Health Conditions, Utilization, and
Expenditures of Children in Foster Care

CHAPTER III:
RESULTS

Contents

1. Demographic Characteristics
2. Medicaid Eligibility Dynamics
3. Managed Care Participation
4. Diagnosed Health Conditions
5. Utilization of Health Care Services
6. Level of Medicaid Expenditures
7. Conclusion

This chapter presents a profile of children in foster care in three states — California, Florida, and Pennsylvania — who were enrolled in Medicaid.⁽¹⁾ Children in foster care comprised between 1.1 and 3.3 percent of the children enrolled in Medicaid in 1994, but accounted for a disproportionate share of Medicaid expenditures, ranging from 3.6 to 7.8 percent (Table III.1 and Figure III.1).

Figure III.1
Comparison of Medicaid Enrollment and Expenditures Across Categories of Medicaid Eligibility, 1994.

California had the highest number of children in foster care per 1,000 children in the state (12.8 per 1,000) followed by Pennsylvania (9.8 per 1,000), and finally, Florida (4.3 per 1,000). Children receiving SSI benefits due to disability also were a relatively small proportion of the enrolled population (2 to 5 percent), but were responsible for between 15 and 27 percent of total expenditures. Children receiving AFDC comprised the largest share of children (51 to 58 percent across the three states), but represented a far smaller share of expenditures (38 to 50 percent). Children receiving adoption assistance accounted for one-half of 1 percent of the enrolled children and less than 1 percent of expenditures.⁽²⁾

Because children in foster care account for a small share of both Medicaid enrollment and expenditures, few studies highlight their health care experiences under Medicaid. Yet, this is a highly vulnerable population about which little is known. This chapter describes their demographic characteristics, the dynamics of Medicaid enrollment, utilization patterns, and Medicaid expenditures. Children in foster care are compared to children receiving adoption assistance, AFDC, and SSI. In general, we present findings first for the foster care population, then we compare these children to other Medicaid children, and finally, we examine subgroups within the foster care population. Most of our results are for 1994 (the common year of data across the three states), except for analyses involving the construction of episodes of enrollment and utilization across the two-year study period.

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A. DEMOGRAPHIC CHARACTERISTICS

Next, we present a demographic profile of children in foster care and compare their characteristics to those of children in other categories of Medicaid eligibility (Tables III.2A, Table III.2B, and Table III.2C and Figure III.2). As shown in Tables III.2A, foster care children averaged 9 years of age in California, similar to children receiving adoption assistance. AFDC children were younger on average (7 years), while SSI children were older on average (10 years). Despite similarities in the average age between children in foster care and adoption assistance, the age distribution was quite different; more infants and adolescents were in foster care and more 5- to 14-year old children received adoption assistance.

The overall age distributions were similar in Florida, although we observed a wider age gap between children in foster care and children receiving adoption assistance, due to a concentration of infants and preschool age children in the foster care group and 5- to 9-year-olds in the adopted group (Table III.2B). In Pennsylvania, the average age of foster care children was almost 11, nearly two years higher than the other two states (Table III.2C). Two in five foster care children in Pennsylvania were adolescents (39 percent), versus 21 to 25 percent in the other two states.

The gender distribution was generally consistent across states and across categories of Medicaid eligibility, with a fairly even split between boys and girls. There were two exceptions, however. In Pennsylvania, the foster care population was dominated by boys (60 percent of the total), and across all three states, there were three boys for every two girls in the SSI population.

The race/ethnicity of foster care children varied considerably across the three states, compared to children in other categories of Medicaid eligibility. Sixty percent of the foster care population in California was white, while half of the adoption assistance children and only about a fourth of the AFDC children were white. We see a different pattern in Florida where black and white children represented nearly equal shares of the foster care population, but the adoption assistance children were disproportionately white and AFDC children were disproportionately black. In Pennsylvania, we see an even sharper contrast in the racial/ethnic distribution between foster care and adoption assistance children; 43 percent of the foster care children were white versus 59 percent of the adopted children. These results suggest that children receiving adoption assistance in Florida and Pennsylvania were disproportionately white, while those remaining in foster care were more likely to be from minority backgrounds. In California, however, just the opposite was found: a higher proportion of foster care children were white compared to those who were adopted.

Foster care children were concentrated in large metropolitan areas, just like the Medicaid population as a whole. Compared to foster care children, adopted children were more likely to reside in small urban areas, especially in Florida and Pennsylvania.

We also compared the demographic characteristics of foster care children according to whether they received assistance through Title IV-E. Across all three states, Title IV-E children were younger, on average, than those not receiving Title IV-E assistance (Table III.3). Adolescents between the ages of 15 and 18 comprised a much larger share of non-Title IV-E foster care children, accounting for 67 percent in Pennsylvania, 40 percent in California, and 31 percent in Florida. In general, boys dominated girls in the non-Title IV-E group, especially in Pennsylvania.

The racial/ethnic composition differed between the two groups, with white children disproportionately eligible through non-Title IV-E categories in Florida and Pennsylvania. There were few differences in the urban/rural distribution, except in Pennsylvania, where children from small urban and rural areas were disproportionately represented in the non-Title IV-E group. These results suggest that in Pennsylvania, more than in the other two states, state foster care assistance (non-Title IV-E funds) was targeted toward adolescents, boys, whites, and residents of small urban or rural areas.

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B. MEDICAID ELIGIBILITY DYNAMICS

Research has shown that continuous health insurance coverage improves access to health care among low-income children (Weissman et al. 1999; Burstin et al. 1998/99; Berman et al. 1999). Lack of continuity in coverage, that is, coverage for less than the full year, can lead to discontinuities in access to health care, including both primary and specialty care. For foster care children, transitions in health insurance coverage (or discontinuation of coverage altogether) can lead to changes in providers, which in turn can lead to duplication of tests and immunizations, changes in treatment protocols, and missed opportunities for care.

We examined the continuity of Medicaid coverage for foster care children, compared to that of children in other groups (Table III.4 and Figure III.3). (We cannot discern from Medicaid enrollment data whether children who disenrolled from Medicaid obtained other coverage or became uninsured.) Across the three states, about 7 in 10 foster care children were enrolled continuously in Medicaid for all of 1994. Only about 1 in 10 were enrolled for less than half the year. The average length of enrollment was 10.3 to 10.6 months. Children receiving SSI benefits and those in families receiving adoption assistance more often had continuous Medicaid coverage than foster care children. Eighty to 90 percent of SSI and adoption assistance children were enrolled for 12 months. In general, continuity of Medicaid coverage among foster care children was similar to that among AFDC children, except in Florida, where turnover among AFDC children was quite high (only 56 percent were enrolled the full year).⁽³⁾ These results reflect the orientation of AFDC and foster care to provide temporary services during times of crisis, whereas SSI and adoption assistance are targeted to children who stay eligible for long periods of time (SSI due to disability and adoption assistance usually until the child reaches age 18).

Figure III.3
Continuous 12-Month Medicaid Coverage, by Category of Medicaid Eligibility, 1994

We also examined continuity of Medicaid coverage over a 24-month period to determine whether patterns of coverage differed over a longer time horizon. As expected, continuity improved over a two-year period, such that 83 percent of foster care children in California, 85 percent in Florida, and 78 percent in Pennsylvania had 12 months of continuous coverage within a 24-month period. Nevertheless, foster care children were less likely to have continuous coverage than the other groups, with the exception of AFDC children in Florida who still had a very high rate of turnover. When children entered foster care, were they newly enrolled in Medicaid or did they have Medicaid coverage through another eligibility category? The percent without prior Medicaid coverage when foster care eligibility began ranged from 27 percent in Florida to 45 percent in California (Table III.5). Among those with prior Medicaid coverage, the largest share across all three states came from AFDC. Thus, the majority of foster care children were known to the "Medicaid system" at the time their foster care eligibility began.

