September 8, 2005

The Child Welfare League of America (CWLA) representing our nearly 900 public and private nonprofit, child-serving member agencies nationwide appreciates this Committee’s efforts to give thoughtful review of the impact of Medicaid changes on beneficiaries. Evidence shows that Medicaid has continuously provided important services to vulnerable populations for the past forty years. As Congress is set to make decisions about ways to reduce federal spending for Medicaid through the budget reconciliation process, it is important to ensure that these changes do not harm abused and neglected children.

A Snapshot of Children in the Child Welfare System

  • In 2003, an estimated 906,000 children were victims of abuse or neglect according to information provided by the National Child Abuse and Neglect Reporting System (NCANDS). 1
  • Of these nearly one million children 63% were victims of neglect, 19% suffered from physical abuse, 10% were sexually abused and nearly 5% were victims of emotional or psychological abuse. 2
  • In 2003, NCANDS data reported that 206,000 of these children were placed, at least for a time, in foster care. Throughout the course of a year over 800,000 children spent some time in foster care. The time that children spend in foster care may be brief or last longer than a year while a permanent home for them is being sought. On an annual basis, the U.S. Department of Health and Human Services (HHS) reports the number of children in foster care at the end of the federal fiscal year. This data finds that there are over 530,000 children in foster care in a year’s end point in time.
  • Many abused and neglected children never enter foster care. The NCANDS data found that of the 906,000 children substantiated as abused or neglected, most will not enter foster care, but still have needs related to the effects of abuse or neglect. Data indicates that 57% of all children who have been abused and neglected do not enter into foster care, do receive services as a result of an investigation. That means that over 40% of children reported as abused and neglected never receive any form of services.
  • The child welfare system also provides support to the 50,000 children who are adopted each year from the public foster care system. Due to the trauma and loss experienced by each child, supportive services are needed for both children and their adopted families. The needs of some adopted children and their families may not be apparent until years after the adoption is finalized.

Mental Health Needs Of Abused And Neglected Children

Children who are victims of physical and/or sexual abuse and neglect are likely to be in foster care for safety reasons and require treatment for mental/behavioral health conditions related to their victimization.

  • Children in foster care face many challenges. Repeated studies find that as many as 80% of children in the foster care system have significant mental health problems in addition to many physical health care needs. A child placed in foster care may suffer from the effects of abuse or neglect. At the very least, that child has to cope with being taken away from his or her home; separation from a parent, parents, or siblings; placement into a different family or substitute care setting; separation from community; and, depending on the length of stay and the availability of care, he or she may face the trauma of several placements.
  • Mental health services are repeatedly identified as the number one need of children in foster care. HHS reports that between 75%-80% of the children who need mental health services do not receive them.
  • A survey of CWLA member agencies found that both public and private child welfare agencies identified meeting the behavioral health needs of children as their number one challenge.
  • Children in foster care have been repeatedly found to have clinical levels of mental health problems far in excess of children in the general population.Yet, despite the obvious and disproportionate mental health needs of children in foster care, most children in the child welfare system do not receive even the most basic mental health services, including screening, evaluation and referral. As a result, more than 500,000 children in the nation’s child welfare system have unmet mental health needs. 5

Importance of Medicaid for Abused and Neglected Children

Medicaid alone provides health care protection for more than 51 million people in the United States. That total includes 25 million children, including children in the child welfare system. While Medicaid does address some of the health care needs of children in the child welfare system, its services extend much further.

Medicaid also supports the treatment needs of abused and neglected children, whether or not those children qualify for federal foster care and adoption support through the Title IV-E program. Children in foster care who receive federal Title IV-E foster care and adoption assistance are automatically eligible for Medicaid. However, due to outdated income eligibility standards, less than 50% of all abused and neglected children in this country who are in foster care receive federal support. State and local funds support the other 50% of all foster care placements. All states do however; utilize their option to provide Medicaid assistance for every abused and neglected child in their care who is in need of treatment

A recent report released from the Urban Institute, “Medicaid Spending on Foster Children,” documents the importance of Medicaid for children in foster care. It reflects the significant treatment needs presented by these children who have been traumatized both physically and emotionally by abuse and neglect. Using FY 2001 data, highlighted findings from the report include: 6
  • 869,087 children in foster care were enrolled in Medicaid at some point during FY 2001.
  • Of this total, 509,000 children who were in foster care were enrolled in Medicaid for all 12 months.
  • Of the foster children enrolled in Medicaid, approximately 75% had used Medicaid services in the fiscal year.
  • States spent $3.8 billion of Medicaid on foster children in FY 2001, of this at least $2.1 billion was federal spending.
  • Although children in foster care represent only 3.7% of non-disabled children enrolled, they account for 12.3% of all Medicaid expenditures.

