State Innovations in Child Welfare Financing. Chapter 1: Introduction


The provision of child welfare services has undergone significant changes during the 1990s. Some of the most important changes include a renewed focus on the rapid achievement of permanency goals for children, a large increase in the number of children in foster care, the continuing shift of responsibility for direct care to private agencies (both nonprofit and for-profit), the development of management information systems to monitor case progress more carefully, and the use of financial incentives to direct services toward desired goals. State child welfare systems have responded to these new circumstances in different ways and to varying degrees.

Generally, the provision of child welfare services is a partnership between government and private providers of service. Although states vary considerably in the division of responsibility, most states and localities contract with private nonprofit or for-profit organizations for the provision of at least some services to children and families. Until recently, these contracts were largely fee-for-service arrangements, in which the provider was paid by the state or county for delivering specific services.

This report describes the implementation by states of fiscal reforms in child welfare that replace traditional fee-for-service payment arrangements.1 It also identifies issues that implementation of fiscal reforms faces and describes how well fiscal reforms are working. Many of these reforms, such as capitated rates, are based on the managed care model that has been used in medicine for the past 30 years. However, some reforms reflect other approaches, such as the privatization of services and performance contracting. Some states, perhaps most notably Kansas, have transformed their entire systems along these lines. Most states have chosen to implement fiscal reforms on a smaller scale, targeting specific populations or programs.

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