This report describes (1) the extent to which public agencies are using managed care to provide child welfare services, (2) the financial and service delivery arrangements under managed care that are being applied to the child welfare system, and (3) challenges child welfare agencies face as they develop and implement managed care, and the results of such efforts to date. Managed Care Is a New and Growing Strategy in Child Welfare

Nationwide, public child welfare agencies are implementing, planning, or considering managed care initiatives in 35 states. Most ongoing initiatives are serving foster care children with the most complex and costly service needs. Finally, for-profit managed care companies have not had a major role in implementing managed care in child welfare, with only a few locations using these organizations to manage the delivery of child welfare services. For example, public agencies can incorporate fixed payments into existing contracts with community-based service providers. Managed Care Initiatives Use Capitated Payments and Rely on Private Entities to Assume Case Management Responsibilites

Child welfare agencies have implemented capitated payment systems and new service-delivery strategies in their managed care initiatives. In addition, service providers in eight ongoing initiatives are being held accountable for their performance for the first time. Another method public child welfare agencies use to help ensure that managed care entities do not inappropriately limit the amount or types of necessary service to children and families is to restrict profit levels or require that cost savings be reinvested in services. Third, managed care requires both public and private agencies to assume new roles and responsibilities. Despite these challenges, public officials are encouraged by early—though limited—positive results. Public Agencies Face Initial Start-Up Tasks

Before managed care arrangements can be implemented, both public and private agencies have found they need to accomplish a number of start-up tasks. Management Information Systems Are a Continuing Challenge

Program officials responsible for the initiatives we surveyed view the development of a management information system as the most difficult task they face in their move to managed care. Roles and Responsibilities Change Dramatically

Under managed care, public agencies are adjusting to new responsibilities while shifting some traditional functions to the private sector. New Responsibilities Demand a Culture Change and Staff Adjustment

Many of the public agencies implementing managed care initiatives have shifted most of the day-to-day casework responsibilities to private contractors, while developing the capacity and expertise to perform system oversight and monitoring activities. Some contracts require the service provider to provide the information the public child welfare agency needs to file claims for federal title IV-E reimbursement of the costs associated with feeding and housing an eligible child in out-of-home care, as well as certain administrative costs related to that child’s placement, such as case management and licensing of foster homes. While there is no single managed care approach, in general, states and localities are (1) experimenting with capitated payments to transfer financial risk to providers and (2) managing children’s care through a single point of entry to a full array of services.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the states' efforts to implement managed care into their child welfare systems, focusing on determining the: (1) extent to which public agencies are using managed care to provide child welfare services; (2) financial and service delivery arrangements being used under a managed care approach; and (3) challenges child welfare agencies face as they develop and implement managed care, and the results of such efforts to date.

What GAO Found

GAO noted that: (1) nationwide, public child welfare agencies have implemented managed care projects or initiatives in 13 states, with new initiatives being planned or considered in more than 20 other states; (2) most of the ongoing initiatives involve foster children with the most complex and costly service needs; (3) currently, only about 4 percent of the nation's child welfare population is being served under managed care arrangements; (4) public agencies have contracted with experienced nonprofit, community-based providers in their service systems to implement managed care initiatives; (5) for-profit managed care companies have not had a major role in implementing managed care in child welfare; only a few jurisdictions are using for-profit companies to administer and provide child welfare services; (6) the majority of the ongoing child welfare managed care initiatives have established a capitated payment system; (7) lacking experience and uncertain about the feasibility of new fixed payments, some initiatives also use mechanisms to limit the financial risk that has been shifted to providers; (8) managed care initiatives require service providers to organize and coordinate a full array of services to ensure that appropriate and necessary services are available to children and their families; (9) most of the public agencies responsible for the initiatives have transferred case management functions to private entities; (10) the public sector, however, continues to play an active role at strategic points throughout the service-delivery process; (11) to ensure that providers' cost-controlling strategies do not jeopardize service quality or access to care, public agencies use various quality assurance techniques to hold service providers accountable for outcomes; (12) as more public child welfare agencies move toward managed care, public officials and their private contractors face several challenges; (13) as they develop and implement a capitated payment method, agencies need to find ways to maintain adequate cash flow; (14) agencies face the difficult tasks of developing sound management information systems; (15) both public and private agencies face new responsibilities as some traditionally public functions shift to the private sector and new roles emerge; (16) these changes may require these agencies to develop new procedures for case management and program administration and to provide additional training for both public and private employees; and (17) despite these challenges, public officials are encouraged by some positive, though limited, early results from managed care initiatives.