Child Welfare League of America Making Children a National Priority


Child Welfare League of America Making Children a National Priority
About Us
Special Initiatives
News and Media Center
Research and Data
Conferences and Training
Culture and Diversity
Support CWLA
CWLA Members Only Content

Home > Advocacy > CWLA 2007 Children's Legislative Agenda > Medicaid


CWLA 2007 Children's Legislative Agenda


© Child Welfare League of America. The content of these publications may not be reproduced in any way, including posting on the Internet, without the permission of CWLA. For permission to use material from CWLA's website or publications, contact us using our website assistance form.


  • Preserve the federal guarantee of Medicaid as an entitlement program for low-income children, youth, and families. Oppose any efforts that result in reduced benefits and restricted eligibility for beneficiaries.

  • Ensure the availability of and accessibility to comprehensive preventive health care services guaranteed in federal law through the Early Periodic Screening Diagnosis and Treatment (EPSDT) program for children younger than 21 receiving Medicaid.

  • Conduct oversight of efforts to implement provisions of the Deficit Reduction Omnibus Reconciliation Act (DRA) which could negatively impact Medicaid coverage for vulnerable children and families.

  • Ensure that Medicaid targeted case management (TCM) and rehabilitative services remain available to children in the child welfare system, and that collaboration between the state child welfare and Medicaid systems is encouraged.


Medicaid serves as the nation's essential link to health care for more than 52 million people, including 25 million children. 1 In addition to financing acute and long-term health care services for millions of people in low-income families, elderly people, and persons with disabilities, the Medicaid program is responsible for ensuring that children in foster care receive the acute care and long-term services they need. 2
Medicaid is a joint federal-state partnership that allows states to create individual and unique programs tailored to their needs. Federal guidelines outline a set of mandatory beneficiaries states must provide services for, including:
  • pregnant women and children 6 or younger with family incomes up to 133% of the federal poverty line (the poverty line for a family of three in 2006 was $16,600);

  • children aged 6-18 with family income below the poverty line;

  • parents whose income is within the state's eligibility limit for cash assistance through the Temporary Assistance for Needy Families (TANF) program;

  • all current and some former beneficiaries of Supplemental Security Income;

  • all beneficiaries of Title IV-E Foster Care and Adoption Assistance; and

  • certain other low-income Medicare beneficiaries.
After states meet their mandatory obligations to provide required core services, they have the option to provide additional services for individuals who may exceed the income guidelines or to expand the scope and types of services offered. Any direct change of service to one of the state's mandatory populations requires specific permission from the Center on Medicare and Medicaid Services (CMS) outlining the scope of the program. Optional services include mental health services, such as inpatient psychiatric treatment, rehabilitative services, and other outpatient therapeutic services. All states cover at least some optional services, and have the flexibility to determine the amount, duration, and scope of the services they provide under Medicaid. Thus, Medicaid eligibility and benefits packages vary substantially from state to state. 3

States and the federal government were expected to spend about $330 billion on Medicaid in FY 2006. The portion that states fund is determined solely by the established Federal Medical Assistance Percentage (FMAP) rate. FMAP determinations are set annually and are inversely proportional to the state's average personal income-easing the burden of cost for low-income states. FMAP rates range from 50% to 77%, and the national average is approximately 57%. 4 States are required to provide the matching dollars, or the difference between the FMAP and 100%. For every dollar of state Medicaid spending, for example, CMS provides a $1 match for states with a 50% FMAP rate. States with FMAPs of 75% receive a $3 federal match for every $1 spent.

Medicaid spending is projected to increase 7% per year over the next decade, primarily due to the increasing number of low-income Americans eligible for the program and rising health care costs. 5 Much of the recent political focus on reducing Medicaid expenditures stems from substantial growth in Medicaid spending over the past few years. Medicaid expenditures increased from $182.7 billion in 2000, to $270.9 billion in 2004 during a period of limited state and federal revenue growth. In 2004, Medicaid accounted for 7% of the entire federal budget and an estimated 17% of all state general fund spending. As a result, states have struggled to maintain funding for their share, and many states have made significant cuts to their state Medicaid budgets. These cost-cutting measures have led to controlled costs of pharmaceutical drugs, reduced or frozen provider payments, reduced or restricted eligibility, loss of benefits, increased co-payments for beneficiaries, and reduced long-term care services.

