Health Conditions, Utilization, and Expenditures of Children in Foster Care. Level of Medicaid Expenditures

09/19/1999

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.

Table III.20A: Distribution of Average Monthly Medicaid Expenditures, by Category of Medicaid Eligibility: California, 1994.

Table III.20B: Distribution of Average Monthly Medicaid Expenditures, by Category of Medicaid Eligibility: Florida, 1994.

Table III.20C: Distribution of Average Monthly Medicaid Expenditures, by Category of Medicaid Eligibility: Pennsylvania, 1994.

Figure III.9: Average Monthly Medicaid Expenditures, by Category of Medicaid Eligibility, 1994.

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.

Table III.21: Concentration of Medicaid Expenditures, by Category of Medicaid Eligibility, 1994.

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

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.

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.

Table III.22A: Distribution of Average Monthly Medicaid Expenditures Among Children in Foster Care, by Age, California, 1994.

Table III.22B:

Table III.22C

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.

Table III.23: Distribution of Average Monthly Medicaid Expenditures Among Children in Foster Care, by Length of Medicaid Eligibility, 1994.

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.

Table III.24A: Distribution of Average Monthly Medicaid Expenditures Among Children in Foster Care, by Type of Health Condition: California, 1994.

Table III.24B: Distribution of Average Monthly Medicaid Expenditures Among Children in Foster Care, by Type of Health Condition: Pennsylvania, 1994.

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

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).

Table III.25: Distribution of Average Monthly Medicaid Expenditures Among Foster Care Children with and without SSI Eligibility, 1994.

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).

Table III.26
Distribution of Average Monthly Medicaid Expenditures Among Children in Foster Care, by Title IV-E Assistance Status, 1994
  California Florida Pennsylvania
Receiving Title IV-E Assistance (N=63,381) Not Receiving Title IV-E Assistance (N=31,087) Receiving Title IV-E Assistance (N=7,136) Not Receiving Title IV-E Assistance (N=4,153) Receiving Title IV-E Assistance (N=18,056) Not Receiving Title IV-E Assistance (N=6,946)
All services (mean) $147 $171 $366 $389 $308 $253
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Institutional services (subtotal) 51.3% 55.0% 32.1% 26.0% 43.1% 48.5%
Inpatient hospital services 48.7 44.7 32.1 25.8 28.5 24.2
Inpatient psychiatric services 2.0 6.7 0.0 0.0 14.6 24.2
Institutional care facilities for the mentally retarded 0.5 2.9 0.0 0.0 0.1 0.2
All other nursing facilities 0.1 0.6 0.0 0.2 0.0 0.0
Outpatient services (subtotal) 23.3% 17.9% 45.0% 50.8% 47.4% 43.9%
Physician services 7.1 5.4 7.5 6.2 3.5 3.0
Dental services 3.1 2.4 1.5 1.5 1.6 2.1
Other practitioners' services 4.7 3.7 1.8 1.1 1.8 1.7
Outpatient hospital services 3.6 2.7 6.0 5.5 2.7 2.4
Clinic services 2.1 2.0 27.4 35.9 13.3 17.4
Family planning services 0.2 0.2 0.0 0.0 0.2 0.3
Rural health clinic services 0.4 0.2 0.1 0.0 0.7 0.5
EPSDT services 2.1 1.2 0.7 0.4 23.7 16.4
Ancillary (subtotal) 25.4% 27.1% 22.9% 23.2% 9.5% 7.6%
Home health services 0.7 0.9 4.4 3.3 2.3 1.1
Lab and x-ray services 2.5 2.2 1.1 1.0 1.3 1.4
Prescribed drugs 4.7 3.5 3.6 3.3 4.5 4.2
Equipment and supplies 1.2 1.0 0.6 0.6 1.3 0.7
Transportation 0.3 0.2 0.0 0.0 0.1 0.2
Case management 0.0 0.0 10.2 12.4 0.0 0.0
All other services 16.0 19.2 3.1 2.7 0.1 0.1
SOURCE: HCFA State Medicaid Research Files.
NOTE: Numbers may not sum to total due to rounding.