The HomeRebuilders project was an ambitious effort to test a major reform of the foster care system in New York City. Planning for the project extended over more than 2 years and involved many staff from the state, city, and the private agencies delivering services. The project entailed countless hours of effort, required negotiations of new relationships among the organizations involved, and took all participants into uncharted territory. It was the first large-scale experiment with managed care concepts in child welfare, and it may still be the largest.
The HomeRebuilders project was built on the notion that the current financing arrangements for foster care, primarily payments for each day in care, create all the wrong incentives for agencies providing the service. Criticisms of per diem payments are based on the view that they do not encourage agencies to work toward reunifying the child with birth parents or toward other resolutions, such as adoption. In fact, the incentive is to retain the child in care because a child in care assures a steady flow of dollars into the program. To correct these perceived distortions in incentives, HomeRebuilders offered agencies capitation payments, a central feature of managed care programs. Agencies were paid a flat amount to work with a group of children who were in foster care at the end of June 1993. Instead of payments for each day in care, the agencies received the predetermined funds, no matter how long the children were in care. Agencies thus assumed the financial risk that children might stay in care longer than projected. The funds were to be used for the costs of foster care, but could also be used for services designed to effect reunification or other permanency arrangements. Funds could also be used for aftercare services, intended to prevent reentry to foster care. The agencies believed that the new arrangements gave them an opportunity to develop new ways to work with families.
As in any major initiative, HomeRebuilders encountered some problems along the way. Agencies did not receive promised funding from Medicaid. During the experiment New York City adopted a new focus on adoption. The shift of a substantial number of cases in the HomeRebuilders group to adoption created financial pressures, since adoptions cost more than returns home (in part, because they take longer on average). There was also a significant decrease in numbers of children entering foster care. Although not directly affecting the HomeRebuilders program, the decrease caused financial stress in the agencies involved and required shifts in personnel and layoffs. Finally, and perhaps most important, the program was terminated after two and a half years, 6 months before its scheduled ending date, causing considerable disruption in the agencies.
It should be noted that the agencies insisted to us that HomeRebuilders was not a managed care program. In the pure form of managed care, agents given responsibility for cases also have the authority to make critical decisions. In HomeRebuilders, agencies had to have the approval of the New York City CWA and the court to return children home, close the case, change the goal to adoption, and to take other actions in the case. Thus, there were risks that were imposed on the agencies that were not under their control, in particular, the possibility that a child would remain in care longer than the agency thought was necessary. The agencies had to bear the financial effects of these longer stays.