model, where the public agency contracts with a private entity that is
  responsible for coordinating and providing all necessary services--either directly itself or by subcontracting
  with a network of service providers--for a defined population of children and families; (3) administrative
  services organization model, where the public agency contracts with a private organization for administrative
  services only, and direct services are structured as in the lead agency or public models; and (4) managed care
  organization (MCO) model, where the public agency contracts with a private organization as in the lead agency
  model, but the MCO arranges for the delivery of all necessary services by subcontracting with other service
  providers and does not itself provide direct services.
b Ten-county initiative includes Columbia, Dodge, Green Lake, Jefferson, Manitowoc, Ozaukee, Sauk, Sheboygan,
  Washington, and Winnebago Counties.

      

                                

    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.
    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 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.
    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 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 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 
incorporated 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.
    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 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 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:]

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 long-standing 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, cross-system 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 broad-based 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 jointly 
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 thorough 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 financing 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 particular, 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.
---------------------------------------------------------------------------
    \1\ On 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.
---------------------------------------------------------------------------
    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 
permanency--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 providing 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-of-home 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.
         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.
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 well-being; 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 
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 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         $5M              $5M               $10M
 Additional
 Investment In Year
 2001
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.

                            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.
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 equivalent to the rate 
established for the adoption assistance program.
      

                                

    Chairman Johnson. Thank you. We certainly will work with 
you on those things. The maintenance of effort issue is 
extremely important 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 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 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:]

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 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 funding 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 welfare 
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 initiatives 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 stimulated.
    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. 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 contractor 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 IV-E 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 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 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 system 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 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'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 
procedural 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. 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.
    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 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 quarter (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 discontinue 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. Adjustments 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 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 open-ended 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.

Exhibit A.
[GRAPHIC] [TIFF OMITTED] T8871.001

Exhibit B.
[GRAPHIC] [TIFF OMITTED] T8871.002

Exhibit C.
[GRAPHIC] [TIFF OMITTED] T8871.003

      

                                

    Chairman Johnson. Thank you very much. We will adjourn 
briefly for the vote. It will take about 10 minutes. Thanks. 
Unfortunately, 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 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 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.
    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 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 
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 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 youth in residential 
placement.
      

                                

    Chairman Johnson. Thank you very much, Mr. Wentworth. Ms. 
Allen.

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 majority 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 Federal 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:]

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 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: Understanding 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 
out-of-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 permanence 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.
    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 recommends 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 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.
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 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 post-
permanency 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 short-term 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 to increase capacity in the states to better 
promote safety and permanence for children.
      

                                

    Chairman Johnson. Thank you very much. Mr. Geen.

  STATEMENT OF ROBERT GEEN, SENIOR RESEARCH ASSOCIATE, URBAN 
                           INSTITUTE

    Mr. Geen. Madam Chair, thank you very much for the 
opportunity 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.
    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 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 structure 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 interest 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.
---------------------------------------------------------------------------
    \1\ Geen, 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.
---------------------------------------------------------------------------
    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 January, 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:
---------------------------------------------------------------------------
    \2\ Leos-Urbel, J., Bess, R., and Geen, R. State Policies for 
Assessing and Supporting Kinship Foster Parents. The Urban Institute, 
(In Press).
---------------------------------------------------------------------------
    (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 of the Urban Institute, its trustees, 
or its sponsors.
      

                                

    Chairman Johnson. I'd like to start by saying that a number 
of you have mentioned the complexity of the current system. And 
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 something. 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 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 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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