At the other end of the continuum, when children left foster care, what happened to their Medicaid eligibility? We see from the bottom panel of Table III.5 that one-third to one-half were not enrolled in Medicaid the month after their foster care eligibility ceased. Among those remaining on Medicaid, most became eligible for AFDC (or resumed AFDC), except in California, where most entered an "other" category while awaiting a final eligibility determination. In California, we observe a gradual increase in the number not enrolled in Medicaid following the end of foster care eligibility as a final eligibility determination was made. Additionally, 11 percent returned to foster care by the end of the 12- month period.

In Florida, discontinuation of Medicaid coverage among foster care children held steady at 42 to 48 percent over the 12-month period. About one in seven appear to have been adopted and were receiving adoption assistance. One in four obtained AFDC coverage. At the end of the 12-month period, foster care children in Florida were more likely than those in other states to be enrolled in Medicaid. That seems to be due to the higher rate of eligibility due to adoption assistance in Florida, compared to the other two states.

In Pennsylvania, about half of those leaving foster care were not enrolled in Medicaid the month after foster care eligibility ended, and this pattern held throughout the 12-month period. In general, the patterns after 12 months were similar to those in California.

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C. MANAGED CARE PARTICIPATION

Managed care participation rates varied widely across states and by category of Medicaid eligibility within states (Table III.6). About 1 in 10 foster care children in California and Pennsylvania and one in five in Florida were enrolled in Medicaid managed care in 1994. Across all categories of Medicaid eligibility, Florida had the highest level of managed care penetration in 1994 (35 percent), followed by Pennsylvania (30 percent), and California (20 percent). In all three states, the AFDC population was most likely to be enrolled in managed care (27-45 percent) and SSI children had the second-highest participation rates (12-25 percent). The rate was by far the lowest among children receiving adoption assistance.⁽⁴⁾

How did managed care participation rates vary within the foster care population? The patterns varied by state, presumably reflecting variations in program rules (Table III.7). In California and Florida, the rate was lowest among infants, whereas in Pennsylvania, the opposite was found (one in five infants in foster care were enrolled in managed care). In Florida, the rate peaked among children between the ages of one and nine, and in California, among children ages five to nine. Adolescents (ages 15 to 18) had the lowest participation rates in all three states. As might be expected, there were no major gender differences.

In all three states, managed care participation rates were highest among foster care children who were black or Hispanic and lowest among those who were white. In Pennsylvania, for example, 19 percent of black foster care children and 13 percent of Hispanic foster care children were enrolled in managed care, compared to 4 percent of white foster care children. One possible explanation is that a disproportionate share of black and Hispanic foster care children resided in communities with above-average Medicaid managed care penetration.

Managed care participation rates also followed a consistent pattern across geographic areas; the highest rates in all three states were observed in large urban areas and the lowest rates in rural areas. As an example, 22 percent of foster care children in large urban areas in Florida, but only 9 percent in rural areas, were enrolled in managed care. This reflects the focus of state Medicaid managed care programs in large urban areas due to the challenges of developing capitated programs in rural areas.

Subsequent analyses of patterns of diagnoses, utilization, and expenditures are based on claims data and exclude children enrolled in managed care. This is because managed care organizations are paid on a prospective, capitated basis, and thus, do not submit claims data to Medicaid for reimbursement for individual services. Only children enrolled in Medicaid on a fee-for-service basis have complete claims data; therefore, these children are the basis of all remaining analyses in this report.

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D. DIAGNOSED HEALTH CONDITIONS

1. Chronic Illness and Disability

Previous research has shown that children in foster care have a high prevalence of mental health conditions (Halfon et al. 1992(b); Chernoff et al. 1994; Takayama 1994), but no studies, to our have knowledge systematically compared the diagnoses among children in foster care to those of other children enrolled in Medicaid. Differences in the diagnostic mix could have implications for service delivery under Medicaid (especially with ongoing transitions to managed care). For example, higher levels of mental health conditions may require access to a specialized set of services and providers that most Medicaid programs do not traditionally offer. Likewise, management of complex physical disabilities in a community-based setting may involve personal nursing, medical equipment, transportation, and other ancillary services.

In recent years, with the expansion of Medicaid managed care, advocates have acknowledged the challenges of placing foster care children in managed care due to their special health care needs (Battistelli 1996; Battistelli 1997). Their needs involve multiple systems of care (medical, mental health, juvenile justice, special education), and managed care networks often exclude the necessary providers or are not equipped to facilitate the linkages across systems of care. Dreyfus and Tobias (1998) stress the importance of developing financing mechanisms to create appropriate incentives for the delivery of services to this population.

To measure the frequency of chronic illness and disability in the Medicaid population, we used the Chronic Illness and Disability Payment System (CDPS).⁽⁵⁾ The CDPS classifies selected diagnoses into hierarchical cost categories, based on Medicaid claims data. Because Florida did not include diagnoses on outpatient claims, we were able to produce this information only for California and Pennsylvania. Table III.8 shows the diagnostic categories included in the CDPS and provides examples of diagnoses within each category. For purposes of analysis, we have grouped the diagnoses into two broad categories: mental health conditions, which include psychiatric and substance abuse conditions; and physical conditions, which cover all other conditions, including developmental disabilities.

As shown in Table III.9 and Figure III.4, about one in three foster care children in California had a CDPS condition in the Medicaid claims (32 percent), versus two in five in Pennsylvania (41 percent).⁽⁶⁾ The rate of CDPS conditions in the foster care population was nearly double the level in the general Medicaid population (16 percent in California and 24 percent in Pennsylvania).⁽⁷⁾

Table III.10 and Figure III.5 present further detail on the types of mental and physical conditions affecting foster care children. Psychiatric conditions were the single most common diagnostic condition among children in foster care; of the children with a CDPS condition, about half had a mental health condition, either alone or in combination with a physical condition (17 percent in California; 21 percent in Pennsylvania). The most common physical conditions within the foster care population were those associated with the central nervous system (5 percent) and pulmonary conditions (6.5 percent). The rate of substance abuse diagnoses (1.1 percent) was highest in the foster care population, although the rate was still very low.⁽⁸⁾

Figure III.5:
Percent of Foster Care Children with Chronic Illness and Disablity, by Type of Condition, 1994

In general, the rate of CDPS conditions among adoption assistance children was quite a bit lower than the rate among foster care children, especially in California. This would suggest that children who were adopted had fewer medical conditions than those who remained in foster care.⁽⁹⁾ This could be a function of either the risk selection in the adoption process (that is, healthier children are adopted) or the more stable risk profile of children who have been in adoptive families for several years.

The AFDC population was less likely to have a CDPS condition as well; the rate was nearly half that of the foster care population. However, this was entirely due to lower rates of mental health/substance abuse conditions diagnosed in the AFDC population, given that the rate of physical conditions was somewhat higher.

Finally, as expected, the likelihood of having a CDPS condition was higher for the SSI population than the foster care population, which largely is a function of the higher rate of physical conditions and developmental disabilities among SSI children. SSI children were more likely to have conditions associated with the central nervous system, such as cerebral palsy and epilepsy; pulmonary conditions, such as cystic fibrosis and asthma; and skeletal conditions, such as arthritis. In addition, about 8 percent of SSI children had a diagnosis of mental retardation or developmental disability (MR/DD), versus 1 percent or less in the foster care population.⁽¹⁰⁾

We also considered the frequency of comorbidities among those with at least one CDPS condition. (Comorbidity is defined as having a condition in more than one diagnostic group.) Multiple diagnoses add significantly to the complexity and cost of care (Kronick et al. forthcoming). Of the foster care children with at least one CDPS condition, about 30 percent had more than one type of condition (Table III.11). Not surprisingly, the rate of comorbidities was higher among SSI children; nearly half of those with a condition had more than one. The rate of comorbidity was lower in the adoption assistance and AFDC groups.

Given the frequency of mental conditions within the foster care population, we performed a more detailed analysis of the severity of mental conditions. The CDPS creates a hierarchical distribution of conditions within a diagnostic category, permitting an analysis of case mix variations. Table III.12 shows the hierarchy and types of diagnoses included in each of the psychiatric categories. The CDPS also includes two categories known as "extra low" and "not well defined," which are not counted in the CDPS classification of chronic illness and disability, either because these conditions are not considered to add significantly to costs or because there is no general agreement about the diagnosis and/or treatment of these conditions. As such, the "extra low" and "not well defined" conditions were excluded from previous frequencies. We include these conditions here to show the full magnitude of mental health conditions in the foster care population.