Medicaid is used to provide many important services to children in the child welfare system. Almost three-quarters of all Medicaid spending on foster children was used to provide seven (of the 29 total) allowable services.

  • Rehabilitative services represented $493 million in Medicaid spending, or 13% of the Medicaid spending on children in foster care.
  • Inpatient psychiatric services totaled $376 million, or 11% of the Medicaid spending on children in foster care.
  • Inpatient hospital services totaled $354 million, or 9.4% of the Medicaid spending on children in foster care. The Medicaid funds spent on providing inpatient psychiatric care to children in foster care represented 28% of all Medicaid spending on inpatient psychiatric care. When non-disabled children are eliminated from this total, the spending on inpatient psychiatric care for children in foster care represents 46% of all Medicaid funded inpatient psychiatric care.
  • Clinic services totaled $327 million or, 8.7% of the Medicaid spending on children in foster care.
  • Prescribed drugs totaled $290 million, or 7.7% of the Medicaid spending on children in foster care.
  • 7.1% of the $3.8 billion in Medicaid expenditures was used to provide targeted case management (TCM) services for children in foster care, totaling $266 million.

Importance of Targeted Case Management Services for Children in Foster Care

TCM provides case management as defined in regulation as services that “assist eligible individuals gain access to needed medical, social, educational and other services”, such as those children in the child welfare system.

The new Urban Institute report demonstrates that children in the child welfare system who receive Medicaid TCM services have greater access to a variety of services that support a child’s well-being. The report documents that through the use of Medicaid TCM foster children are much more likely to receive physician’s services, prescription drugs, dental services, therapy, and rehabilitative services than children not receiving TCM services.

  • 68% of children in foster care receiving TCM services also received physician services while only 44% of foster children not receiving TCM services received physician services.
  • 70% of children in foster care receiving TCM services also received prescription drugs, while only 47% of foster children not receiving TCM services received prescription drug services.
  • 44% of children in foster care receiving TCM services also received dental care, while only 24% of foster children not receiving TCM services received dental care.

The Medicaid data on the use of TCM may reflect recent attempts by the Center for Medicare & Medicaid Services (CMS) to restrict, deny, and prevent states from using these funds to provide foster children with these needed services. In FY 2001, only 38 states funded TCM services for foster children with Medicaid funds.

Medicaid TCM funds are not used to substitute for Title IV-E Foster Care assistance. Title IV-E funds serve a different purpose. Title IV-E assistance funds can only be used to pay for the room and board costs for children in foster care. Title IV-E administrative funds are used to address what is needed to achieve the goal of a permanent living arrangement for a child. These services may include such items as time spent in court, preparation, family meetings, and other social services.

Importance of Rehabilitative Services for Children in Foster Care

Rehabilitative services are defined in regulation as “services that may include any medical or remedial services recommended by a physician or other licensed practitioner of the healing arts, within the scope of his practice under State law, for maximum reduction of physical or mental disability and restoration of a recipient to this best possible functional level.” Each state has the option to provide rehabilitative services. A state electing this option designs its program within the parameters set by its state plan. Each state defines its conditions of participation, conditions of eligibility, and the scope of service.

For many states, Title IV-E and Medicaid are each significant federal funding sources for the care and treatment of children in the state’s custody. By law, Title IV-E Foster Care and Adoption Assistance is available for the care and support of eligible children. This “care and support” includes room, board, school supplies, supervision, and transportation. It does not include treatment of a child’s medical condition or the provision of social services.

Medicaid covered services are designed to treat a recipient’s medical condition, with “medical” encompassing both physical and mental health conditions. Medicaid may pay for treatment, but not food, clothing, and shelter. Nursing facilities and accredited psychiatric residential treatment facilities are an exception of this rule. Medicaid does not provide supports to meet the child’s needs that are paid for with Title IV-E funds. Title IV-E funds are used to provide food, clothing, and shelter for children in foster care.

While some states claim Medicaid reimbursement for both TCM and rehabilitative services, each program is discrete. States may have either or both programs. TCM is defined as assisting eligible recipients to access needed medical, social, educational, or other services. While rehabilitative services provide medical or remedial services to reduce a physical or mental disability and restore the individual to the best possible functional level.

CWLA’s Concerns with White House Proposals to Restrict the Use of Medicaid for Abused and Neglected Children

On August 5, U. S. Department of Health and Human Services Secretary Michael Leavitt sent the White House Medicaid legislative proposals to Congress. Initially introduced in the President’s FY 2006 Budget, these proposals specifically call for ways to reduce federal Medicaid support for children in foster care or otherwise involved in the child welfare system.

