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Home > Advocacy > Medicaid > Targeted Case Management (TCM) and Rehabilitative Services, Update - Fall 2006


Targeted Case Management (TCM) and Rehabilitative Services
Update - Fall 2006


Children and adolescents in the child welfare system have medical, developmental and mental health needs that far surpass those of other children, even those living in poverty. Despite this, the federal government continues - through various proposals and actions - to tighten the rules on Medicaid funding for child welfare services which facilitate and help provide adequate health care for foster children. States use Medicaid to fund some medical services, beyond expenditures for routine health care services, to children and families involved with the child welfare system.

Two key Medicaid options utilized for such purposes are targeted case management (TCM) and rehabilitative services:
  • Targeted Case Management: The use of Medicaid's targeted case management allows states to target a portion of their eligible Medicaid population, such as foster children, to receive special assistance in accessing necessary medical and social services. Not all states utilize the TCM option to help meet the unique health care needs of foster children, but many (38 states) do. A recent analysis published by the Urban Institute found that among foster children, those who received TCM benefited from considerably more Medicaid services than those who did not receive TCM. 1

  • Rehabilitative Services: Rehabilitative services are medical and remedial services provided for the reduction of a physical or mental disability, helping recipients to reach a better functional level. Examples of rehabilitative services include behavior management services, day treatment services and family functioning interventions. Again, not all states utilize the Medicaid rehabilitative option to fund services for children in the child welfare system, but many do, and thereby offer critical mental health services to foster children through this funding source.

Current Issues & Looking Ahead

CWLA believes that there is a shared mission between Medicaid and child welfare services to provide not only for the basic safety of children in foster care, but also to act to improve their overall well-being, including attention to physical and mental health care outcomes. It is essential that the federal government allow and adequately fund the use of Medicaid targeted case management and rehabilitative services to meet the health care needs of foster children. Unfortunately, in recent years, federal Medicaid policy has been moving in the opposite direction, to the detriment of roughly 800,000 children who spend time annually in the nation's foster care system.

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 targeted case management 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 any of various other) agencies to individuals who are not Medicaid eligible. In addition, the Administration's proposal would reduce federal funding for all targeted case management to 50 percent, 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 which 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. In particular, the DRA further clarified the definition of TCM medical assistance, and specifically excluded from the definition "the direct delivery of an underlying medical, educational, social or other service to which an eligible individual has been referred, including with respect to the direct delivery of foster care services." Examples of such foster care services given in the legislation included 2:
  • Research gathering and completion of documentation required by the foster care program;

  • Making placement arrangements and/or assessing adoption placements;

  • Recruiting or interviewing potential foster care parents;

  • Serving legal papers, conducting home investigations or administering foster care subsidies.
The legislation also ambiguously requires public programs that reimburse for case management services to be "first dollar" to Medicaid, under Medicaid "third party liability" rules. This provision is so broad that it includes virtually every public program, including child welfare, Title V programs, developmental disability programs, and state mental health and substance abuse programs. 3 The Center for Medicare and Medicaid Services (CMS) is expected to issue regulations implementing these TCM provisions this fall; exactly how these regulations will be implemented remains unclear at this time. Expected upcoming regulations may also include the Administration's continued budget proposal to reduce federal funding for all TCM services to 50 percent.

The Administration's efforts to limit the use of Medicaid's rehabilitation option to provide rehabilitative services to foster children and others were once again reflected in the President's 2007 budget proposal, which again 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 "excluding payment for rehabilitation services that are intrinsic to programs other than Medicaid, such as foster care, child welfare and education." 4 The President projected these proposed changes in reimbursement policies for rehabilitative services to result in a $2.3 million cost savings over five years.
Examples of services that the Administration asserts are "intrinsic elements" of other programs and that, under this proposal, would not be paid under Medicaid include:
  • Supplemental payments to foster care families to be foster care providers for special needs children (referred to as "therapeutic foster care");

  • Payments to foster care institutions that house a child that cannot be placed with a foster care family (referred to as "therapeutic foster care" or "foster care institutions");

  • Adoption services provided by public or private social service agencies;

  • Family preservation and family reunification services provided by public or private social service agencies.
Regulations to implement this proposal restricting the use of rehabilitative services are also possible this fall. However, regardless of whether or when regulations are issued by CMS regarding the use of both TCM and rehabilitative services on behalf of children in foster care, CMS has and continues to take action through various mechanisms, including audits, to restrict child welfare access to both categories of services. This is highly significant to the child welfare community, as the use of both of these Medicaid options to meet the physical and mental health needs of the foster care population is currently widespread. In addition, CMS appears to be increasing restrictions on "per diem," "day of service," or "bundled rates" in a variety of service settings, asserting that it is more difficult to monitor compliance with the delivery of a service package than it is to verify the provision of a discrete service on a particular date. This presents a major challenge to many providers, especially in the area of day treatment services.

Continued Monitoring and Advocacy is Crucial

Medicaid serves as a vital component to meet the needs of children in the child welfare system. States can use Medicaid funded services to address the lasting physical and mental health concerns that are not typically covered under Title IV-E Foster Care and Adoption Assistance. The use of both TCM and rehabilitative services for children in foster care plays a critical role in helping to meet the health and mental health services that Title IV-E Foster Care and Adoption Assistance does not provide.

Of special note is the evidence from the above referenced Urban Institute study, "Medicaid Spending on Foster Children," (Geen, et al. 2005) that the use of TCM by foster children has been associated with a much higher utilization of health care services, compared to foster children who do not benefit from TCM. The 144,508 youth in foster care in the study 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%) and clinic services (34% compared to 20%).
Research shows that most children in the child welfare system do not receive even the most basic mental health services, including screening, evaluation and referral, and that many foster children do not receive needed physical health care services. 5 In the context of these findings, it is vital that collaboration between Medicaid and the child welfare system be continued and, in fact, enhanced, and that access to such valuable services as TCM and rehabilitative services remains available.
CWLA will continue to monitor action by CMS and the Administration, including the expected issuance of regulations in the near future, and advocate for continued access to these Medicaid services within the child welfare system, and encourages other stakeholders in the child welfare system to do so as well.

Contact: Laura Schiebelhut, CWLA Government Affairs, 202-942-0327,

Prepared by Laura Schiebelhut
Child Welfare League of America
July 31, 2006

  1. Geen, Rob, Anna Sommers, and Mindy Cohen. August 2005. "Medicaid Spending on Foster Children." Urban Institute Child Welfare Research Program, Brief No. 2back

  2. Bazelon Center Mental Health Policy Reporter; Volume V: Issue 2; March 21, 2006 back

  3. Rubin, David, Neal Halfon, Ramesh Raghavan, and Sara Rosenbaum. June 2006. "The Deficit Reduction Act of 2005: Implications for Children Receiving Child Welfare Services." Prepared for Casey Family Programs. back

  4. Office of Budget/ASBTF, "Medicaid & SCHIP: Imposing Stricter Reimbursement Policies for Rehabilitation Reimbursement Administrative Proposal." February 6, 2006. back

  5. Burns, B.J., Phillips, S.D., Wagner, H.R., Barth, R.P., Kolko, D.J., Campbell, Y., et al. (2004). "Mental health need and access to mental health services by youths involved with child welfare: A national survey." Journal of the American Academy of Child and Adolescent Psychiatry, 43(8), 960-970." back

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