Kansas' bold experiment in child welfare

Program to hand over its caseload to businesses runs into financial problems.

By , Staff writer of The Christian Science Monitor

It was billed as the grand experiment in privatizing child welfare.

Kansas would bid out adoption, foster care, and other services to private companies. They'd be paid a lump sum for each child. It was up to them to figure out how to deal with the caseload.

But somewhere between idea and implementation, things went wrong.

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Without question, there have been significant advances. Among other things, Kansas has leveled the imbalance in services between poorly served rural areas and better-served cities, and adoptions are up 81 percent.

Yet the much-anticipated revolution in child welfare never occurred. Instead of creating a managed care system similar to a health-maintenance organization, the changes yielded only a semi-privatized system. Moreover, with one of the original private contractors now teetering on the edge of bankruptcy, the state has taken a step back from some of its boldest reforms.

As the presidential candidates begin to debate in earnest privatizing more social services, Kansas is a cautionary tale about the limits of privatization. It raises question about whether some social responsibilities - such as the welfare of children - sit uneasily on private shoulders.

"Kansas was everybody's poster boy for managed care," says Alfred Kahn, professor emeritus at Columbia University in New York and co-author of a forthcoming report on privatization. "And they have nothing to show for it yet that anybody should copy."

A lump sum

Kansas' managed-care plan was set up on the innovative idea that each child in the adoption system came with roughly $13,500 in funding. The state would pay the private agency caring for the child half that amount when the child entered the system, another 25 percent when they were placed with adoptive parents, and the final 25 percent when the adoption became legal.

The goal was to provide a monetary incentive for the agency to find homes for children as soon as possible.

And the new system has made progress.

In addition to the leveling of urban and rural services and the improved adoption rate, the program is moving children back to their original families or adoptive parents more quickly. The state is also offering more services to more children than ever, and it is collecting far better data so it can hold contractors accountable to its new goals for child placement.

"The system was so significantly underfunded in Kansas," says Joyce Allegrucci, assistant secretary for children and family policy at the state's Department of Social and Rehabilitation Services in Topeka. "We have significantly more resources for children in this state than ever before."

But recently, burgeoning problems have overshadowed the successes. Unable to move some hard-to-adopt children into new homes, the agency that has run Kansas' adoption program, Lutheran Social Services, has piled up huge debts.

Another challenge: the new process in 1996 was so different from the old system that no one knew how much it would cost, so monetary figures were just officials' best estimates.

As the costs became clearer, the state gave out more money - foster care funding alone has jumped nearly 17 percent since the new program took effect four years ago. But the increases haven't been enough to slow Lutheran Social Services' losses.

Late last month, Lutheran Social Services of Kansas and Oklahoma told its subcontractors it had only $7.3 million to pay off some $9.8 million in debt. It has offered to pay its subcontractors 74 cents on the dollar.

Such a deal would be a big blow to some subcontractors, many of them local agencies providing various services for children. But if they don't accept, Lutheran Social Services could file for bankruptcy.

The company's biggest problem: cash flow, says Marc Bloomingdale, chief operating officer for the Wichita, Kan., agency.

Backing off

Such funding problems have led the state to back away from its managed-care approach. In its latest round of contracts, which took effect in July, agencies get a specific amount of money per month per child, not the lump $13,500 sum. It's a more traditional approach.

The change removes some of the incentive to move children quickly through the system. But officials hope federal regulations, which force states to integrate children quickly back into families or risk losing federal funds, will ensure that agencies don't simply stall so that they can receive more monthly payments.

Some experts in Kansas say slowing down a bit might be beneficial. While the fast-track approach works for most children, Kansas was in too much of a hurry at times, they say.

"I don't care how much training I have, there are certain kids I can't handle!" says Deborah Edelman-Dolan, a foster parent and clinical social worker at Florence Crittenton Services here in Topeka.

Recently, a caseworker contracted by the state urged her and her husband to take in a 14-year-old sexual offender. It was an inappropriate request for a family with two children of their own. Ms. Edelman-Dolan turned the caseworker down.

Private caseworkers and the state's representatives also depend on cursory evaluations at times.

For example, last week after a 30-minute and a 90-minute conversation with a troubled teen at Florence Crittenton, both the agency and the state caseworkers recommended she move to foster care. Critics say the examination was too hasty.

"We know what kids need," says Karen Shectman, executive director of Florence Crittenton.

Under the old system, the facility might serve 70 different teenage girls in a year. Now, it treats some 90 girls and for shorter periods of time. A half dozen have returned after foster homes didn't work out - something that rarely happened under the old system.

New bureaucracy

The new system has also added another layer of bureaucracy - big contractors - between the state and local care givers, That has caused delays.

More often in recent years, district court judge Dan Mitchell has found that his orders to get children evaluated or to put adults in parenting classes get delayed because the programs have long waiting lists.

"If we're going to make the effort to intervene, then we ought to be able to deliver and do it in a timely manner," says Judge Mitchell, who is assigned to the juvenile division in Shawnee County, which includes Topeka. "And that's not the case."

Supporters of the program, meanwhile, argue the system takes time to work out the kinks.

Privatization "makes sense," says Bob Smith, who heads United Methodist Youthville, a nonprofit child-welfare group that handles foster care for Wichita and surrounding Sedgwick County. "I don't feel it saves money initially. [But] you have the opportunity to create a model of service delivery that will be more efficient."

(c) Copyright 2000. The Christian Science Publishing Society

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