Tuesday, February 3, 2009

Stimulating more foster care?

    There is a lot that is good in the economic stimulus bill now pending in the Senate. But there is one provision that actually would worsen the current financial incentive for states to use foster care instead of better alternatives.

    As noted in a previous post, under current law, for every eligible child (slightly fewer than half of foster children nationwide are "eligible") the federal government picks up anywhere from 50 percent to about 74 percent of the tab; it varies from state to state. (I had previously put the high end figure at 83 percent, but that no longer is the case.) Poorer states get a larger percentage of their costs covered. But there is nothing like that for safe, proven alternatives to taking children from their parents. That's the key reason why federal spending on foster care vastly outstrips federal spending on better alternatives.

    The stimulus bill actually would make this worse.

The amount that states get back for foster care is linked to the amount they get for Medicaid, the health insurance program for the poorest Americans. So, for example, if State X is reimbursed 70 cents for every dollar spent on Medicaid, it also gets 70 cents back for every dollar spent on foster care for an "eligible" child. As the Medicaid rate rises or falls, the reimbursement for foster care (and also some adoption assistance) rises or falls with it.

The stimulus bill would raise this so-called "match rate" by 4.9 percent. So that state that was getting back 70 cents on the dollar might get back nearly 73.5 cents on the dollar. Such an increase for Medicaid would be good. But the last thing Congress should be doing, even as more families are plunged into poverty, which so often is confused with "neglect," is to actually increase the incentive to tear apart these families. Odds are, when the Obama Administration proposed increasing the match rate for Medicaid they were barely aware, or not aware at all, that this automatically increased payments for foster care as well.

To stop this worsening of an already perverse incentive, Congress would have to act to apply the increase to Medicaid only.  And that's exactly what President Obama should ask Congress to do. Then the additional dollars that would have gone to foster care should be directed instead to family preservation. It would be a tragedy if one of the new president's first acts actually increased the already huge financial incentive for states to take children needlessly from their homes.