As shown in Table III.13, most children had psychiatric diagnoses that were classified in the low-cost category (such as panic disorder and adjustment reaction). Less than 1 percent had high-cost psychiatric diagnoses (such as schizophrenia). Below the dotted line, we show the frequency of "extra low" and "not well defined" psychiatric diagnoses (such as conduct disorder and acute reaction to stress). When these conditions are included, the differential in the frequency of psychiatric diagnoses widens between foster care children and those in other groups (increasing to 24.2 percent of all foster care children in California and 31.5 percent in Pennsylvania). These "extra low" and "not well defined" diagnoses are clearly more prevalent in the foster care population. Within the foster care population, we see considerable variation among subgroups in the frequency of CDPS conditions (Table III.14). Beginning with California, the rate increased with age, doubling from 17 percent among infants to 35-37 percent among those age 10 and up. This increase was attributable to the manifestation of psychiatric and substance abuse conditions in the preteen and teenage years. It is unknown whether these conditions are a cause or consequence of or unrelated to foster care placement. The higher rate of mental health conditions among adolescents is consistent with previous research by Halfon and colleagues (1992b), also based on California Medi-Cal claims data. The age-related patterns were slightly different in Pennsylvania. The absolute rates were quite a bit higher than in California across all age groups, except that they converged in the adolescent age group (15 to 18).

There was little difference in the overall rate of CDPS conditions by gender in both states. White foster care children were slightly more likely to have mental conditions, and black foster care children were slightly more likely to have physical conditions than other children (apparently due to a higher rate of asthma among black foster care children).⁽¹¹⁾ In both states, foster care children in rural areas had a slightly higher frequency of chronic illness and disability, compared to children in urban areas. Children who were enrolled in Medicaid the full year were more likely to have a chronic condition than those enrolled at least half the year (but not the full year); these children in turn, were more likely to have chronic conditions than children enrolled less than half the year. This pattern persists across the three diagnostic groups (physical only, mental only, and both). One possible explanation is that foster care children who are often ill have more continuous Medicaid coverage. On the other hand, this could be endogenous, in that the longer children are enrolled, the more likely they are to have a Medicaid claim with a CDPS diagnosis.

There were differences in the diagnostic profile according to type of benefits received. Foster care children who also received SSI benefits had a substantially higher likelihood of a CDPS condition; indeed, they were three to four times more likely to have both physical and mental conditions than those who were not eligible for SSI. In addition, those receiving Title IV-E assistance were more likely to have a condition than those not receiving such assistance; this was mostly attributable to the higher likelihood of having a physical condition.

2. Comparison of Delivery Rates

In addition to examining variations in chronic illness and disability within the Medicaid population, we compared the rate of deliveries among teenage girls. Little is known about the birth rate among girls in foster care compared to that of girls in other categories of Medicaid eligibility and the general population.

As shown in Figure III.6, the delivery rate for girls in foster care ranged from 35.4 per 1,000 in California to 67.6 per 1,000 in Florida. The foster care delivery rate was substantially lower than the rate in the AFDC population but higher than that in the SSI population.

Figure III.6
Deliveries per 1,000 Girls Age 15-17,
by Category of Medicaid Eligibility, 1994

Sources:  Medicaid reates derived from 1994 State Medicaid Research Files. State benchmarks from Ventura, et al (1996).
Note:  State benchmarks reflect births per 1,000 while Medicaid rates reflect deliveries per 1,000.

Compared to the state benchmarks, the delivery rate among girls in foster care was lower than the general population in California, but higher than the general population in Florida and Pennsylvania. These findings should be considered illustrative (rather than definitive) because of differences in the way the rates are constructed using claims data versus birth certificates.⁽¹²⁾

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E. UTILIZATION OF HEALTH CARE SERVICES

Previous studies have shown that children in foster care utilize more mental health services, on average, than do other children covered by Medicaid (Takayama et al. 1994; Halfon et al. 1992(b), 1995). Studies have differed in their findings as to whether children in foster care utilize more physical health services. For example, Chernoff et al. (1994) and Halfon et al. (1995) found that foster children had higher health care costs than other children, whereas Takayama et al. (1994) found that they did not.

This section explores patterns of health care utilization among foster care children and children in other categories of Medicaid eligibility. Utilization is measured in two ways: first, in terms of initial access to care (initial entry into the health care system); and, second, in terms of the intensity of use. The access to care measures reflect the percentage of children with one or more inpatient stays or one or more visits of a particular type, while the intensity measures capture the number of inpatient days or outpatient visits per 1,000 children. We analyze patterns of mental health and substance abuse treatment separately, given the importance of this type of care for the foster care population. The utilization measures were defined in Chapter II (Table II.5).

1. Access to Care and Intensity of Use

a. Inpatient Care

Children in foster care had above-average rates of hospitalization compared to the general population of Medicaid children (Table III.15 and Figure III.7). Among the three states, foster care children in Florida were slightly more likely to have a stay (4.1 percent in Florida versus 3.2 percent in the other two states). As expected, SSI children had the highest likelihood of a hospital stay (7 to 12 percent in 1994), and correspondingly, the number of hospital days per 1,000 children was dramatically higher among SSI children than foster care children, ranging from three times higher in Pennsylvania to 14 times higher in California. Compared to the AFDC children, those in foster care were more likely to be admitted to the hospital and they had two to three times more inpatient days per 1,000 children. Children receiving adoption assistance had by far the lowest rate of inpatient use.⁽¹³⁾

b. Outpatient Provider Visits

We observed considerable variation in patterns of outpatient provider visits, both across states and among groups of Medicaid children within each state. Over 80 percent of the foster care children in Florida and Pennsylvania had at least one provider visit in 1994 (excluding visits to emergency rooms), compared to 65 percent in California. Nationally, 74 percent of children had at least one ambulatory medical care visit in 1996 (McCormick et al. 2000), suggesting that utilization by foster care children in California was lower than the national average for all children.⁽¹⁴⁾

Not only was the likelihood of a provider visit among foster care children lower in California than in the other two states, but it was also lower relative to the AFDC and SSI children within that state (71 and 77 percent, respectively). On the other hand, foster care children in California had a higher intensity of provider contact than AFDC children (as measured by visits per 1,000 children), signifying that once they were in the system, they received more care. Nevertheless, these comparisons echo the conclusions of a task force in California, which cited the lack of a "system of health care for foster children, but rather an unplanned, often uncoordinated set of services" (California State University 1998).

In Florida, we found that the rate of provider visits among foster care children was higher than that of SSI children (85 percent versus 78 percent) and moreover, the intensity of visits was higher (14,400 versus 12,200 per 1,000). In Pennsylvania, the likelihood of a visit was relatively comparable (83 percent versus 86 percent), but SSI children had more visits (22,700 versus 15,600 per 1,000). Not surprisingly, in both states foster care children had substantially higher utilization than AFDC children (averaging three times more visits per 1,000 children).

c. Emergency Room Utilization

Between one-fourth and one-third of all foster care children visited an emergency room (ER) at least once in 1994. Nationally, the self-reported rate was much lower, at 13 percent overall, and 15.5 percent among those with public insurance coverage (McCormick et al. 2000). Across all three states, foster care children were less likely than SSI children to use the ER. The patterns of ER use varied, however, relative to the AFDC population. The likelihood of an ER visit among foster care children was similar to that of AFDC children in California (28-29 percent), slightly higher in Florida (25 percent versus 22 percent), and quite a bit lower in Pennsylvania (34 percent versus 42 percent). Indeed, in Pennsylvania, the number of ER visits per 1,000 children was one-third lower among foster care children than AFDC children. It is unclear what is driving these variations in patterns of ER use across states and among populations within states.

d. Prescribed Drugs

We found that one-half to two-thirds of foster care children had one or more prescriptions in 1994, with the lowest rate observed in California (51 percent). The rate in the general population nationally was 55 percent in 1996, so foster care children in California were below the national rate (McCormick et al. 2000).

