The Real Story Behind Michigan Child Welfare Performance Based Funding

Boondoggle for Non-Profits?

The State of Michigan’s new plan to restructure child welfare services and funding for public and private agencies had be dubbed “Child Welfare Performance Based Funding. In reality the plan, strongly supported by private child placing agencies, would mean privatization and outsourcing of many child welfare services – statewide.

The history behind it:

The current foster care rate of pay to private agencies is based on a “per diem” system, essentially a daily rate of reimbursement by the state and counties to purchase of service agencies for children in foster care. The current method is paid upon a set rate – regardless of the specific or unique needs of the child or family. Payment is based on the number of days in care.

In 2013, Kent County created a work group to identify and implement ways to privatize foster care and adoption services 100% for their county. The project is referred to as “Project 515.” As a part of this undertaking, “The Kent County Section 515 report” was completed which outlined an implementation framework and identified barriers to successful implementation. In 2014, Kent County successfully went to 100% privatization.

As a result of legislative mandates and the 515 report – a larger task force was created in conjunction with members from DHHS, the legislature, and multiple private agency representatives. The goal of the task force and work groups were to review the feasibility of establishing performance based funding for all public and private child welfare service providers. The task force published the Michigan Child Welfare Performance Based Funding Report on February 24, 2014.

What does the report tell us?

The new payment structure would be a set dollar amount, based on the child’s level of need. The set rate of payment would no longer be dependent on the number of days a child spends in foster care. Under the proposed framework the purchase of service agency/private agency will be 100% responsible for all case outcomes, coordination of care, and “continuously building capacity and competency throughout their organizations and provider network.”

The State of Michigan has already completed or is in the process of working on a number of initiatives that will be used to integrate the Child Welfare Performance Based Funding (i.e. – they are piloting and “researching” ways in which privatization will occur). These initiatives include:

- The Chapin Hall Study

- Michigan Modified Settlement Agreement

- Federal Title IV-E Waiver Project: Protect My Family (in Kalamazoo, Muskegon, and Macomb Counties currently)

- Wayne County Permanency Pilot

- Enhanced MiTEAM and MiSACWIS rollout

- The Child Care Fund Task Force

- Kent County 515 Project

The state indicates through this implementation more kids will be able to be in their homes with services in place; resulting in a reduction of children in out of home care. This would be good if this is what it really meant – but why not just hire an adequate number of state employees and give us the tools necessary to make this happen? Because there is more to the story!

Why is this plan bad for the State of Michigan, its vulnerable children, and child welfare workers?

1. First and foremost – child safety and well-being is of the utmost importance. Under this plan there is a financial incentive to minimize duration and services to children and families in order to maximize profit. The State indicates they will regulate this by imposing financial penalties on agencies with poor outcomes (i.e. – children return to care). These are children’s lives and to create a financial incentive to return them to an unsafe home or to reduce needed services to save money is simply not okay! We must invest in Michigan’s children by making safety and well-being a number one priority.

2. Outsourcing of positions – The report indicates the following:

a. CPS Ongoing Positions: An anticipated “tipping point” will occur in which the number of out-of-home placements will be reduced. The report indicates the state will need to address this in a variety of ways including “the likely need to assign some in-home cases to out-of-home providers to ensure that public and private agencies have a sufficient number of cases.” It is thought that the Protect MiFamily initiative is a part of piloting this initiative.

b. DHHS Monitor Positions: The report indicates the purchase of service agencies will be responsible for all aspects of case management. They will implement services they deem appropriate and these provisions of service will come out of the base rate funding. It is thought DHHS Monitor positions would no longer be necessary; as the agencies would monitor their own cases and no longer need approval to provide services.

c. CPS Investigator Positions: The report indicates a barrier on page 74 “the current requirement that removal of a child from their home requires state action creates legal issues around the concept of full case management responsibility for the private agencies. In addition, the impact of IV-E funding wording in removal orders is another potential barrier to the full case management role for private agencies.” This creates question about if the State eventually plans to outsource CPS positions all together.

d. Foster Home Licensing Positions: Possibly at risk as a result of outsourcing on a statewide scale.

3. Financial Implications:

a. This plan does NOT include cost reduction mechanisms; but the opportunity to outsource services to private agencies.

b. There is a large cost to hiring a “third party evaluator” who will be engaged for a minimum period of 5 years to conduct an ongoing analysis of the Child Welfare Performance Based Funding implementation. There is also a lack of transparency as “the independent evaluator will validate findings and data with involved parties before making this information public.”

c. Another downturn in Michigan’ economy could result in the Legislature limiting or reducing expenditures in child welfare programs for use in other areas. The report indicates there is a need to identify “a way to tie the legislature’s hands on funding must be found and implemented.”

d. A “startup fund for any necessary capital and seed money” will be “fully supported by the state.” The private agencies will have a “hold harmless” period during which they are not liable for any financial risk.

Timeline:

- Many initiatives are already underway

- This year the plan will be implemented in Kalamazoo County and/or other multi-urban or rural proximate counties.

- Fiscal Year 2016 (October 2015- September 2016) – DHHS will make efforts to make legislative, fiscal, and program adaptations and final decisions regarding implementing the program statewide.

- Fiscal Year 2017-2020 – Implementation of rollout across the state