State Innovations in Child Welfare Financing. Colorado: Boulder County Managed Care Pilot


From 1991-1997, the State of Colorado funded 90 percent of the costs for each child who met out-of-home placement criteria. In 1991-1992, out-of-home expenditures were $40.9 million; by 1996-1997, that had risen to $125.9 million. The legislature that year denied a supplemental funding request and demanded that the state child welfare agency roll back provider rates by 10 percent for three months. The agency had been discussing privatizing the entire child welfare system; the legislature told the agency to study managed care for six months and come back with a report.

Then the legislature decided to support a public child welfare managed care model, but not privatization. In 1997, the legislature block-granted child welfare funding and capped it (the legislation is referred to as “Capped Allocation”). That legislation also authorized three managed care pilots, and legislation in 1998 authorized three more pilots. The state’s objectives for the managed care pilots are to control costs and to assist children and families to achieve safety and permanency within ASFA timeframes. The requirements are: (1) there is a single entry point (i.e., the client was not referred out for services); (2) there are interagency agreements with community partners regarding funding of services; and (3) there are utilization review mechanisms (which often resulted in front-end approval mechanisms).

The managed care initiative is testing the principles of child welfare managed care; the counties keep savings that, if it were a private corporation, would go to shareholders, and they put the savings back into child welfare services. In addition, pilots are required to have performance agreements regarding outcomes, and some rules and regulations are waived. Managed care counties also have more flexibility for spending within the lines; they can negotiate provider rates, services, and outcomes except for some rates such as for Residential Treatment Centers. One result has been that counties with children in high-end placements moved relatively quickly toward getting those children adopted. The counties can opt to apply up to 5 percent of their savings toward their 20 percent portion of child welfare costs (there’s an 80/20 split with the state), but so far they all have opted to use their savings instead for creative ways to do child welfare.

Establishing the right allocation is difficult, and there is little incentive to become a managed care pilot site unless a county is sure it would have savings. For the first couple of years, managed care counties underspent their allocations, and in 2000 four out of six overspent their allocations. They were trying to find a balance, but the rule for blocked allocations is that since managed care counties can keep their savings, they’re last in line to receive any surplus child welfare funds. So those counties ended up covering their overspending with county-only funds. Eight of the 10 big counties overspent; both of the 2 who did not overspend were managed care counties.

Boulder County was one of the original three pilots and initiated its managed care initiative in July 1997. Several collaborative efforts were already in place in the county, and the pilot was seen as an opportunity to implement managed care activities by building on the existing collaborations, without using a for-profit managed care organization. The objective of the Boulder County Managed Care Pilot was to gain the flexibility to enhance the interagency partnership.

Boulder’s initiative involved developing a new organizational entity called Integrated Managed Partnership for Adolescent Community Treatment (IMPACT). The local community mental health center, the Mental Health Center of Boulder County, Inc., served as the fiscal agent, while the pilot’s board comprised representatives of all of the local child- and youth-serving agencies (Department of Youth Corrections or DYC, probation, mental health, Department of Social Services or DSS, public health, substance abuse services provider, and other community members). IMPACT’s primary function is to manage out-of-home placements for DYC, mental health, and social services; each of these agencies provides funding to IMPACT based on their historical costs for providing out-of-home placements. In addition, each participating organization contributes funding for IMPACT.

IMPACT is organizationally a part of the county mental health department. The county DSS has a contract with the mental health department for IMPACT services, and DSS supervises IMPACT staff. DSS is responsible for all administrative functions for the initiative, and usually DSS does intake and works with the family. Out-of-home case management is the responsibility of IMPACT, and service delivery usually is done by contract providers but some foster homes are provided by the county or through private foster care agencies.

The initiative’s focus is adolescents ages 12-18 in need of, or at-risk of needing, residential services. Also all DYC youth are included. The rationale for focusing on these youth is that they are the most expensive; also, the model is very interagency-focused, and probation is an important partner. Any of the partners (schools, mental health centers, probation, child welfare) can refer cases, and all youth who fit the criteria are referred. IMPACT serves about 500 youth per year.

After referral, an interagency meeting assesses needs and plans the treatment. Staff present at the interagency meeting can authorize services; they also decide whether the case will be in the child welfare or the juvenile justice system. The flexibility of the initiative allows services to be “out of the box” and also allows the county to avoid duplication. Ongoing utilization review identifies and addresses gaps in services.

The funding for services varies according to the type of provider. For example, the mental health center is a partner, and its services are paid for by one lump sum spread over 12 months. For that amount, they provide services to everyone referred. Residential treatment centers and day treatment providers are fee-for-service. The rates are determined by how the amount of funding appropriated by the state. The child welfare block allocation is flexible, and the county negotiates rates based on utilization patterns and how much money is available. The core services allocation is less flexible; the county negotiates with providers and sets the rates.

In the first couple of years after implementation, DSS had substantial savings because of managed care, and those savings were shared with the partners – they go into the IMPACT “pot” and are divided among the partners. In 2000 DSS experienced significant losses, due in large part to the State granting a 15 percent increase for Medicaid but only 1.5 percent to the counties, so the county allocation was not sufficient to fund residential treatment centers. Also, staff were given a larger raise than 1.5 percent. So DSS overspent, but the county was able to save money through DYC and “bail out” part of the financial liabilities. There is no risk sharing with the residential providers.

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