In FY 2006 and FY 2007, however, while policies to control costs remain a priority, state Medicaid programs have made more program investments than in previous years, and many states have adopted plans to expand or restore Medicaid eligibility. As the national economy has recovered from the severe economic downturn in 2001, state revenue growth has rebounded and for the first time since 1998, state revenue growth in FY 2006 exceeded total Medicaid spending growth. 6

In addition, studies have shown lately that Medicaid has been more effective than private health insurance at controlling costs and that costs per beneficiary have been rising less rapidly in Medicaid than in private insurance. 7 Medicaid spending growth slowed to near record lows in 2006, to an estimated national average of 2.8%. 8 Children in general-and particularly children in foster care-account for only a small portion of total Medicaid spending. In FY 2001, total Medicaid spending on children involved with child welfare agencies was approximately $3.7 billion, representing little more than 2% of the $180 billion of total Medicaid spending nationwide. 9

Importance of Medicaid for Abused and Neglected Children

Child welfare agencies are responsible for meeting the health and mental health needs of all children in state custody, and virtually all children in foster care are eligible for and obtain health care services through Medicaid. Other federal programs that support the child welfare system do not provide coverage for acute or long-term health services. 10 The need for comprehensive Medicaid coverage for this population of vulnerable children is particularly significant, as research has extensively documented that children in foster care have more health problems, especially mental health problems, than the general population of children from low-income families. 11

Children in foster care are at higher risk for having physical and mental health needs, stemming either from the maltreatment that led to their placement, or from preexisting health conditions and long-term service needs. 12 Exposure to domestic violence, abuse, substance abuse, neglect, homelessness, separation from family, and other traumas are just some of the many pressures children in the child welfare system face. Previous studies have found that up to 80% of youth involved with child welfare agencies suffer from emotional or behavioral disorders, developmental delays, or other issues requiring mental health intervention. 13 This is striking when compared to the general population of youth in which a mental health diagnosis is present only 20% of the time. 14 One major study found that half of all adults who had been placed in foster care as children experience serious mental health problems into adulthood, and one-quarter suffer from post-traumatic stress disorder. 15

In addition to relying on Medicaid for a broad range of acute and long-term health services, children in foster care differ from other children because of their greater need for mental health and disability-related services. 16 Beyond funding the direct provision of basic physical health care services, Medicaid currently allows many states to provide critical rehabilitative, therapeutic, psychiatric, and targeted case management (TCM) services to children in foster care. Such funding is essential for the child welfare system to ensure children in foster care receive the necessary physical and mental health supports while in protective custody.

A 2005 Urban Institute report documented the role of Medicaid for children in foster care. Using available data from FY 2001, the report documents that nearly 870,000 children were enrolled in Medicaid due to their status as a foster child. Per capita spending for children in foster care during that same year was $4,336 per child-more than three times the per capita spending on children without disabilities receiving Medicaid.

The report documents that of the total $3.8 billion in Medicaid funds spent on children involved with child welfare agencies in FY 2001, 13.1% was allocated for rehabilitative services; 11% for inpatient psychiatric services; 9.4% for inpatient hospital services; 8.7% for clinical services; and 7.7% for prescription medication. States were not able to specify how the remaining 16.7% (or $628 million) of the funds was used. These funds are designated as "other" and are often used for services such as prosthetic devices, eyeglasses, and home- and community-based waivers. 17

TCM is an optional Medicaid benefit that helps a specified group of Medicaid beneficiaries receive better coordinated care and greater access to necessary medical services. Employment of TCM allows states to target a select population (for example, children in foster care, people with severe mental illness, or people with HIV/AIDS) to receive in-depth case management services. TCM for children in foster care facilitates the provision of essential health and mental health services, while Title IV-E Foster Care and Adoption Assistance funding cannot be used for such health care purposes.

Currently, 38 states employ the TCM option to provide greater coordination of health care services for children in foster care. Such case management services play a crucial role in coordinating the health care needs of children in out-of-home care across child-serving systems, and helping ensure children actually receive the services prescribed by medical professionals and other service providers. 18 In short, TCM increases the likelihood that children in foster care will receive the health care services-both physical and mental and short-term and long-term-they need and are entitled to. According to the Urban Institute, TCM represented 7.1%, or $266 million, of the total amount of Medicaid from states that reported using TCM services for children in foster care in FY 2001. The 144,508 youth in foster care who received TCM in FY 2001 were more likely than children in foster care not receiving TCM to receive physician services (68% compared to 44%); prescription drugs (70% compared to 47%); dental services (44% versus 24%); rehabilitative services (23% versus 11%); inpatient services (8% versus 4%); clinic services (34% compared to 20%); and inpatient psychiatric and home health care services at a rate of 3 to 1 over non-TCM recipients. 19

Medicaid also provides rehabilitative services for children in the child welfare system. These services aim to reduce physical or mental disabilities and help recipients reach their optimal functioning level. Some of these key services include therapeutic or treatment foster care, behavioral management services, day treatment services, and family functioning interventions. Use of the rehabilitative services Medicaid option often plays a critical role in allowing states to provide essential mental health services in the least restrictive setting to children in foster care.

