State Innovations in Child Welfare Financing. Chapter 4: What Are the Challenges?


Recent fiscal reform initiatives have attempted to address some of the seemingly chronic problems of the child welfare system in the United States. The purposes of this review of fiscal reforms in child welfare are to identify how states are addressing the need to contain costs or improve system performance, and to see whether the changes appeared to be positive or negative for children and families. The 23 initiatives reviewed focus on altering the financial relationships between public child welfare agencies (states or counties) and organizations with which they contract for services. The altered relationships are intended to lead to greater efficiency in the use of resources, improved services, and better outcomes for children and families.

Unlike other child welfare initiatives, these reforms are not focused on technologies of service (e.g., family preservation). They do not, in and of themselves, provide new ways to solve the problems of families. Rather, they rely on a reorganization of existing methods. Also unlike other initiatives, these efforts do not tilt the system one way or the other on the continuum of protecting children from harm vs. upholding the integrity of the family. Rather, the initiatives are overlaid upon the existing system orientation.

How widespread is the adoption of fiscal reforms in child welfare? A few years ago, it was thought that managed care was about to sweep through the system, revolutionizing the field. It is evident that the impact of these ideas has been somewhat more modest. In a Child Welfare League of America survey in 1998, it was estimated that in the 29 states with initiatives identified at that time, only about 10 percent of the nation’s child welfare population was affected.14 The scope of fiscal reform efforts varies considerably across states. In some states (e.g., Kansas), the program covers most child welfare services across the state (except for initial intake and investigation, which was retained as a responsibility of state workers in all states). In other states, programs deal with small numbers of cases in limited geographical areas. Some states continue to expand the scope of their programs while others have pulled back. Several programs include children and families in systems other than child welfare.

One finding that emerged from the review of fiscal reforms was that, despite a concern that focusing on fiscal aspects of child welfare systems will lessen the focus on children and families, that does not appear to be what happened in the states reviewed. An integral part of the initiatives seems to be a push to do things better for the children and families served, or at least not to allow things to get worse for them when money is being saved. Many of the initiatives have implemented close monitoring of outcomes, quality-assurance procedures, performance contracting, client satisfaction surveys, evaluations, and other mechanisms for helping to ensure that saving money does not become more important than helping children and families. However, if some initiatives do not live up to early expectations that they will reduce costs, or if early success creates pressure to save more money or do even more with the same amount of money, it will be important to emphasize accountability and effectiveness. Fiscal considerations must not be allowed to overshadow objectives of improved well-being of children and families.

Available evidence does not support the conclusion that the fiscal reforms have had a major direct impact on outcomes, although impressionistic and anecdotal information points to some efficiencies and improvements in permanency outcomes. However, the initiatives’ overall impact may be difficult to quantify and document. Many states experienced a “jump-start” in child welfare when they implemented their fiscal reforms; as one administrator stated, the fiscal reform “got them out of the box and encouraged them to discover creative ways to do things.” This may be the greatest effect of the fiscal reforms, and it may not influence outcomes until much later, as states experiment with innovations and make improvements over time.

Another finding was that ongoing problems in child welfare are not necessarily eliminated by changes in fiscal relationships. In fact, the fiscal reforms may even highlight or exacerbate these problems, some of which are discussed later in this chapter. An example is in establishing rates and incentives (further discussed below); a state must clearly identify what it wants to buy and what is needed to buy it. Although the child welfare outcomes of safety, permanency, and well-being are often the goals, there is little agreement on specific outcomes. For example, does a state want to buy basic safety or does it want to achieve improvement in longstanding situations? The answer will greatly affect the design and costs of services.

At any rate, it appears that fiscal reforms are likely to be part of child welfare’s future, as agencies strive to improve child and family outcomes and reduce inefficiencies in the face of escalating costs. As fiscal strategies are adopted, there are many challenges to address; some of the major ones (discussed below) include the following:

  • structuring risks and rewards;
  • gaining flexibility;
  • obtaining data;
  • maintaining accountability and effectiveness; and
  • changing people and organizations.

Since it seems that fiscal strategies are here to stay, at least in the foreseeable future, these issues need further consideration at both program and policy levels if the initiatives are to have a positive impact.

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