State Innovations in Child Welfare Financing. Rate Setting


Another significant problem for child welfare managed care is that prepayment or prospective payment systems often rely on historical utilization data to set payment rates. If it is known that there are 20 people with diabetes in a population and it takes X dollars to treat them, predictions can be made about the future costs of providing that treatment. In child welfare, data of this sort are rarely available, and even where they are, they are often deficient.

Case mix is also a problem. In the medical arena, both managed care and traditional insurance providers have developed mechanisms to limit their exposure to costly cases. They do this to minimize risk, since to enroll large numbers of people with expensive, chronic, or disabling conditions would quickly generate high costs and therefore financial losses (Master, 1998).3 Similar dynamics may occur in child welfare managed care. Insofar as child abuse and neglect are acute and episodic, a managed care approach is more likely to be successful; chronic, long-term conditions will cause difficulties. Ideally, there would be sufficient low-intensity users to balance out the risk involved with long-term conditions. However, child welfare cases are heavily weighted toward the chronic and long-term.

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