Significantly, The Early, Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit is Medicaid's comprehensive and preventive health program for children under the age of 21 and, therefore, is supposed to guarantee comprehensive physical and mental health coverage for children in out-of-home care. As defined in law as part of the Omnibus Budget Reconciliation Act of 1989, EPSDT requires states to ascertain physical and mental defects and to provide treatment to correct or ameliorate any defects or chronic conditions found. States are also required to inform children and their families of the availability of EPSDT services, their benefits, and where and how to obtain them, as well as to provide transportation and scheduling assistance if requested.

EPSDT was intended to provide comprehensive screening, diagnostic, and treatment services to poor children and youth in the United States. Unfortunately, despite EPSDT's broad benefits aimed at helping the neediest children, studies have repeatedly shown that not all children are receiving the services to which they are entitled by federal law. Several factors are thought to contribute to the underutilization of EPSDT services among eligible children. These factors include low provider participation in Medicaid, especially among mental health providers and dentists, which creates access problems. Also, many parents are simply not aware that their children are entitled to such a wide variety of screening and treatment services. As a result, many frustrated parents and advocates have sued states in recent years for failing to fulfill the federal EPSDT mandate. 20 Congress must work to maintain EPSDT and improve its implementation throughout the nation so that all children receiving Medicaid, including children in foster care, receive the comprehensive health care services they are entitled to.

Recent and Ongoing Debate

Deficit Reduction Omnibus Reconciliation Act (DRA)

Congress enacted large cuts to Medicaid through last year's Deficit Reduction Omnibus Reconciliation Act (DRA). Passed in February 2006, the DRA will result in a net cut of $26.1 billion to Medicaid over the next decade. 21 While the legislation affirms the use of TCM for children in foster care, including assessment, development of a specific care plan, referral to other needed services, and monitoring and other follow-up activities, the DRA also specifically notes that TCM funds cannot be used to provide basic foster care services. Child welfare services for which TCM funds may not be used include services as part of research and completion of required foster care documentation; assessment of adoption placements; recruiting or interviewing potential foster parents; serving legal papers; conducting home investigations; providing transportation; administering foster care subsidies; or making other placement arrangements. These fundamental services should all be part of permissible Title IV-E expenditures.

This clarification assumes net federal savings of $760 million over five years and $2.1 billion over 10 years. Estimates also assume that the changes would shift some costs to the federal Title IV-E foster care program, increasing federal Title IV-E spending by $350 million over five years and $940 million over 10 years. This clarification, while on its face does not prohibit the use of Medicaid for legitimate child welfare services to meet the health care needs of children in foster care, raises concern regarding how the Centers for Medicare and Medicaid Services (CMS) will implement this provision. It remains possible that CMS may restrict legitimate TCM claims through ongoing regulatory decisions (see "Bush Administration Proposals" below). Congress must conduct the necessary oversight to ensure that this does not occur and that the use of TCM for valid health care purposes within the child welfare system remains available.

The DRA includes several other provisions that could negatively impact children and families, including children in foster care. The Act provided increased flexibility for state Medicaid programs related to benefit packages and cost-sharing requirements, calling for low-income families to pay Medicaid co-payments. Previous law restricted co-payments to $3, but for the first time, states can now charge families a co-payment of 10% if their income is at the poverty level (or up to 150% of the federal poverty level, $16,000 to $24,000 for a parent and two children). For families whose income is 150% of poverty, states could charge a 20% co-payment and a premium. So far, only three states-Idaho, Kentucky, and West Virginia-have used the new DRA options to change benefit packages, but other states are considering these options. The DRA also created new citizenship documentation requirements for Medicaid applicants to prove their legal immigration status before receiving any Medicaid benefits. After much lobbying by child welfare advocates, including CWLA, Congress decided to exempt children in foster care from these stringent documentation rules. Unfortunately, the strict new rules still apply to millions of children across the country, and a growing number of states are reporting enrollment declines. 22 Congress must provide the necessary oversight of state efforts to implement such DRA provisions that could negatively impact vulnerable children and families, and ensure that this legislation does not result in the inappropriate loss of critical health care services available through Medicaid.

