Children's Monitor Online
A Public Policy Update from the Child Welfare League of America

   
   
Vol. 18, Issue 31: 8/15/2005   
Headlines

Special Introduction

Key Reconciliation Decisions Likely Soon

White House Sends Medicaid Cuts to Capitol Hill

Medicaid Changes Part of Budget Reconciliation

Medicaid Changes Affect Children in Child Welfare

TANF Reauthorization Impact on Child Welfare

Take Action

Key Upcoming Dates for Congres



Special Introduction

This is the second of a two-part series on cuts to key child welfare programs. Since Congress is in recess until after Labor Day, the August editions of Children's Monitor are highlighting the potential impact of FY 2006 budget reconciliation decisions on child welfare. This week's edition focuses on possible changes to Medicaid and other possible target programs.

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Key Reconciliation Decisions Likely Soon

Congress passed an FY 2006 budget resolution earlier this year that requires Congress to prepare reconciliation legislation by September 16. The FY 2006 budget resolution specifically calls on Congress to reduce federal spending on entitlement programs by $35 billion over five years. Of that total, $10 billion presumably will come as a result of changes to Medicaid, the main health insurance program for the poor.

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White House Sends Medicaid Cuts to Capitol Hill

On August 5, Health and Human Services (HHS) Secretary Michael Levitt submitted draft legislation to Congress directly focusing on Medicaid financing reform. Included in this draft legislation is direct language limiting the use of Medicaid-funded Targeted Case Management (TCM) and rehabilitation services, changing the TCM administrative reimbursement rate to 50%, and introducing a capped limitation on what states can allot for Medicaid administrative costs. These are proposals the Bush Administration has pushed for since the release of the President's FY 2006 budget, and the timing of this draft legislation places a heightened emergency on the possibility that these proposals could be included in a reconciliation package.
Levitt's proposal would directly limit what constitutes TCM services, and Medicaid reimbursement for such services would not be allowed if they fell under other federal or state jurisdiction, including Title IV-E Foster Care and Adoption Assistance. If passed in its current form, states would face an immediate fiscal crisis, as they would have to account for the change to the 50% reimbursement rate for Medicaid administrative costs. The current language of the proposal has this component going into effect October 1 of this year, virtually rendering previously adopted state budgets into a state of disarray.

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Medicaid Changes Part of Budget Reconciliation

Reflecting recommendations in the President's budget sent to Congress in February, the budget resolution passed by Congress last spring gives specific direction to two key congressional committees with jurisdiction over Medicaid--the Senate Finance Committee and the House Commerce and Energy Committee--to craft legislation by September 16 to reduce federal spending for Medicaid.

The budget resolution specifically directs the Senate Finance Committee to make changes to programs that result in an $11 billion reduction in federal spending. The assumption was that $10 billion would come from changes to Medicaid. The budget resolution also directs the House Energy and Commerce Committee to find ways to reduce federal spending by $14 billion, again with an understanding that $10 billion in savings would come from Medicaid. When Congress considered the budget resolution, cuts greater than $10 billion for Medicaid were considered; however, Senators Gordon Smith (R-OR) and Jeff Bingaman (D-NM) rallied efforts to ensure the budget resolution did not require that even larger cuts be made to Medicaid.

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Medicaid Changes Affect Children in Child Welfare

Medicaid is an important source of federal funding to support children in the child welfare system. Medicaid is especially important to address the mental health needs of the nearly four out of five children in the child welfare system who require mental health interventions.

A soon-to-be-released report from the Urban Institute documents for the first time, on a national scale, the vital supports Medicaid provides for children in the child welfare system. Foster children, for example, account for 28% of all Medicaid expenditures on inpatient psychiatric services and 13% of rehabilitative services. A full description of that report will be highlighted in a future edition of Children's Monitor.

The primary proposed changes to Medicaid that would affect children in the child welfare system include restricting the use of Targeted Case Management (TCM) and Rehabilitative Services to provide services to children in the child welfare system.

Targeted Case Management

TCM is the provision of case management, defined as services that help eligible individuals gain access to needed medical, social, educational, and other services to a targeted population, such as children in the child welfare system.

Under current law, not all children in foster care are eligible for federal foster care assistance through Title IV-E. Through Medicaid TCM, a state can provide case management to the entire foster care population, not just children eligible for IV-E funding. Less than half of the foster care population is eligible for IV-E funding due to eligibility restrictions.

The Urban Institute's forthcoming report demonstrates that children in the child welfare system who receive Medicaid TCM services also have greater access to a variety of health services vital to their well-being. According to the report, through TCM, children in foster care were much more likely to receive physicians' services, prescription drugs, dental services, therapy, and rehabilitative services than were children not enrolled in TCM.

For many states, TCM represents a significant source of child welfare funding. Based on an earlier Urban Institute report, The Cost of Protecting Vulnerable Children IV, Medicaid provides at least 11% of all federal child welfare spending nationally. In some states, it represents more than half of child welfare funds. This 11% figure does not include the cost of basic health care services provided through Medicaid.

Medicaid TCM cannot be used to pay for room and board costs for children in foster; rather, it helps provide such services as assessing service needs, accessing those services, following-up, and providing coordination among service providers. These activities can enhance a child's condition and reduce the likelihood that more intensive--and more expensiveóMedicaid-covered services are needed in the future.