Not surprisingly, across all three states SSI children were more likely than foster care children to receive one or more prescribed drugs. We were surprised, however, to find that in two states — California and Pennsylvania — the AFDC population also had higher prescription drug utilization than the foster care population. We would expect these differences to be driven by case mix (such as differences in the prevalence of otitis media or asthma), but we were not able to explore what drugs or diagnoses account for the variation.

e. Preventive Care

Turning now to preventive checkups, foster care children in Pennsylvania had the highest rate of preventive care (41 percent), compared to 35 percent in California and 28 percent in Florida. Indeed, in Florida, the rate was similarly low across all categories of Medicaid eligibility. In the other two states, foster care children had the highest levels of preventive care compared to children in other groups. In California, for example, one-third of the foster care children but only one-fourth of the SSI children had a preventive visit in 1994.

Despite somewhat more favorable levels of preventive care among foster care children in two of the three states, it is nevertheless apparent that many foster care children do not receive routine check-ups in a given year, despite the recommendations for preventive health examinations every six months for infants and preschoolers in foster care, and annual exams thereafter (CWLA 1988).⁽¹⁵⁾

f. Dental Care

Foster care children were more likely to receive dental care than any other group of Medicaid children. Sixty percent of the foster care children in Pennsylvania and 44-45 percent in California and Florida had at least one dental visit in 1994, compared to 28-38 percent in the AFDC population and 31-35 percent in the SSI population. Moreover, the number of visits per 1,000 foster care children exceeded the number for the other groups, especially in Pennsylvania. In general, the level of dental care observed in the foster care population was comparable to that observed in the general population, with about 43 percent of all children nationally having at least one dental visit in 1996 (McCormick et al. 2000). Other Medicaid children, however, used dental care at rates well below the national average.

2. Utilization of Mental Health and Substance Abuse Services

The likelihood of receiving mental health or substance abuse treatment services varied substantially among foster care children in the three states, ranging from a low of 23 percent in California to a high of 38 percent in Florida, with Pennsylvania in the middle at 33 percent (Table III.16 and Figure III.8).⁽¹⁶⁾ Few foster care children were hospitalized for mental health or substance abuse treatment (only 1.7 to 2.9 percent). Most received treatment on an outpatient basis.

Figure III.8:
Variations in Use of Mental Health/Substance Abuse Services, by Category of Medicaid Eligibility, 1994

Source: HCFA State Medicaid Research Files.

Among foster care children receiving any services, there was wide variation across states in the average number of services. For example, in Pennsylvania, foster care children averaged nearly 22 visits per user, versus 18 in Florida, and only 6 in California. ⁽¹⁷⁾ Thus, not only did foster care children in California have the lowest likelihood of a visit, but those who entered treatment also had fewer visits. In contrast, utilization was highest in Pennsylvania, both in terms of the likelihood of entering treatment and the number of visits once children were in treatment. This pattern is consistent with results on the higher frequency of mental conditions among foster care children in Pennsylvania than in California, as classified in the CDPS (recall Table III.9). What is not clear, however, is whether the level of use is commensurate with clinical need, and moreover, whether children in California are more likely to have an undiagnosed mental health condition due to barriers to care.

How do patterns of use among foster care children compare to those among children in other categories of Medicaid eligibility? As expected, based on our previous analysis of health conditions in the Medicaid population, foster care children had not only the highest likelihood of a visit, but in some cases, a higher intensity as well. In California, for example, 6 percent of AFDC children and 15 percent of SSI children received treatment, compared to 23 percent of the foster care population. Thus, even though the likelihood of use among foster care children was lower in California than in the other two states, it was nevertheless higher than comparison groups within the state. We see an even more substantial difference in Florida, where the likelihood of any mental health or substance abuse treatment was more than two times higher among foster care children than SSI children, and more than 12 times higher than AFDC children.

In general, the intensity of outpatient treatment (captured by the average number of visits per user) was higher among foster care children than among those in the other groups. In Florida, for example, foster care children averaged 18 visits per user, compared to 12 visits among SSI children, and 7 visits among AFDC children. On the other hand, in Pennsylvania, it would appear that once children entered the treatment system, there was a relatively small difference in the number of visits they received (22 visits, foster care children; 20 visits, SSI children; 19 visits, adoption assistance children).

Although foster care children were more likely to be admitted for inpatient treatment in all three states, the average length of stay was typically greater among SSI children than foster care children. This pattern was most pronounced in California, where SSI children averaged 57 days and foster care children averaged 17 days. This is largely a function of a few outlier cases in the SSI population that influence group averages.

3. Variations Within the Foster Care Population

Tables 17A, 17B, and 17C show patterns of health care utilization among foster care children by selected demographic characteristics and Tables 18A, 18B, and 18C show patterns of mental health and substance abuse treatment.

a. Variations by Age

The relationship between age and health care utilization is far from consistent across the various measures of utilization. In general, inpatient use declined with age, although in California and Florida, inpatient rates rose in adolescence.⁽¹⁸⁾ Like the general population of children (McCormick et al. 2000), infants had the highest rate of inpatient use.

The level of outpatient provider visits was highly variable across states. In general, the highest visit rates were among foster care children ages 10 to 14 and 15 to 18, but the number of visits per 1,000 in California was always well below that in the other two states. These data highlight the extensive health care needs of foster care children during the preteen and teenage years.

Patterns of emergency room utilization were more similar across states, with foster care children ages 1 to 4 and 15 to 18 having the highest rates in all three states. (This is consistent with national patterns as well.) Although one in three adolescents in foster care used emergency room services in 1994, the visit rates were highly variable across states: 1,019 visits per 1,000 adolescents in California, versus 721 per 1,000 in Florida, and 867 per 1,000 in Pennsylvania. Among preschool children, 30 to 40 percent had at least one emergency room visit and the number of visits ranged from 564 to 1,041 per 1,000. In general, foster care children in California, regardless of age, had higher levels of emergency room use than those in the other two states, perhaps compensating for the lower level of other provider visits in that state.

The next three measures of utilization — prescribed drug use, preventive care, and dental care — were highest among preschool children and declined with age. For preventive care, in particular, adolescents had the lowest level of use. One in four adolescents in California and Pennsylvania and only one in six in Florida had a preventive visit in 1994. Clearly, this does not conform to the CWLA/AAP standards, which recommend annual health exams for children in foster care (CWLA 1988; AAP 1994).

Utilization of mental health and substance abuse treatment services generally increased with age (Table III.18A, 18B, and 18C). This was particularly true for inpatient care, where admission rates were highest among those ages 10 to 14 and 15 to 18. The likelihood of an outpatient visit and the average number of outpatient visits per user also was highest in these two age groups, except in Pennsylvania, where children ages 5 to 9 had a higher level of use than the 15- to 18-year-olds. This might be a function of the greater emphasis in Pennsylvania on health screenings and assessments through the early and periodic screening, diagnosis, and treatment (EPSDT) program in Pennsylvania. (Section G discusses variations in expenditures for EPSDT services across states.)

b. Variations by Length of Medicaid Eligibility

In general, health care utilization increased with length of Medicaid eligibility, such that foster care children enrolled for the full 12 months had higher levels of use than those who were enrolled for only part of the year. This was particularly true for provider visits, where the likelihood of a visit as well as the number of visits per 1,000 children was dramatically higher for those enrolled the full year. (The visit rate was adjusted for the number of months of coverage, to control statistically for the number of months of coverage.) As shown in Table III.17B, for example, 49 percent of foster care children in Florida who were enrolled 1 to 5 months had one or more provider visits, compared to 80 percent of those enrolled 6 to 11 months, and 92 percent of those enrolled the full year. Likewise, the number of visits ranged from 8,900 per 1,000 (1 to 5 months of enrollment) to 15,300 per 1,000 (12 months of enrollment). Similar disparities were observed for utilization of preventive care, dental care, and use of prescribed drugs. For example, 23 percent of foster care children in Pennsylvania who were enrolled 1 to 5 months had a prescribed drug in 1994, versus 57 percent of those enrolled 6 to 11 months, and 77 percent of those enrolled all 12 months (Table III.17C).

