Friday, January 22, 2010

Congress takes on the bad financial incentives in foster care – and makes them worse

It is well known that, thanks to decades of poor policy at the federal level, the financial incentives in child welfare are atrocious. For every eligible child a state or local government throws into foster care, (and the cases of about half of America's foster children are eligible) the federal government will pay more than half the tab – sometimes way more than half the tab. The same is true for adoption subsidies. There is nothing close for safe, proven programs to keep children out of foster care.

As a result, this year, for every dollar the federal government spends on prevention and family preservation, it will spend more than $10 on foster care and adoption – and that's a conservative estimate.

As a result, while it is not true, as some have claimed, that government makes money on foster care, it is true that though family preservation costs less in total dollars, it sometimes costs less for a state or local government to throw a child into foster care.

All of which means one should always worry about what will happen to children on days like this coming Tuesday, when "child savers" – to use the term their 19th Century counterparts gave themselves – swarm over the U.S. Capitol as part of the annual "advocacy day" for the giant trade association for child welfare agencies, the Child Welfare League of America. The "advocacy day" is part of CWLA's Annual Conference, highlights of which include a presentation on why supposedly there is too much accountability to the public in child welfare and an entire "track" of panels on how the people who run residential treatment centers, which are largely worthless, can save their dying industry.

CWLA has led the opposition to real reform of child welfare finance, and if CWLA gets what it wants most, those incentives will become far, far worse.

NCCPR will discuss all of this in detail in a new briefing paper on child welfare finance. We'll be releasing it on our website,, Monday.

For now, though, I want to highlight what Congress already has done lately to make things worse. It's happened twice since 2008.

One change may have happened almost by accident. States are reimbursed for foster care at the same rate they receive for Medicaid. When the economic stimulus bill raised reimbursement for Medicaid, reimbursement for foster care automatically went up as well – so the incentive to use foster care instead of alternatives actually got worse. Before the stimulus, the federal government reimbursed from 50 cents to 77 cents of every dollar spent to hold an eligible child in foster care. Now, thanks to the stimulus bill, its 56 to 83 cents on the dollar. The same is true of adoption subsidies.


But the other change was intentional. In 2008, Congress passed the Fostering Connections to Success and Increasing Adoptions Act. CWLA and the rest of what I have come to call the "foster care -industrial complex" hasn't been able to stop gushing about this for the past year. And no wonder: it increases money in all sorts of categories, without providing so much as one additional penny for efforts to keep children out of foster care.

Some of the provisions of this law actually do some good, and only one does real harm. But the harm is huge. It's in a provision that's gone by almost unnoticed:

One way the "Increasing Adoptions Act" may increase adoptions is by providing still another huge incentive to pursue them at the expense of reunifying families.

The incentives to push adoption over reunification, financial and otherwise, already are enormous. Everyone in child welfare, from the frontline worker to the agency chief, knows that the only time a child welfare agency gets good press is when it gets those adoption numbers up – and no one looks too closely at how it was done. It also is the principal means of psychic satisfaction for people in the field – witness the fact that while everyone claims the system's primary goal for children is reunification, the only option that is celebrated each year in most of the country is adoption. That is clear from all those annual "Adoption Day" events, each of which generates another favorable story in the local paper.

There's also a significant financial incentive. Since 1998, under the so-called Adoption and Safe Families Act, child welfare agencies receive a bounty; now $4,000 to $12,000, and sometimes more, for every foster child adoption over a baseline number. There is, of course, no such payment when a child is returned to her or his own parents.


In 2008, Congress further stacked the deck. Remember how I said that all that money for foster care and adoption is given for every case in which a child is eligible, and about half the cases are eligible? In cases involving adoption, the Fostering Connections Act phases in the other half. it eliminates a link to an old funding formula that was the one and only brake on this open-ended entitlement.

That's known as "delinking." Perhaps you've heard about it. It's hard to be anywhere near anyone from CWLA and not hear about it. CWLA is desperate for delinking, not just for adoption, but also for foster care. CWLA craves delinking the way Homer Simpson craves donuts.

But while the current link (discussed in detail in our briefing paper Monday) is a cumbersome and clumsy brake on the current open-ended entitlement for foster care, it's the only brake we've got. It would be crazy to remove this brake from the runaway train of unlimited foster care funding without something better to replace it.

Unfortunately, the brake already is coming off for adoption funds.

The implications are profound.

For starters, this change ultimately will funnel at least an extra $2.46 billion per year into adoption. That money is going to have to come from somewhere, and given the current state of the federal deficit, every new dollar for foster care and adoption is one less potential dollar for prevention and family preservation.

Though the law requires that the savings states gain from this new federal aid be spent on child welfare, that doesn't mean it has to go to prevention and family preservation. So those savings are far more likely to be plowed into hiring more child abuse investigators, more foster care, and big raises in rates for group homes and institutions – further worsening the imbalance in child welfare funding.

But that isn't even the worst of it. Because this new money for adoption also creates a terrible new incentive:

Consider the hypothetical case of Tommy, an eight-year-old who's been in foster care for a year because a caseworker didn't like the conditions in the tiny apartment where Tommy was living with his parents. Tommy's case did not meet the eligibility requirements for federal aid.

That means the state or local child welfare agency is picking up the entire tab for foster care. (Don't feel too sorry for the agency. Remember, they're already getting a huge subsidy for half their cases, and, contrary to what CWLA likes to imply, those funds are spread equally among all cases, including Tommy's.)

Similarly, if the agency returns Tommy home, the federal government will provide almost no help paying for any services Tommy and his parents might need to remain together.

But, once the new law is fully in effect, the federal government will pay between 56 and 83 cents out of every dollar spent on an adoption subsidy for Tommy's adoptive parents.

So while reunification may be in Tommy's best interests, the caseworker's need for psychic satisfaction, her boss' need for good press and, most important, the lure of more money for the child welfare agency, all push the decision toward adoption.

But that's just the start. The real prize for CWLA is attaining delinking for foster care – that would pour at least another $4.7 billion per year into foster care, and make the incentive to use foster care instead of family preservation even worse. (CWLA is willing to settle for reducing the payment per case in exchange for this delinking – but that's almost as bad.)

So there is every reason to fear for the fate of vulnerable, impoverished children while people from CWLA's member agencies are swarming Capitol Hill. Because when it comes to real reform of child welfare finance, the track record of Congress in recent years is frightening.