On the heels of the cuts made earlier last year, it is unclear if Congress will enact any significant changes to Medicaid during the remainder of this year. A new political environment exists following last fall's elections that changed the face of Congress, and efforts to reauthorize the State Children's Health Insurance Program (SCHIP) are expected to be front and center. As legislators work on locating resources to make the necessary funding increases to sustain the very important SCHIP program, it is vital that Medicaid funding not be subjected to related cuts. SCHIP and Medicaid are complementary programs that work together to cover the nation's uninsured children. Cuts to either program would be extremely harmful and counterproductive. At the same time, as Congress is considering these issues, post-DRA decisions about Medicaid are occurring in state legislatures. The possibility that additional states may decide to take advantage of new DRA options to reduce benefits and increase cost-sharing, potentially resulting in many low-income children and families losing access to health care, must be guarded against.

Bush Administration Proposals

On top of this legislative activity, there has been continued federal scrutiny over state financing mechanisms for Medicaid in recent years, including Bush Administration proposals to limit the use of the TCM and rehabilitative services Medicaid options that often serve the child welfare population. This heightened regulatory oversight poses a significant threat to the child welfare system's capacity to meet the health care needs of children in out-of-home care.

Specifically, the Bush Administration proposed in 2005 to severely restrict Medicaid coverage for case management and rehabilitative services in the context of child welfare through changes to the definitions of Medicaid rehabilitation and TCM services, and proposed new reimbursement limitations. Alarmingly, the Administration proposed to statutorily exclude payment for rehabilitation and case management services that are "intrinsic to programs other than Medicaid," including child welfare. Essentially, this provision means that Medicaid could not be billed for services if federal, state, or local law permits these services to be furnished by child welfare or other agencies to individuals who are not eligible for Medicaid. In addition, the Administration's proposal would reduce federal funding for TCM to 50%, which is the rate for administrative services rather than the normal Medicaid services rate for a particular state. No official legislative action was taken on these proposals in 2005. However, the budget reconciliation legislation that Congress enacted at the beginning of 2006-termed the Deficit Reduction Act (DRA)-did reflect some of these proposals, as it targeted the use of TCM by child welfare agencies.

The Administration's efforts to limit the use of Medicaid's option to provide rehabilitative services to children in foster care and others were once again reflected in the President's 2007 budget proposal, which endorsed the use of an "intrinsic elements" test. Specifically, the Administration proposed to issue a regulation that would clarify Medicaid payments for rehabilitation services and define allowable services as "excluding payment for rehabilitation services that are intrinsic to programs other than Medicaid, such as foster care, child welfare and education." 23 However, many of the services the Administration highlighted as being "intrinsic" to child welfare, such as therapeutic foster care, provide valuable mental health benefits to children in the child welfare system. These mental health services allow children in out-of-home care to receive necessary therapeutic services in the least restrictive setting possible, and should be paid for by Medicaid. The President projected these proposed changes in reimbursement policies for rehabilitative services would result in a $2.3 billion cost savings over five years.
Regardless of whether or when regulations are issued by CMS for the use of both TCM and rehabilitative services on behalf of children in foster care, CMS has taken and continues to take action through various mechanisms, including audits, to restrict child welfare access to both categories of services. This concerns the child welfare community, as the use of both of these Medicaid options plays a crucial role in allowing child welfare agencies to meet the many physical and mental health needs of the foster care population. Federal policies and regulations should allow and encourage substantial collaboration between state Medicaid and child welfare systems, rather than continue recent trends that attempt to restrict the use of Medicaid dollars that dutifully serve the legitimate health needs of children in out-of-home care through the TCM and rehabilitative services Medicaid options.

The Administration has also repeatedly proposed the use of caps or limitations on the services that Medicaid can provide. Placing a cap on Medicaid limits the services a state can provide because its funding stream is locked into a fixed, unalterable account. Currently, Medicaid is an entitlement program guaranteeing that the federal government increases its share of the cost to help states provide the care needed by individuals. Amending Medicaid to a fixed allocation fails to meet the extreme demand that states face and will result in states increasingly altering their plans and potentially decreasing coverage.

Medicaid plays a vital role in providing essential health care to children in foster care, who are some of our nation's most vulnerable children. The program also plays an invaluable role in serving the health care needs of low-income, at-risk families that children in foster care most often come from and return to. On multiple levels, Medicaid provides a lifeline for the children and families involved in the child welfare system, and we must guard against any administrative or legislative efforts to restrict legitimate uses of Medicaid funding to serve the health care needs of children in foster care.