The one exception to this pattern was the use of inpatient services, where children enrolled the full year tended to have lower levels of inpatient use than those enrolled part of the year. As an example, foster care children in California who were enrolled the full year had one-third fewer days per 1,000 than those enrolled part of the year (Table III.17A). One possible explanation is that hospitalization may be the direct cause or immediate consequence of foster care placement, resulting in higher hospitalization rates at the beginning of the foster care placement.⁽¹⁹⁾ Indeed, children with no Medicaid coverage prior to their foster care placement had nearly a threefold higher likelihood of being hospitalized within two months of placement than those who had been enrolled in Medicaid prior to placement. This is discussed below in the analysis of patterns of use before and after foster care placement.

As shown in Tables III.18A, 18B, and 18C, the likelihood of mental health or substance abuse treatment was dramatically higher among foster care children enrolled the full year. Similarly, the number of visits per user and average length of stay was longer among those enrolled the full year. This could signify a lag in initiating a treatment plan for children newly placed in foster care, or it could reflect case mix differences. (As was shown on Table III.14, foster care children enrolled the full year were more likely to have mental conditions — either alone or in combination with physical conditions — than children enrolled part of the year.) In any event, such disparities raise concerns that the clinical needs of children in foster care are not being met during the early stages of placement. At a minimum, prevention and evaluation services are recommended to ease the transition into foster care and to identify emotional and behavioral problems (Schneiderman et al. 1998).

c. Variations by Type of Health Condition

As might be expected, foster care children with none of the specified CDPS conditions had lower levels of utilization than those with one or more conditions. This relationship held for all of the utilization measures shown in Tables III.17A, 17B, and 17C and III.18A, 18B, 18C. The observed differentials — especially for inpatient care, outpatient provider visits, emergency room visits, and prescribed drugs — are consistent with the higher medical needs among those with one or more chronic conditions. Nevertheless, the lower levels of use of preventive care and dental care among children with no chronic or disabling conditions suggest that these children are not receiving the recommended routine care (CWLA 1988; AAP 1994). It is likely that this group of children is less connected to the health care system, and therefore less likely to receive routine care. Indeed, it is possible that some of these children have undiagnosed conditions due to infrequent contact with the health care system. This group of children should be the target of outreach to ensure that they are receiving the necessary preventive care, and that physical or mental health conditions are being diagnosed and treated.

Virtually all foster care children with a CDPS condition had one or more provider contacts during 1994; the likelihood of a visit exceeded 90 percent across all three groups of children with a CDPS condition. Nevertheless, we observed substantial differentials in utilization patterns among those with a CDPS condition. For example, children with physical conditions only had the highest inpatient rates, while those with both physical and mental conditions had by far the highest provider visit rates. In general, those with mental conditions only had the lowest levels of inpatient care, emergency room services, prescribed drugs, and preventive care. Additionally, those with physical conditions only were least likely to receive dental care. Disparities across groups do not automatically signify that certain groups of foster care children are underutilizing services or that other groups are overutilizing services. Nevertheless, lower levels of preventive and dental care among certain children suggests a barrier to obtaining routine care.

As expected, children with mental conditions — either alone or in combination with physical conditions — were the most likely to receive mental health or substance abuse services (Tables III.18A-C). In California, for example, 69 percent of those with a mental condition only and 76 percent of those with both mental and physical conditions — versus only 23 percent of those with a physical condition only — received at least one mental health or substance abuse service. Children with both mental and physical conditions had by far the highest rate of inpatient mental health/substance abuse treatment. While these comparisons make intuitive sense, they nevertheless raise two questions: First, are certain children with mental health or substance abuse conditions falling through the cracks and not receiving mental health or substance abuse treatment? And second, are children with physical conditions receiving adequate mental health services following their transition to foster care?

d. Variations by SSI Eligibility Status

Next, we compared utilization patterns between children who were and were not eligible for SSI. Foster care children who are also eligible for SSI are expected to be more vulnerable than those who are not eligible for SSI benefits.⁽²⁰⁾ Foster care children who were also eligible for SSI had higher utilization across the board than those who were not eligible for SSI (Tables III.17A-C). This pattern held for mental health and substance abuse services as well (Table III.18A-C). Across all three states, the number of provider visits per 1,000 foster care children on SSI was double that of children not on SSI, while the number of inpatient days per 1,000 was four to seven times higher among foster care children receiving SSI benefits. In general, preventive and dental use also was higher among the foster care children receiving SSI (except in Florida). This differential in the use of well child care may be a result of the connectedness of SSI children to the health care system due to their higher health care needs.

e. Variations by Title IV-E Status

In general, foster care children whose Medicaid eligibility was through Title IV-E had higher levels of utilization, although patterns varied slightly across states. One consistent finding is that Title IV-E foster care children had higher levels of preventive care. In addition, although the likelihood of a provider contact was higher among Title IV-E children, the number of visits per 1,000 tended to be quite similar between the two groups of children. It is not clear why we observed such differences but they are likely to be a function of underlying case mix variations. (As was shown in Table III.14, Title IV-E children were more likely than non-Title-IV-E children to have physical conditions.) Patterns of mental health and substance abuse treatment were fairly similar between the two groups, except in Florida, where non-Title IV-E children were more likely than Title IV-E children to receive treatment.

4. Analysis of Utilization Before and After Foster Care Placement

In addition to looking at annual utilization patterns, we explored patterns of use before and after foster care placement. There is considerable concern among policymakers that children do not receive adequate care once they are placed in a foster care setting. Health care needs are often overlooked, accurate health history information is often not available, and caseworkers may not understand the Medicaid system (Rawlings-Sekunda 1999).

The CWLA developed a set of guidelines for health services for children in foster care (CWLA 1988).⁽²¹⁾ According to these guidelines, children in foster care should receive the following screening, assessment, and treatment services:

• Immediate health screening. This should be performed prior to placement, if possible, or within 24 hours after placement to identify health problems that may affect placement or that require immediate attention. The evaluation should include a comprehensive health, nutrition, and developmental assessment; complete physical examination; screening for vision, hearing, and dental status; and a mental health screening.
• Comprehensive health assessment. This should be performed within 30 days of placement. The assessment should include tests for anemia, tuberculosis, and developmental delays, as well as a complete blood count and urinalysis. Tests for sickle cell anemia, lead poisoning, HIV infections, hepatitis B, and other communicable diseases should be performed as needed. Immunizations and medications should be provided as necessary. A dental examination should be performed.
• Comprehensive mental health assessment. This should be performed within 30 days of placement by a qualified mental health practitioner.
• Ongoing primary care. This should include preventive care, following the AAP periodicity schedule or the state Medicaid agency's EPSDT schedule.
• Mental health services. These services should be made available to all children in placement, and should include psychiatric services and psychological testing.
• Specialized health services. These services include 24-hour emergency care, referrals for specialized health consultations, and other specialized services, including services for learning disabilities, hearing or vision impairment, orthodontia, plastic surgery, and speech and language problems.
• Transportation services. These services should ensure access to health care.
• Case management services. These services should facilitate continuity and coordination of care.

We analyzed how frequently children placed in foster care received these services, and whether the likelihood of that happening varied depending on whether the child had Medicaid coverage through another eligibility category at the time of placement.

To conduct this analysis, we identified a subset of children who were placed in foster care from January through October 1995 (1994 in Pennsylvania), who had no other period of foster care eligibility in the previous 12 months, and who remained enrolled in Medicaid for two months following the month of initial foster care eligibility. The number of children included in this analysis, including the percent with prior Medicaid coverage, was as follows:

To assess whether children received health care services on a timely basis — in accordance with the CWLA guidelines — we examined utilization during the post-placement periods. We recognized, however, that states may lag in designating foster care as the reason for eligibility for those children who were already enrolled in Medicaid. Therefore, we also included a two-month window for utilization prior to the designation of foster care eligibility. We created "windows" for analyzing utilization one and two months prior to foster care eligibility (for those with prior Medicaid coverage), during the month of initial foster care eligibility, and during the two months following. The CWLA guidelines stipulate windows for receipt of certain services, for example, within 24 hours or 30 days of placement. Because the SMRF file indicates only the month in which eligibility began, we were required to use broad windows to examine utilization patterns.

