State Innovations in Child Welfare Financing. Community Resources


Similar to flexible funding and individualized treatment plans, many contractors rely on community resources and informal supports to both meet some of the needs of children and reduce the level of their own resources that would otherwise be used to meet those needs. Contractors often reported that one of their major roles was to assist the family to “build up their own community support” or “set up [community] services.” In fact, some states’ case rates are based on the assumption that the contractor will rely extensively on existing community resources. For instance, the state administrator of an initiative designed to move children from residential care into communities said that the case rate would be adequate if the MCO used existing community resources and natural supports. If, on the other hand, the MCO was unable to tap into other resources, it is presumed that the state payment would not cover the purchase of needed services. In another initiative that provides services to families with children at risk of entering placement, a major objective of case management is to link families with informal support--family, friends, churches, community organizations--so that overall the state would cover only about 25 percent of the costs of services, with 75 percent coming from local resources.

Many child welfare advocates have pointed to the importance of linking families to ongoing community and informal supports in maintaining children in their local communities. However, it is not clear that these community resources are good substitutes for child welfare services. In addition, the strategy of reducing child welfare expenditures by relying more on community resources assumes that communities are well equipped to assist troubled families. This may not be the case, and if not, contractors who count on community resources to reduce their expenditures could face budget shortfalls. Indeed, a lack of appropriate community resources could be one reason that some contractors have been unable to prevent residential placements and, as a result, have experienced financial losses.

Of course contractors do not rely solely on the mechanisms discussed above to manage their budgets. Many contractors have developed utilization management systems to help them regulate expenditures; these systems range in sophistication from simple to complex. The more simple systems consist of frequent case reviews that examine lengths of stay and levels of care and develop plans to reduce both. On the more complex end, one contractor (in Kentucky) has developed software to predict costs based on a family assessment and the types and lengths of services needed. This same contractor tracks all of the costs of providing services to a family and the balance of the case rate. One of Michigan’s contractors created a new position of utilization manager. The manager tracks how many children are receiving various services, the length of time children receive services, and the number of slots that are open. Also, the manager is responsible for approving services that the caseworkers provide. Despite the differing levels of sophistication of contractors’ utilization management systems, there is unanimous agreement among contractors that budget oversight receives greater attention under the new payment arrangements.

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