  1. The Kaiser Commission on Medicaid and the Uninsured. (2005, October). Early and periodic screening, diagnostic, and treatment services. Medicaid Facts. Washington, DC: Author. back
  2. Crowley, J. S., & O'Malley, M. (2006, December). Profiles of Medicaid's high cost populations. Washington, DC: The Kaiser Commission on Medicaid and the Uninsuredback
  3. Center on Budget and Policy Priorities. (2006, October). An introduction to Medicaid. Available online. Washington, DC: Author. back
  4. Ibid. back
  5. Ibid. back
  6. The Kaiser Commission on Medicaid and the Uninsured. (2006, October). State fiscal conditions and Medicaid. Medicaid Facts. Washington, DC: Author. back
  7. Center on Budget and Policy Priorities, An introduction to Medicaidback
  8. The Kaiser Commission on Medicaid and the Uninsured, State fiscal conditions and Medicaid. back
  9. Sommers, A., & Cohen, M. (2006, March) Medicaid's high cost enrollees: How much do they drive program spending? Washington, DC: The Kaiser Commission on Medicaid and the Uninsured. back
  10. Crowley & O'Malley. back
  11. Geen, R., Sommers, A., & Cohen, M. (2005). Medicaid spending on foster children. Available online. Washington, DC: Urban Institute. back
  12. Crowley & O'Malley. back
  13. Farmer, E. M. Z., Burns, B. J., Chapman, M. V., Phillips, S. D., Angold, A., & Costello, E. J. (2001). Use of mental health services by youth in contact with social services. Social Service Review, 75(2): 605-24.
    Landsverk, J., Garland, A. F., & Leslie, L. K. (2002). Mental health services for children reported to child protective services. In J.E.B. Myers et al. (Eds.), APSAC handbook on child maltreatment (pp. 487-507). Thousand Oaks, CA: SAGE Publications.
    Taussig, H. N. (2002). Risk behaviors in maltreated youth placed in foster care: A longitudinal study of protective and vulnerability factors. Child Abuse and Neglect, 26(11), 1179-99. back
  14. U. S. Department of Health and Human Services. (1999). Mental health: A report of the surgeon general. Rockville, MD: U.S. Department of Health and Human Services, Substance Abuse and Mental Health Services Administration, Center for Mental Health Services, National Institutes of Health, National Institute of Mental Health. back
  15. Pecora, P., Kessler, R., Williams, J., O'Brien, K., Downs, A. C., English, D., et al. (2005). Improving family foster care: Findings from the Northwest Foster Care Alumni study. Seattle, WA: Casey Family Programs. back
  16. Crowley & O'Malley.. back
  17. Geen, Sommers, & Cohen. back
  18. Crowley & O'Malley. back
  19. Geen, Sommers, & Cohen. back
  20. The Kaiser Commission on Medicaid and the Uninsured, Early and periodic screening, diagnostic, and treatment services. back
  21. The Kaiser Commission on Medicaid and the Uninsured. (2006, February). Deficit Reduction Act of 2005: Implications for Medicaid. Washington, DC: Author. back
  22. Cohen R. D., Cox, L., & Marks, C. (2007, January). Resuming the path to health coverage for children and parents: A 50 state update on eligibility rules, enrollment and renewal procedures, and cost-sharing practices in Medicaid and SCHIP in 2006. Washington, DC: The Kaiser Commission on Medicaid and the Uninsured. back
  23. Office of the Assistant Secretary for Budget, Technology, and Finance. (2006, February). Medicaid & SCHIP: Imposing stricter reimbursement policies for rehabilitation reimbursement administrative proposal. Washington, DC: U.S. Department of Health and Human Services. back

CWLA Contact

Tim Briceland-Betts

 Back to Top   Printer-friendly Page Printer-friendly Page   Contact Us Contact Us




About Us | Special Initiatives | Advocacy | Membership | News & Media Center | Practice Areas | Support CWLA
Research/Data | Publications | Webstore | Conferences/Training | Culture/Diversity | Consultation/Training

All Content and Images Copyright Child Welfare League of America. All Rights Reserved.
See also Legal Information, Privacy Policy, Browser Compatibility Statement

CWLA is committed to providing equal employment opportunities and access for all individuals.
No employee, applicant for employment, or member of the public shall be discriminated against
on the basis of race, color, religion, sex, age, national origin, disability, sexual orientation, or
any other personal characteristic protected by federal, state, or local law.