Members of Congress are currently considering these proposals as they put together budget reconciliation legislation by September 16th that reduces federal spending for entitlement programs by $35 billion over five years. Of that amount, $10 billion is expected to come from Medicaid.

The Administration’s proposal reduces federal spending for Medicaid by restricting the use of Medicaid services and by reinforcing that Medicaid is the payer of last resort. The Administration proposal includes options that would:

  1. Restrict the use of both TCM and rehabilitative services to cases where the services could not be provided with any other federal, state or local funding sources.CWLA Concern: While some of these services currently funded under Medicaid may be allowable uses of other funding sources such as Temporary Assistance for Needy Families, Social Services Block Grant, Title IV-B Child Welfare Services, Title IV-B Promoting Safe and Stable Families program, and to a much more limited extent Title IV-E Foster Care and Adoption Assistance administrative funds and other mental health and juvenile justice funding sources, it is not likely that states would be able to use these other funding sources. These funds are used to provide services for many other allowable populations and are also used to provide other types of services to children in the child welfare system such as child abuse prevention.
  2. Deny Medicaid reimbursement if the same service were furnished without charge to non-Medicaid eligible individuals.CWLA Concern: States do not charge non-Medicaid recipients for case management services. These services are provided to non-Medicaid recipients with state funds. If a state began charging non-Medicaid recipients for these services, it would raise the question whether parents of children in the child welfare system also have to be charged. This requirement would mean that fewer abused and neglected children would receive needed services.
  3. Requires that Medicaid services be billed under a fee schedule.CWLA Concern: It is a common practice for therapeutic programs for children to use a milieu model of treatment. In these programs, treatment is woven throughout the entire fabric of daily activities of the child and it is the child’s participation in that program for the day that constitutes treatment. Because of that, one day of service in these programs equals one unit of service and all the costs of providing treatment are bundled into a single rate. Would a bundled rate be interpreted as meeting the requirement of a “fee schedule”? If not, then stand alone services with unit intervals, such as 15 minutes of life skills, 30 minutes of individual therapy; 30 minutes of group counseling would have to be billed instead of one day of service. Enlisting an itemized billing schedule fails to meet the complex and multi-layered approach to services that foster children receive.
  4. Requires that both TCM and rehabilitative services be linked to specific, measurable outcomes.CWLA Concern: It is difficult to measure outcomes for TCM since TCM services link children to needed services rather than projecting what the outcomes of those services should be. While it may be difficult to measure TCM services, the services that TCM links recipients to are measurable. The new report from the Urban Institute found that TCM recipients were more likely than non-TCM recipients to receive physician services, prescription drug services, dental, rehabilitative, inpatient, clinic, inpatient psychiatric, and home health care services.
  5. Reduces the federal reimbursement for TCM to 50% instead of at the Federal Medical Assistance Percentage rate (FMAP).CWLA Concern: FMAP reimbursement rates currently range from 50% up to 83%. Currently over half of the states are operating with FMAP rates that exceed 60%. Altering this reimbursement rate would add an immediate and severe financial burden on states since the proposal calls for an effective date of October 1, 2005.
  6. Caps federal reimbursement for Medicaid administration.CWLA Concern: The State’s administrative activities are not likely to lessen which means that states will receive less federal support for these activities.

Impact of the White House Proposals

Restricting the use or reducing the federal support for TCM and rehabilitative services for children in foster care would cause states to have to make choices.

  • States could continue services for these children at the same level at a greater cost in state/local dollars.
  • States could decrease the amount of services children receive even though the federal Child and Family Services Reviews (CFSR) have found an existing significant shortage of needed services. In the first round of reviews, only four states met the CFSR standard for providing adequate mental health services for children in the child welfare system. 7
  • States could decrease the number of children receiving services. Research shows that despite the significant mental health needs of children in the child welfare system, they are grossly under-served. 8 Less than one-third of children who come into the child welfare system following an investigation of maltreatment receive mental health services, despite at least 60% having moderate to severe mental health problems. 9 Some studies estimate the number to be 80% or higher. 10Studies also demonstrate that children in foster care have variable access to necessary services. 11 For instance, children in foster care often receive psychological evaluations only after displaying highly disruptive behavior, such as suicidal ideation. 12 When children in foster care receive mental health evaluations, clinical problems are not always addressed properly. According to one study, only 48% of children with psychiatric diagnoses indicating a need for psychotropic medication received any such medication. 13
  • States could decrease the per diem reimbursement paid to the providers of the services. The majority of private agency providers however, already supplement their local/state/federal reimbursements that fall short of actual costs. A reduction in federal support for treatment would mean providers would have to choose between altering/reducing their programs; attempting to tap deeper into their donor base to provide for children who are in the legal custody of a state; or both.
  • States could choose some combination of all of the above choices.