Tables III.19A, 19B, and 19C present the results of this analysis. The tables show, for each measure, the utilization patterns before and after foster care placement. The two pre-placement windows include those children with prior Medicaid eligibility and are designed to be cumulative, showing the percent of children with utilization in the two months prior to placement (as reflected in the Medicaid eligibility record) and then the subset of those who had use in the one month prior to placement. In the post-placement period, we show the percent with use during the month that placement began, and the cumulative effect over time (that is, one and two months after the initial placement). As an example, in California, about one-third of the children had a provider visit during the month foster care eligibility began; two full months after the foster care placement, 54 percent of those with prior Medicaid coverage, but 60 percent of those with no prior Medicaid coverage had at least one visit (Table III.19A). The average number of visits per user was similar between the two groups during the post-placement period.

The use of inpatient care in the pre- and post-placement period varied across the three states (Tables III.19A-C). In California and Florida, foster care children with no prior Medicaid coverage were more likely to be hospitalized during the month of placement, compared to foster care children with prior coverage. The differential persisted over the two-month post-placement period. As mentioned earlier, hospitalization is often the impetus for obtaining Medicaid coverage.

We would expect almost all children to have had at least one Medicaid-paid provider visit within the two months following foster care placement. ⁽²²⁾ This was not the case, however. The highest rates were observed in California, with 54 to 60 percent having a visit, followed by Pennsylvania (51 percent), and lastly, Florida (40 to 44 percent). Only about one-fifth to one-third had a visit during the month of foster care placement. The average number of visits, among those with at least one visit, ranged from 2.8 to 5.9 by two months post-placement. Interestingly, foster care children in California had the highest likelihood of a provider visit within the first two months of placement, despite overall lower levels of utilization on an annual basis (recall Table III.15). The rate of preventive care — which includes health screenings and assessments — was less than 10 percent during the month of foster care placement. Interestingly, however, the rates in California and Florida were higher among those children with no prior coverage than among those with previous Medicaid coverage, suggesting that providers were more likely to perform assessments on those who were newly enrolled. However, combining the five-month window surrounding the foster care placement for those with prior Medicaid coverage, eliminates the difference, with 35 percent of children having a preventive visit during that period (data not shown). What is not clear is whether some children receive the assessments in the pre-placement period, which is recommended, or whether the dates of placement on the eligibility files are incorrect so that some of the utilization appearing on the claims file before placement is actually occurring after placement. What is clear from these data is that few children were receiving comprehensive assessments reimbursed by Medicaid within the two-month post-placement period.

Although the CWLA guidelines suggest that laboratory tests and x-rays should be performed during the initial assessments, only 20 to 27 of children percent of children had such a claim during the two-month post-placement period. It is possible that such tests were performed in public health clinics and not billed to Medicaid, but this cannot be determined from the available data.

Mental health services were provided to relatively few children following a foster care placement. Only about one in six children received such services in California and Pennsylvania, and only 2 to 3 percent in Florida. It is possible that these services were being provided through the state mental health system and not reimbursed by Medicaid during the initial placement period, but nevertheless, the rates are quite a bit lower than would be expected. It is also possible that evaluations of mental health status were performed in conjunction with a general preventive exam, rather than through a separate mental health evaluation. Dental visit rates were uniformly higher than visits for mental health and substance abuse related services.

The CWLA guidelines mention the need for specialized health services, including 24-hour emergency treatment. In California and Florida, patterns of emergency room use following placement were similar between children with and without prior Medicaid coverage, whereas in Pennsylvania, children with prior Medicaid coverage were slightly more likely to use the emergency room than those with no prior coverage.

Certain services recommended in the CWLA guidelines, especially case management and transportation, were never or only rarely paid for by Medicaid. Case management services were paid through Medicaid only in Florida, with 11 to 18 percent receiving these services in the two-month, post-placement period. Interestingly, those with prior Medicaid coverage were more likely to receive such services through Medicaid, perhaps because they were already linked to a case manager through another program. Transportation services were almost never paid for by Medicaid. That is not to say that families were not receiving these services through another system (such as child welfare), but Medicaid was not the reimbursement mechanism.

The primary observation from this analysis is that few children were receiving services that conform to the CWLA guidelines (to the extent that we have been able to operationalize the standards using claims data). The CWLA guidelines were published in 1988 and these data are from 1994. It seems clear that foster care children were not receiving services at the level envisioned by the guidelines. What cannot be discerned without more recent data is whether the situation has improved in the six years since this study period. Further analysis of more recent claims data would be required. Analysis of medical records also would be desirable, to overcome the coding limitations of administrative data (such as uncertainties concerning the initial date of the foster care placement, limited information on types of health screenings and assessments, and lack of data on referrals for specialty care). Such an analysis would also reveal whether children were receiving services prior to Medicaid coverage or through systems of care not reimbursed by Medicaid (such as public health, mental health, schools, or child welfare).

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F. LEVEL OF MEDICAID EXPENDITURES

The previous two sections have shown considerable differences across the Medicaid eligibility groups in the frequency of health conditions and patterns of utilization. We now turn to an analysis of Medicaid expenditure patterns. We developed a variety of measures to characterize Medicaid spending, including average monthly spending by eligibility group and distribution of spending by type of service.

Expenditures varied widely not only across states, but also within states among Medicaid eligibility groups. Across all Medicaid eligibility groups combined, average monthly expenditures ranged twofold from $76 in California to $133 and $158 in Pennsylvania and Florida, respectively (Tables III.20A-C and Figure III.9). The range was even wider across states for the foster care population, ranging from $154 in California to $375 in Florida, with Pennsylvania averaging $293. California was consistently lower in average monthly Medicaid expenditures for all groups. As we saw in the previous section, this is consistent with the lower levels of utilization in California relative to the other two states.

We caution against making direct comparisons in absolute spending levels because we did not adjust for differences in Medicaid payment rates across states. Colby (1993) found wide variations in Medicaid physician fees, which would affect comparisons of expenditures across states, even if utilization patterns were equivalent. As a result, we tend to focus on relative distributions of expenditures (such as the percent of total), rather than absolute differences (that is, the total per se). Appendix B contains detailed expenditure tables on average monthly expenditures by type of service that correspond to the distributions discussed in this section.

1. Variations by Category of Medicaid Eligibility

How do average Medicaid expenditures vary by category of Medicaid eligibility? Foster care children, in general, had average monthly Medicaid expenditures that were two or more times higher than the average for all Medicaid children (Figure III.10). In addition, their expenditures were higher than the adoption assistance and AFDC children, but considerably lower than the SSI children (Tables III.20A-C). Children receiving SSI benefits had average monthly Medicaid expenditures that were one and one-half to more than three times the level of those in foster care.

This pattern also is reflected (and is somewhat more dramatic) at the extremes, that is, when comparing the top 10 percent of spenders in each eligibility group (Table III.21). Each decile represents 10 percent of children, ranked from lowest to highest in their total Medicaid expenditures. For example, average spending in the top decile was $11,319 for foster care children in California versus $44,583 for SSI children.

Figure III.10:
Ratio of Average Monthly Medicaid Expenditures,
by Category of Medicaid Eligibility,
Relative to Average for All Medicaid Children, 1994

Source: HCFA State Medicaid Research Files.
Note: The ratio reflects average monthly Medicaid expenditures for each Medicaid eligibility group in relation to the average for all Medicaid children.