The President's budget submitted to Congress in February proposed changes to "clarify" which services may be claimed under TCM. Restricting the use of Medicaid TCM for these purposes would mean that children might no longer have access to these needed services. Under the February budget proposal, federal Medicaid costs would not be reduced in 2006 but would be reduced by $2.035 billion over the following four years. The legislation sent to Capitol Hill by HHS Secretary Leavitt on August 5 would make these particular changes effective fiscal year 2007, which starts October 1, 2006.

The President's budget also reduces federal support for TCM services to no more than a 50% federal matching rate, the same as Medicaid administrative services. Current practice allows TCM services to be matched at the higher Medicaid service rate, which varies by state from 50% to as high as 80%. The White House calculates this reduced federal matching rate would reduce federal Medicaid spending by $129 million in 2006 and by $1.049 billion over five years. The Leavitt proposal would require this change to take place at the start of FY 2006, which begins October 1, 2005. Such changes would create fiscal problems for states that have already begun their fiscal years and have budgeted according to current law.

While Congress is considering these proposals as part of budget reconciliation, HHS continues to scrutinize states' use of TCM to provide services to children in the child welfare system.

Rehabilitative Services

As defined in federal regulation, rehabilitative services include any medical or remedial services recommended by a physician or other licensed health practitioner for maximum reduction of physical or mental disability and restoration of a recipient to this best possible functional level.

To reduce overall federal spending for Medicaid, the White House, as supported by the Leavitt letter, is proposing, and Congress is considering, an option to restrict the use of Medicaid to provide rehabilitative services for children in child welfare. HHS is also scrutinizing many states' spending through audits that focus on Medicaid expenditures for rehabilitative services. A reduction in federal support for the treatment of children would force states to choose between continuing treatment at the same level at a greater cost in state and local dollars, decreasing the amount of treatment children receive, decreasing the number of children receiving treatment, decreasing the per diem reimbursement paid to the providers, or some combination of all of these.

Most providers already supplement their local, state, and federal reimbursements, which fall short of actual costs. A reduction in federal support for treatment would force providers to choose between altering or reducing their programs; tapping deeper into their donor base, which raises the issue of whether a state is obligated to pay for the care of children in its custody; or both.

CWLA opposes a restriction on the use of TCM or rehabilitative services for children in the child welfare system in budget reconciliation efforts designed to reduce overall federal spending. CWLA also opposes reducing the federal reimbursement rate to states for TCM.

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TANF Reauthorization Impact on Child Welfare

Many states use funds from Temporary Assistance for Needy Families (TANF) to provide child welfare services. Nationally, TANF provided 20% of all federal funds spent on child welfare services in 2002, but some states used much more. Texas, for example, reported that TANF funding represented 41% of the federal funding it spends on child welfare.

TANF funds also represent nearly 50% of all federal spending for child care. Since TANF funding has remained constant since 1996, the number of children receiving child care subsidies has begun to decline.

Congress and the Bush Administration have debated possible changes to TANF since 2002. As a result of these stalled negotiations, Congress has passed 10 short-term extensions of the program and is now considering adding TANF reauthorization to the budget reconciliation bill. If TANF is added to the reconciliation bill, the significant changes proposed for TANF, including increased work requirements for TANF recipients and the need for increased child care funding, would compete for consideration under a debate limited to 20 hours as prescribed by the reconciliation rules.

TANF reauthorization will affect child welfare in several ways. The pending TANF reauthorization bills would continue the $16.5 billion 1996 level of funding for TANF for five more years. TANF reauthorization is also likely to contain additional work requirements for adult TANF recipients. Although the White House wants Congress to freeze child care funding at its current level, Congress is considering increasing child care funding, but by only 4% for the next five years.

If the increased work requirements were adopted without increased funding for child care, states would need to divert existing TANF funding to implement these new work requirements. Many states would have to choose between maintaining current child welfare funding or maintaining child care funding while trying to implement new work requirements.

CWLA opposes congressional consideration of TANF reauthorization as part of the budget reconciliation process designed to reduce overall federal spending. CWLA is encouraging Congress to consider TANF reauthorization as a free-standing bill. CWLA supports reasonable work requirements for TANF recipients and substantial increases in federal funding for child care to help families attempting to leave TANF, as well as other working families and other families in need, including foster parents.

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Take Action

August is a good time to contact members of Congress to let them know that budget reconciliation decisions should not reduce federal supports for abused and neglected children. Many members of Congress conduct town meetings during this time. Information about local congressional activity can be found by contacting your Senators' or Representative's local district offices, or from the member of Congress's website. These are great opportunities to make your views known.

All members of Congress will have an opportunity to vote on final budget reconciliation legislation. Members of the Senate Finance and House Ways and Means Committees are especially key, since those committee members are assembling recommendations that will affect child welfare.
  • List of the Members of the Senate Finance Committee.

  • List of the Members of the House Ways and Means Committee.

  • For more information from CWLA.


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    Key Upcoming Dates for Congres

    July 30-September 5: Summer Congressional Recess

    September 16: Deadline for assigned committees to adopt $35 billion in cuts to mandatory programs for budget reconciliation bill

    September 23: Deadline for tax-writing committees to adopt tax cuts of $70 billion

    October 1: Start of federal fiscal year


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