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Medicaid Spending on Foster Children

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Document date: August 30, 2005
Released online: August 30, 2005

Brief #2 from the series Child Welfare Research Program

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).

The text below is a portion of the complete document.


Each year more than 800,000 children in the United States spend time in foster care as a result of abuse and neglect. States disburse about $10 billion a year in federal and state funds to meet the needs of children placed in foster care. Foster children are at particularly high risk for physical and mental health problems stemming from not only the maltreatment they have experienced but also the separation from their homes and families, and the continuing disruptions to their daily lives.

Prior research has documented that foster children have more health problems, especially mental health problems, than the general population or the population of poor children. Previous studies suggest that as many as 80 percent of youth involved with child welfare agencies have emotional or behavioral disorders, developmental delays, or other issues requiring mental health intervention (Farmer et al. 2001; Landsverk, Garland, and Leslie 2002; Taussig 2002). In contrast, mental health disorders are diagnosed in approximately 20 percent of youth in the general population (Costello et al. 1996; HHS 1999).

Child welfare agencies are responsible for meeting the health and mental health needs of all children they take into custody. This includes completing timely, comprehensive health and mental health screenings and ensuring foster children receive preventive health and dental services as well as any necessary therapeutic heath and mental health services. All foster children for whom states receive federal reimbursement for foster care expenses (under title IV-E of the Social Security Act) are categorically eligible for Medicaid. States have the option to extend Medicaid benefits to non-IV-E eligible foster children, and all states do. In addition, children receiving federally reimbursed adoption subsidies are categorically eligible for Medicaid. All states but one have also chosen to cover adopted children supported by state-funded subsidies in their Medicaid programs. Thus, virtually all children in foster care and in adoptive placements are eligible for Medicaid.

While child welfare agencies are expected to meet the health care needs of the children they supervise, and foster and adopted children are generally eligible to receive Medicaid-funded health services, each state establishes eligibility standards, determines services, sets payment rates, and administers its own foster care and Medicaid program in accordance with general federal guidelines. In addition, some children in foster care or receiving adoption subsidies may be covered through private coverage available to their foster and adoptive parents. The resulting diversity produces variation in which services are available to children in foster care and when they receive them.

Data suggest that many foster children do not receive needed health care services. In recent assessments of state child welfare agency performance, the U.S. Department of Health and Human Services (HHS) found that only one state met federal standards for provision of health and mental health services to children involved with the child welfare system (HHS 2005). Overall, HHS found that child welfare agencies failed to provide adequate services in more than 30 percent of the cases reviewed. The HHS Office of Inspector General analyzed Medicaid claims for foster children in eight states and identified issues in each state about meeting the health care needs of children in foster care. Combined, these HHS reports identified common challenges faced by states, including an insufficient number of doctors and dentists willing to accept Medicaid, a lack of consistency in conducting adequate and timely health and mental health assessments, and a lack of consistency in providing children with preventive health and dental services. A sheer lack of mental health services for children was also cited as a major challenge. These access issues are not unique to the child welfare population.

Previous studies, including several that relied on Medicaid claims data, have examined health care use by foster youth. These studies consistently find that children in foster care account for a disproportionate share of Medicaid expenditures, relative to their share of Medicaid enrollment. Much of this disparity results from foster children's disproportionate receipt of mental health services. For example, youth in foster care use Medicaid-reimbursed mental health services at a rate 8 to 15 times higher than other eligible youth (dosReis et al. 2001; Halfon, Mendonca, and Berkowitz 1995; Harman, Childs, and Kelleher 2000). At the same time, the rate of foster children's receipt of services, especially mental health and substance abuse treatment, appears to vary significantly across states. Average per child Medicaid expenditures vary widely as well, consistent with patterns of variation in service use (Rosenbach, Lewis, and Quinn 2000).

The present study is the first to examine the health care services received by foster children based on Medicaid expenditure data from all 50 states and the District of Columbia. This brief provides some key statistics on the medical and mental health services provided to foster children based on federal fiscal year (FFY) 2001 data from the Medicaid Statistical Information System (MSIS) Annual Summary File. The quality and completeness of MSIS data have improved significantly in recent years, making such an analysis of health care expenditures on foster children possible.

Study results reinforce and expand the findings of prior research by documenting significant variation in state Medicaid expenditures on foster children, and variation in spending among foster children of different ages, genders, and races/ethnicities. In addition, the study examines states' use of targeted case management for foster children, a practice that has been debated by the current administration, the Centers for Medicare and Medicaid Services (CMS), and Congress. However, given the limitations of the MSIS data, this brief does not answer research questions itself, but rather identifies and refines the questions that future studies should examine.

Note: This report is available in its entirety in the Portable Document Format (PDF).



Topics/Tags: | Children and Youth | Health/Healthcare | Race/Ethnicity/Gender


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