On the other hand, average monthly Medicaid expenditures for children receiving adoption assistance were one-fourth to one-half lower than those for children in foster care. The lower expenditures among children receiving adoption assistance may in part be a function of case mix differences (recall the differences in chronic illness and disability reported in Table III.9). Another possible explanation is the role that Medicaid may play as the payer of last resort. To the extent that adoptive families have other third-party coverage that serves as the payer of first resort, Medicaid would then pay for services that either are not covered or for which benefit limits have been exhausted. As shown in Table III.21, we see that a substantial proportion of children receiving adoption assistance had no Medicaid expenditures during the year (especially in California). Thus, most of the expenditures (88 percent) were concentrated in only 10 percent of the adopted children in California. A high level of concentration in the adoption assistance group is also observed in the other two states, with 76 to 85 percent of the expenditures clustered among the top 10 percent of children.

Among AFDC children, we see a different pattern of expenditures. In two of the three states, AFDC children had the lowest expenditures of any group, averaging $50 to $100 per month. The AFDC group also had the lowest concentration of expenditures, as reflected by the percent of total expenditures accounted for by the top 20 percent of children. This reflects a tendency for a large number of AFDC children to have a small amount of spending.

2. Variations by Type of Service

In addition to observing differences in the relative levels of spending and the concentration of expenditures, we also found differences in the distribution by major type of service. As shown in Tables III.20A-C and Figure III.11, institutional-based services — such as those provided in inpatient hospital settings, psychiatric hospitals, and intermediate care facilities for the mentally retarded (ICF-MR) — accounted for 30 to 53 percent of expenditures for the foster care population. The SSI population typically exceeded the foster care population in the share of expenditures attributable to institutional care (50 to 60 percent), due in part to a disproportionate share of spending for ICF-MR services. This is not surprising, given the disproportionate share of the SSI population with MR/DD diagnoses (recall Table III.10).

Otherwise, most of the institutional facility expenditures were for general inpatient hospital services, with one exception. The higher share of spending in Pennsylvania for inpatient psychiatric services is largely attributable to family-based rehabilitation services, which are essentially community support services that include therapeutic, social support, and respite services (Table III.20C).⁽²³⁾ These services averaged $49 per month for foster care children, $25 for adoption assistance children, $3 for AFDC children, and $55 for SSI children. The most common diagnoses among foster care children using these services were attention deficit hyperactivity disorder (ADHD), oppositional disorder, and adjustment reaction. There were no expenditures in this category in Florida, and only minimal expenditures in California.

In both Florida and Pennsylvania, in contrast to California, outpatient services accounted for a higher proportion of spending for foster care children, although the patterns differed in these two states. In Florida, clinic services accounted for the majority of outpatient spending ($115 on average per month in the foster care population), 99 percent of this amount was for mental health clinic services. The top three procedures (which accounted for 50 percent of clinic service spending) included home and community based rehabilitation services, intensive therapeutic onsite services, and individual psychiatric therapy. In Pennsylvania, EPSDT and clinic services combined accounted for the majority of outpatient spending for foster care children. Clinic services included psychiatric partial hospitalization and psychotherapy (individual, group, and family). EPSDT services included both health screens and follow-up therapy (such as physical therapy and occupational therapy).

Figure III.11
Distribution of Average Monthly Medicaid Expenditures, by Type of Service, 1994.

Expenditures for ancillary services — such as home health, lab and x-ray, prescribed drugs, equipment and supplies, transportation, and case management — were always highest in the SSI population due to their complex needs, but second-highest in the foster care population. (See Appendix Tables B.1A through B.1C for actual expenditures for ancillary services.) There were state-level differences in the most common types of service. In California, "all other services," which was comprised primarily of mental health services, dominated spending, especially for foster care and adoption assistance children. In Florida, case management was the dominant category in the foster care population (averaging $41 per month). Services were provided to many different populations, with 59 percent of case management expenditures for children with chronic mental illness, another 30 percent for children with medical disabilities, 8 percent for children with developmental disabilities, and 3 percent for AIDS waiver clients. Neither California nor Pennsylvania utilized Medicaid funds for case management services for the foster care population. None of the states relied on Medicaid funds to support transportation services that would enable foster care families to obtain nonemergency services.

3. Variations Within the Foster Care Population

a. Variations by Age

As shown in Tables III.22A-C, infants in foster care had by far the highest average monthly expenditures, driven primarily by high inpatient costs. Foster care children between the ages of 10 and 18 usually had the next highest expenditures, although as before, we observed differences across states in the distribution by type of service, due in part to differences in coding practices (particularly for mental health services). For example, about one-fourth of spending for school-age children (ages 5 to 18) in California was for "all other services," largely mental health services. In Florida, 40 to 46 percent was for clinic services, which too, were mostly mental health services, and another 13 to 16 percent was for case management services, primarily for children with serious emotional disturbance. In Pennsylvania, 40 to 45 percent was for family-based rehabilitation services or for EPSDT early intervention services.

As a rule, EPSDT expenditures were concentrated in the preschool population, although the share varied dramatically across states, from a low of 1.4 percent ($3.68 per month) in Florida and 3.6 percent ($4.14) in California to a high of 39.1 percent ($106) in Pennsylvania. States vary in their implementation of EPSDT for children in foster care (English and Freundlich 1997), and it would appear that Pennsylvania has utilized this mechanism more than the other two states. Florida spent one of every seven dollars on home health services for preschool-age foster care children, including personal care by a home health aide, nursing services by a registered nurse, and private duty nursing by a licensed practical nurse.

b. Variations by Length of Medicaid Eligibility

Although this analysis implicitly controls for length of Medicaid eligibility by presenting average monthly expenditures, we examined whether there were differences in monthly spending levels by length of enrollment. On one hand, shorter periods of eligibility could be associated with higher expenditures if a child received intensive services during a brief period of eligibility. On the other hand, longer periods of eligibility could be associated with higher expenditures if children with full-year coverage were sicker and had more complex health care needs throughout the year. Interestingly, we do not see a consistent pattern across states (Table III.23). In California, average expenditures decreased as length of eligibility increased, while in Pennsylvania, just the opposite was true. In Florida, there was little difference among the three groups.

One pattern that is consistent across states is the higher share of expenditures devoted to institutional based care among foster care children with only 1 to 5 months of eligibility (76 percent in California; 60 percent in Florida; and 70 percent in Pennsylvania). This result is also consistent with the analysis of utilization patterns before and after foster care placement in which we found that children with no prior Medicaid coverage had higher rates of hospitalization immediately following placement. In contrast, children with full-year eligibility tended to have a higher share of expenditures for outpatient services (especially clinic services in Florida and EPSDT in Pennsylvania) as well as selected ancillary services ("all other services" in California and case management in Florida).

c. Variations by Type of Health Condition

Next, we compare patterns of spending by type of health condition (as reflected in the CDPS). The results are consistent across the two states with diagnostic data. Compared to those with no chronic condition, spending was 10 to 12 times higher for those with both physical and mental conditions and 5 to 7 times higher for those with either a physical or mental condition (Tables III.24A and 24B; Figure III.12). Spending was considerably higher in Pennsylvania than in California for those with a mental condition (either alone or in combination with a physical condition), due to higher Medicaid spending for specialty psychiatric services (family-based rehabilitation), EPSDT, and clinic-based services.

Figure III.12:
Average Monthly Medicaid Expenditures, by Type of Health Condition, 1994

d. Variations by SSI Eligibility Status

Table III.25 compares average monthly Medicaid spending for foster care children receiving SSI benefits versus those with no SSI eligibility during the study period. Average monthly expenditures were 3.5 to 6.5 times higher among foster care children with SSI eligibility relative to those with no SSI eligibility. Higher expenditures were driven principally by higher institutional expenditures, including specialty psychiatric services in California and Pennsylvania. Other services that accounted for a large share of the differential included clinic, home health, and case management services in Florida; "all other services" in California; and EPSDT in Pennsylvania. (See Appendix Table B.5.) These patterns are consistent with a higher frequency of mental health conditions (either alone or in combination with physical conditions) among children in foster care who also receive SSI benefits. Fifty percent of foster care children with SSI had mental health conditions, versus 23 percent of those without SSI eligibility (data not shown).

e. Variations by Title IV-E Status

In California and Florida, average monthly expenditures were slightly higher for non-Title IV-E children than for Title IV-E children, with much of the difference attributable to mental health services (clinic services in Florida; inpatient psychiatric and "all other services" in California) (Table III.26). In Pennsylvania, Title IV-E children had higher average monthly expenditures, largely due to higher EPSDT expenditures. Nevertheless, as in the other two states, non-Title IV-E children in Pennsylvania had substantially higher mental health-related expenditures than those eligible under Title IV-E. These services were provided through the family-based rehabilitation program (reported under inpatient psychiatric services in SMRF).

