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Home > Advocacy > No Caps on Kids > Medicaid


Summary of Medicaid Budget Reconciliation Proposals Impacting Child Welfare

As part of an effort to reduce overall federal spending, Congress is considering ways to reduce federal spending for Medicaid. The Senate Budget Committee bill reduces federal net spending for Medicaid by $4.2 billion and the House Energy and Commerce Committee proposes to cut Medicaid by $12 billion.

I. Targeted Case Management (TCM) and Rehabilitative Services

Medicaid Targeted Case Management (TCM) and Rehabilitative Services provide necessary supports and services for children that have been abused or neglected. One-fifth of all children in foster care benefit from these direct specialized supports and services. The benefits of TCM are clear, as recipients have greater access to physicians, prescription drugs, dental care, and rehabilitative services than those children who do not receive TCM do. Rehabilitative services help address the mental health needs of children in foster care.

Current Law
  • TCM is defined as including services to assist a Medicaid beneficiary in gaining access to needed medical, social, educational, and other services. TCM is a currently an optional benefit under Medicaid.

  • A state is currently reimbursed for TCM and rehabilitative services at the state's Federal Medical Assistance Percentage (FMAP) rate.

  • 17% of children in foster care are currently enrolled in TCM services and account for 15% of all TCM Medicaid expenditures. Children in foster care account for 13% of all Medicaid expenditures for rehabilitative services.
President Bush Proposal
  • Restricts the use of TCM to only those cases where no federal, state, or local funding sources could be used to fund TCM services.

  • Virtually eliminates the use of TCM for children in the child welfare system.

  • Proposes to restrict the use of rehabilitative services for children in the child welfare system.

  • Denies Medicaid reimbursement if the same service were furnished without charge to non-Medicaid eligible individuals.

  • Requires that Medicaid services be billed under a fee schedule.

  • Requires that both TCM and rehabilitative services be linked to specific, measurable outcomes.

  • Reduces the federal reimbursement for TCM to 50% instead of the FMAP rate.

  • Caps federal reimbursement to states for Medicaid administrative expenses.
Senate Budget Committee Bill
  • Affirms the use of and further clarifies the TCM benefit to include:

    • assessment of an eligible individual to determine service needs by taking a client history, identifying an individual's needs, and completing related documentation;

    • development of a specific care plan based on the information collected through an assessment that specifies the goals and actions to address the individual's needs;

    • referral and related activities to help an individual obtain needed services; and

    • monitoring and follow-up activities, including activities and contacts to ensure the care plan is effectively implemented and adequately addressing the individual's needs.

  • Specifies that TCM benefit for children in foster care would not cover: research gathering and completion of required foster care documentation; assessing adoption placements; recruiting or interviewing potential foster parents; serving legal papers; conducting home investigations; providing transportation; administering foster care subsidies; and making placement arrangements.

  • Codifies the ability of states to use an approved cost allocation plan for determining the amount that can be billed as Medicaid TCM services when case management is also reimbursable by another federally funded program, such as Title IV-E Foster Care and Adoption Assistance.
House Energy & Commerce Committee Bill Same provisions as in the Senate Budget Committee bill.

II. Medicaid Access

Medicaid for children has traditionally been limited to families that were at or below the federal poverty line. Current proposals would alter this specification and allow for greater access to allow families to meet the increased medical costs for children with special needs.

Current Law Under current law, parents of severely disabled children who work lose Medicaid eligibility for their disabled children if they have income and resources above the federal poverty line (FPL). Currently, the FPL is $19,350 for a family of four.
President Bush Proposal No change to current law.
Senate Budget Committee Bill
  • Adopts provisions of pending legislation (Family Opportunity Act) to allow parents to go to work and earn above-poverty wages while maintaining Medicaid health care for their disabled child. Medicaid buy-in is allowed for disabled children whose family income or resources are at or below 300% of the poverty level ($58,000 for a family of four).

  • Allows for new waivers of SCHIP for non-pregnant adults and allows states to use 10% of 2006 and 2007 SCHIP allotment for outreach. New expenditures totaled at $128 million.
House Energy & Commerce Committee Bill No Family Opportunity Act or SCHIP provisions.

III. Community-Based Demonstration Projects

Current Law Medicaid home and community-based service (HCBS) waivers allow states to provide a broad range of home and community-based services to Medicaid beneficiaries who would otherwise need the level of care provided in hospital, nursing facility, or intermediate care facility. Federal approval for these waivers are contingent on the state's documentation of the waiver's cost neutrality.

For children with psychiatric disabilities, many states provide Medicaid funding for inpatient residential facilities. However, because the cost neutrality calculation does not allow a comparison of HCBS waiver expenditure to expenditures in these psychiatric residential facilities, most states have had difficulty covering HCBS services for children with psychiatric disabilities.
President Bush Proposal No change in current law.
Senate Budget Committee Bill Provides $218 million for demonstration projects in 10 states to develop home and community-based services as an alternative to psychiatric residential treatment for children with psychiatric disabilities who are enrolled in Medicaid. These projects must follow the requirements of the HCBS waiver program meeting the level of care of a psychiatric residential treatment facility and the average, per-person project expenditures may not exceed the average, per-person cost of a psychiatric residential treatment facility.
House Energy & Commerce Committee Bill No change to current law.


Current Law The Medicaid Early, Periodic Screening, Diagnosis and Treatment Program (EPSDT) ensures that all children receive appropriate health and mental health screening and treatment.
President Bush Proposal No change to current law.
Senate Budget Committee Bill No change to current law.
House Energy & Commerce Committee Bill Loss of guaranteed comprehensive treatment and services provided through EPSDT for young children over 133% of the federal poverty level (including children in foster care and children living with relative caregivers) and children over age six who are above the poverty level. Need for health and mental health treatment for these children would not longer have to be provided.

Child Welfare League of America
November 1, 2005

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