State Innovations in Child Welfare Financing. Michigan: Permanency Focused Reimbursement System


Michigan’s Permanency Focused Reimbursement System was implemented in 1997 to reduce children’s lengths of stay in foster care and to increase the number of children placed in permanent homes with parents, relatives, legal guardians or adopted within specified timeframes. The primary mechanism for inducing providers to achieve permanency goals within specified time frames is an incentive payment system.

Under this system, at initial case referral, providers receive a lump sum payment of $2,150 and an ongoing per diem administrative rate of $13.20. An additional payment of $1,850 is made to the provider if the child is returned home, placed with a relative or legal guardian, or moved into supervised or independent living arrangements within 290 days; or if parental rights are terminated within 515 days. For placement cases, providers receive $1,250 if the child remains in the home for six consecutive months, and an additional $1,550 for placements that are stable for twelve consecutive months. Providers who place a child in an adoptive home within seven months of termination of parental rights receive a payment of $1,250.

These payment rates were based on average foster care costs. Hence, providers are expected to have financial losses on some cases and gains on others, but should break even overall. Providers may use payments flexibly to deliver and purchase whatever services are deemed necessary to hasten permanency.

Currently, under this pilot project, the state contracts with six providers that together serve 45 percent of foster care population in Wayne County (approximately 8,900 children). Providers receive cases on a rotational basis and may not refuse referrals. Also, once a case is assigned, the provider remains responsible for delivering services for 365 days following placement in a permanent home without additional incentive payments. However, if children do re-enter foster care prior to the 365-day period, the provider continues to receive the per diem administrative rate. The incentive payment cycle is restarted for children who reenter foster care after remaining in a placement for 365 days.

At present, state monitoring of the pilot system focuses on whether providers achieve permanency goals within specified timeframes. Contracts with the providers stipulate that the program goals will be achieved in 80 percent of cases. Based on a recent analysis of incomplete data, providers had met permanency goals in about 40 percent of their cases. According to the program administrators, barriers such as a scarcity of foster homes and high staff attrition in Wayne County have prevented higher success rates. In addition to monitoring permanency goals, the Purchase of Care Division conducts site visits to review cases and evaluate the quality and timeliness of services.

In terms of utilization management, one provider employs an access 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.

Michigan has contracted with the University of Michigan, Ann Arbor, MI, to evaluate the pilot project.

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