CWLA Recommendations

The Child Welfare League of America urges you to reject the White House Medicaid changes that would limit services to abused and neglected children. Instead, we urge this Committee to seek ways to improve and strengthen coordination between the Medicaid and child welfare programs at the state level so that all children in the child welfare system have better access to Medicaid and the treatment and services they need.

With the needs of children placed into foster care ever increasing, it is crucial that local and state providers maintain federal Medicaid supports. While some of these services are “optional”, meaning that a state has the choice whether or not to provide them, we encourage you not to lose sight of how critically important they are to the well-being of these vulnerable children.

As Congress is considering legislative changes to Medicaid as part of budget reconciliation, CMS is continuing to arbitrarily scrutinize, and in some cases prohibit, state’s uses of TCM and rehabilitative services for children in the child welfare system. CWLA opposes these administrative actions that restrict the ability of individual state to meet the needs of abused and neglected children.


While much of the recent reform discussion on Medicaid is cast in terms of how to cut costs and restrict federal spending, the reality is a much larger challenge. This challenge is how to provide comprehensive health care for all children regardless of income boundaries, especially those children in the child welfare system. This reform must provide complete and integrated access to mental health services, behavioral health services and long-term care. The absence of addressing these demands cripples any reforms enacted through a reconciliation package and may only serve to delay an inevitable crisis for children in the child welfare system.

CWLA looks forward for the opportunity to further engage Congress about the child welfare services funded through Medicaid and in working together in ensuring that the needs of these most vulnerable children are met.


  1. U.S. Department of Health and Human Services, Administration for Children and Families, Administration on Children, Youth and Families. (2005). Child Maltreatment 2003.Washington, DC: Author.
  2. Ibid.
  3. Landsverk J, et al. (2002) Mental health services for children reported to child protective services. In APSAC Handbook on Child Maltreatment, 2nd ed., Thousand Oaks, CA: Sage, pp. 487-507.
  4. Burns, BJ, et al. (2004) Mental health need and access to mental health services by youths involved with child welfare: a national survey. Journal of American Academy of Child Adolescent Psychiatry, 43:8.
  5. Ibid.
  6. Green, R., Sommers, A., & Cohen, M. (2005, August). Medicaid Spending on Children in Foster Children. The Urban Institute: Washington, DC.
  7. U.S. Department of Health and Human Services, Administration on Children, Youth and Families. Statewide Assessments. Washington, D.C.: National Clearinghouse on Child Abuse and Neglect Information, 2004. Online.;
    McCarthy J, Marshall A, et al. (2004) An analysis of mental health issues in states’ child and family service reviews and program improvement plans. Washington, D.C.: National Technical Assistance Center for Children’s Mental Health, Georgetown University Center for Child and Human Development and Technical Assistance Partnership for Child and Family Mental Health, American Institutes of Research.
  8. Pumariega AJ, Winters NC, et al. (2003) The evolution of systems of care for children’s mental health: forty years of community child and adolescent psychiatry. Community Mental Health Journal, 39(5):399-425.
  9. Child Welfare League of America. Fact sheet: The Health of Children in Out-of-Home Care. Online, 2004.
  10. Clausen JM, Landsverk J, et al. (1998) Mental health problems of children in foster care. Journal of Child and Family Studies, 7 (3): 283-296.
    Halfon NG, Mendonca A, et al. (1995) Health status of children in foster care: the experience of the center for the vulnerable child. Archives of Pediatrics & Adolescent Medicine, 149: 386-392.
    Zima BT, Bussing R, et al. (2000) Help-seeking steps and service use for children in foster care. In J. Behav. Health Serv. Research 27 (3): 271-285.
  11. Leslie LK, Hurlburt MS, Landsverk J, et al. (2003) Comprehensive assessments for children entering foster care: a national perspective. Pediatrics, 112 (1): 134-142.
  12. Urquiza AJ, Wirtz SJ, et al. (1994) Screening and evaluating abused and neglected children entering protective custody. Child Welfare, 73 (2): 155-171.
  13. Zima BT, et al. (1999) Psychotropic medication treatment patterns among school-aged children in foster care. J. Child and Adolesc. Psychopharmacology, 9: 135-147.