Child welfare functions, such as foster care, adoption, family preservation, and mental health treatment, have long been candidates for privatization. The City of New York began contracting with nonprofit agencies more than a century ago to provide services for the children in its custody, who now number in the tens of thousands (Bernstein 2001). As of 1998, child welfare agencies in at least 29 states had implemented privatization initiatives of various scales and types (McCollough and Schmitt 1999).
While the involvement of private contractors in child welfare has a long history, new forms of privatization have emerged in recent years. In 1996, Kansas drew national attention by adopting a managed-care system for its child welfare program statewide. Under this system, private-sector organizations were paid a set fee for each child referred, intended to cover the cost of all foster care, family preservation, or adoption services provided. However, the state's Department of Social and Rehabilitative Services recently terminated the managed care approach after discovering that it created significant financial difficulties for contractors. Private providers continue to play an important role in the state's child welfare system but are compensated with a per-child, per-month payment (Kansas Action for Children 2001). The Kansas experience notwithstanding, a number of other states, such as Tennessee and Ohio, have employed managed care as a privatization strategy for child welfare (Kamerman and Kahn 1998).