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G. CONCLUSION

The health care experiences of children in foster care varied widely across the three states in terms of the continuity of their Medicaid coverage and the level and mix of services they received. This study showed that, on average, children in foster care were more likely to have health conditions documented in the Medicaid claims files, were more intensive service users, and had higher health care expenditures than Medicaid children as a whole. The care provided to foster care children through Medicaid was more complex and costly than the care provided through Medicaid to children who received AFDC or adoption assistance. In contrast, children receiving SSI benefits tended to have higher needs, utilization, and expenditures than children in foster care. There was one important exception: children in foster care were more likely than SSI children (and all other Medicaid children) to have mental health or substance abuse conditions and were more likely to receive behavioral healthcare treatment under Medicaid. The higher use of mental health treatment may be a cause, consequence, or unrelated to foster care placement; the relationship and direction of causality are not clear.

These results have important implications for policymakers and, in some cases, raise additional questions for further research. In particular, the findings from this study have implications for the financing and delivery of services in a managed care context and for assuring continuity of health insurance coverage. The next chapter discusses the implications of study results and recaps the limitations of this study.

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Footnotes

1.  This analysis is based on Medicaid eligibility and claims data and is limited to foster care children enrolled in Medicaid. We compared the number of foster care children enrolled in Medicaid (as reported in SMRF) to the number of foster care children reflected in the Voluntary Cooperative Information System (VCIS). In general, the numbers were very similar, suggesting that most foster care children were enrolled in Medicaid. As of January 1994, there were 9,568 children in foster care in Florida (VCIS) and 9,279 foster care children in Medicaid (SMRF). The numbers were even closer in Pennsyvania: 18,761 (VCIS) versus 18,783 (SMRF). In California, however, it would appear that foster care children living with caretaker relatives were and given AFDC but not foster care assistance and were included in the AFDC category rather than the foster care category of Medicaid eligibility. According to VCIS, there were 87,420 foster care children in California as of January 1994, compared to 72, 345 in Medicaid; the differential appears to reflects the number of children living with caretaker relatives.

2.  The other categories of Medicaid eligibility — such as poverty-related expansions, medically needy, and all other categories — comprised between 36 and 42 percent of enrollment but only 26 to 31 percent of expenditures. The data for these children are included in the totals for all children, and are not analyzed separately in this study.

3.  This is consistent with a recent study of enrollment patterns in California and Florida that found a high level of turnover in Medicaid coverage among children leaving AFDC during the year (Ellwood and Lewis 1999).

4.  This could be due to a number of factors, including the higher likelihood of out-of-state placement, the presence of other third-party insurance coverage, or variation in program rules.

5.  Some diagnoses may not be disabling per se but were considered to reflect health status and increased risk of future expenditures (Kronick et al. forthcoming).

6.  By "CDPS condition," we refer to the diagnoses identified in the CDPS, as specified in Table III.8. The rate of CDPS conditions is consistently higher in Pennsylvania than in California. Similarly, utilization and expenditures are consistently higher in Pennsylvania. It is possible that higher utilization in Pennsylvania led to increased diagnosis. It is unclear whether this is due to differences in access, casemix, or other factors. This is discussed further in Chapter IV.

7.  About 6.5 percent of children nationally had some degree of disability each year from 1992 through 1994; children living in poverty had a 1.8 higher likelihood of experiencing disability due to chronic conditions (Newacheck and Halfon 1998). This estimate is based on self-reported data collected through the National Health Interview Survey.

8.  Among adolescents in foster care (age 15 to 18), the percent with a substance abuse diagnosis was 3.4 percent in California and 4.6 percent in Pennsylvania.

9.  One caveat, however, is that the CDPS is calculated on the basis of diagnoses present in claims and, to the extent that children receiving adoption assistance have other third-party coverage, fewer diagnoses may be recorded in claims. As we will see in the next two sections, adoption assistance children have lower health care utilization and expenditures, but it is impossible to tell whether this is due to the presence of other third-party coverage, fewer health care needs, or more barriers to care.

10.  The rate of MR/DD in the Medicaid population is undoubtedly understated based on claims data. Children with MR/DD tend to be low users of health services and oftentimes, a diagnosis of MR/DD is not recorded on the claim. This would result in an under-reporting of MR/DD diagnoses based on claims data (Burwell et al. 1997). The Social Security Administration (1998) estimates that 39 percent of children receiving SSI benefits are disabled due to mental retardation. It is also likely that the level of MR/DD in the foster care population is understated. To the extent that foster care children with MR/DD are also receiving SSI benefits, they may not be classified in the foster care category due to the coding limitations on the SMRF file. Only one eligibility category is recorded per month, and SSI may take precedence over foster care.

11.  A higher rate of asthma among children in foster care may be due to residual lung disease as a consequence of prematurity. Another possible explanation is that wheezing is associated with stressful life events, especially maternal separation during the first year of life (Halfon et al. 1995).

12.  For example, the state benchmarks are constructed based on 100 percent of birth certificates and they count multiple births individually. The claims-based delivery rates do not count multiple births separately. In addition, they are derived from claims that are tied to the mother's record number. In some cases, however, the delivery claim is submitted with the infants' record number and is not linked back to the mother. These methodological differences could result in an understatement of claims-based delivery rates compared to the state benchmarks.

13.  This could be a function of better health status (recall Table III.9). Alternatively, adopted children may have other sources of health insurance coverage that serve as the primary payer, and hence, such utilization would not be reflected in the Medicaid claims.

14.  National estimates are based on self-reported survey data from the 1996 round of the Medical Expenditure Panel Survey (MEPS). As such, they are not entirely comparable to estimates based on claims, but they provide a useful external benchmark for comparison.

15.  Another protocol recommends two assessments during the first year of placement and one visit every year thereafter, unless more frequent reassessment is indicated based on the child's age, a change in foster care placement, or a change in physical or mental health status (AAP 1994).

16.  The proportion of foster care children receiving mental health/substance abuse services was higher than the proportion who had a CDPS condition (recall Table III.9). This could reflect services provided to children with a mental condition that was "not well defined" (recall Table III.13) or services to children without a diagnosed mental condition who were in need of emotional support during transitions. (See Schneiderman et al. for a discussion of the continuum of mental health services for children in foster care.)

17.  This variation may be due in part to differences in state mental health benefits concerning the number of visits allowed for certain diagnoses.

18.  This differential does not appear to be due to maternity care during adolescence, because such admissions were excluded from the inpatient admission rate and days per 1,000.

19.  A hospitalization is often a reason for seeking Medicaid coverage especially for uninsured children. That could explain the higher hospitalization rate among foster care children with part-year coverage.

20.  Because the SMRF file shows only one eligibility category per month, we undoubtedly are undercounting the number of foster care children with SSI eligibility. The only way that a foster care child could be counted as having SSI eligibility in the SMRF file is if they had at least one month of Medicaid eligibility due to SSI, rather than due to foster care. To maximize the likelihood of identifying SSI eligibility, we used eligibility information for two years. Thus, it is possible that the period of SSI eligibility occurred before or after the period of foster care eligibility. In addition, it is possible that some foster care children are included only in the SSI category and not counted in the foster care category.

21.  The AAP (1994) issued a policy statement on health care for children in foster care that is substantially similar to the CWLA guidelines. For a comparison of the two protocols, refer to Rawlings-Sekunda (1999).

22.  There are a number of obstacles to providing health care services to foster care children immediately upon placement. Provider shortages often serve as a barrier to obtaining care, with the emergency room as the only alternative for children in crisis. For children enrolled in Medicaid managed care prior to foster care placement, there can be a delay of one month or longer until they are moved to a new provider.

23.  These services were classified by the state as inpatient psychiatric services although they are provided in community-based settings.