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Indiana Child Welfare Waiver
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Indiana Child Welfare Waiver
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Summary of
issue.
Matt Mckeary
OMB contact
5-7760.
INDIANA CHILD WELFARE WAIVER REQUEST
Section 1130 of the Social Security Act authorizes the Secretary of HHS to permit up to 10 states
to conduct child welfare demonstrations. Each State authorized for a demonstration waiver is
required to evaluate the impact of the demonstration on service delivery and the outcomes for
children and families. To date, the Secretary has approved six waivers.
Indiana's Waiver Request Indiana is requesting additional flexibility to spend Federal funds on
services rather than per child maintenance payments, and hope that it will move children more
rapidly to permanent placements and decrease foster care costs. Indiana proposes to focus on
adolescents, particularly those with expensive, institutional placements (often out-of-state), to see
whether spending on services produces better outcomes at lower costs (e.g., a foster care
placement in a child's home community with services that support the foster family and make
possible an earlier reunification with the child's own family). Indiana proposes to operate the
demonstration state-wide, providing 4,000 enhanced service slots.
Legislative Requirements Foster Care authorizing language, unlike Medicaid or Food Stamps,
specifically prohibits the Secretary from authorizing a demonstration unless she determines that
the total amount of Federal funds that will be expended will not exceed spending in the absence
of the project. All previously approved foster care waivers and virtually all welfare
demonstrations have been designed to provide reliable comparison groups in order to evaluate
the impact of the proposed changes and assess whether the demonstration was cost neutral.
Medicaid uses a different approach, which compares the actual cost of a demonstration with
previously projected estimates of program costs in the absence of a demonstration. Medicaid
generally bases projections for future costs on national average projections.
Issues With Indiana's Request Indiana has proposed to run the demonstration state-wide. This
makes it difficult to determine the impact of the demonstration on important program indicators:
the number of children in foster care, the average length of stay, and the cost of providing
services. The ability to assess the demonstration is further limited by the very unreliable
historical program information on participation and costs in Indiana.
OMB first proposed to HHS that Indiana hold several counties outside the demonstration to serve
as a basis for evaluating the demonstration and assessing cost neutrality. Indiana would not
agree to this because of their desire to operate the demonstration State-wide. After extensive
discussions with HHS, OMB proposed to HHS that Indiana use the Medicaid model for
determining cost neutrality. HHS also rejected this alternative, because they felt that using
national average figures for projected participation and costs was inappropriate for Indiana.
OMB has two additional concerns with Indiana's current proposal. First, it sets a dangerous
precedent for future waivers, including pending requests from New York and California. Using
Indiana's proposed methodology in could greatly increase Federal costs. Second, moving from
performance based reimbursements to projected funding levels moves foster care in the direction
of block grant funding. Given the tremendous efforts to keep foster care out of a block grant and
the uncertain impact of TANF changes on foster care caseload, this seems unwise at this point.
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FACSIMILE TRANSMISSION
Office of the Assistant Secretary
The Administration for Children and Families
DATE:
TO:
Jen klein
Telephone: 456-2599
Fax:
456-2878 456-5542
Number of Pages (excluding cover): 8
FROM:
Samara Weinstein
Special Assistant to the
Assistant Secretary for Children and Families
Telephone:
(202)401-6953
Fax:
(202)401-4678
MESSAGE:
Jen --
Thank you for your assistance on the Indiana Child Welfare Waiver. Carol Williams and I
would be happy to walk through these with you. In addition we would appreciate your help
in working with OMB to schedule a staff meeting to work through and resolve the Indiana
Child Welfare Waiver impasse.
Attached please find two documents: A piece that Olivia sent to Ken last month which
describes the issues and our proposals for resolution; and a draft chronology and description
of the most recent exchanges and issues we have worked on with OMB.
Again, thank you for your assistance!!
Samara
1
Department of Health and Human Services
Administration for Children and Families
370 L'Enfant Promenade, S.W., Washington, D.C. 20447
(
Phone: (202) 401-9200
JUN-06-1997 14:07 FROM
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COST-NEUTRALITY FOR INDIANA CHILD WELFARE WAIVER
Current proposal:
-
Unit cost set as actual cost per IV-E case in non-demo
population
-
Unit cost adjustment based on demonstrated reduction in
caseload in institutional settings
-
Caseload equal to the greater of:
-
the actual number of IV-E cases served by demo
-
the statewide caseload inflated by minimum growth minus
the number of IV-E cases served outside the demo
OMB suggestions:
Set ceiling to caseload growth
Use straight projection for caseload growth
Set ceiling on growth of non-demo unit costs
Use straight projection for unit cost growth (similar to
Medicaid)
Use national growth for projections or ceiling determination
(similar to what Medicaid uses in negotiations with states)
Comparison counties
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some Chronology Notes related to cost neutrality for the Indiana
child Welfare Waiver Demonstration project:
August 1996:
After the substance of Indiana's proposal had been approved, HHS
and OMB began focussing on cost neutrality. OMB requested and
was provided with additional information from the state on mix of
services provided, number of IV-E children in each type of
service, and rates for each type of services.
September 1996:
HHS had several substantive discussions with Lester Cash at OMB
about feasibility of a per capita unit cost with a growth
projection. State provided additional information on growth
rates and IV-E-12 (financial claim) reports were analyzed for
trend information.
October-December 1996:
Conversations were held at least bi-weekly with OMB and the State
on development of a cost neutrality formula. The State continued
to request unit cost projections. OMB and HHS continued to
question the adequacy of historical data available for such
projections.
January 1997:
Meetings were held with Ken Apfel and Olivia Golden on the status
of Ohio's proposal. Indiana was introduced as our next important
proposal which also was presenting cost neutrality challenges.
OMB staff agreed to continue working with us on developing a
formula.
Following this meeting Lester Cash suggested using non-
demonstration group unit costs and an adjustment for demonstrated
reductions in caseload to resolve the problems with historical
data available for projections. HHS agreed that this was a
favorable solution. Initial conversations were held with state,
but it was determined that a face to face meeting was needed.
February 1997:
Indiana sent Kathy Graham, Jim Mooney, and Mary Edmonds to D.C.
on February 3 to discuss cost neutrality. They were taken aback
to learn that we were not prepared to discuss their preferred
approach -- projections -- but wanted instead to discuss the
approach HHS and OMB had worked out (described above).
Nevertheless the State officials entered into the discussions,
though they felt unprepared to discuss the new approach. After a
day of negotiations, they returned to Indiana with a better
understanding of why projections of unit costs would be
difficult. The State agreed to consider the proposal for using
JUN-06-1997
14:09
FROM
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non-demo unit costs that had been further refined with state
input. OMB was invited to participate in these discussions with
Indiana, but declined.
Indiana called later in the week to inform HHS that they could
accept the proposal for using non-demonstration unit costs and
the institutional adjustments. The only remaining problems were
their need for considerable upfront funding and the fact that the
proposal would only pay the State for title IV-E children
currently in care, thus penalizing the State for reductions in
length of stay and diverting children from foster care.
HHS developed the idea of a minimum growth rate to deal with
disincentive to reduce caseload. The idea was presented to both
OMB and Indiana.
March 1997:
David Nelson in Indiana developed an alternative model for using
the non-demonstration population as a comparison group for length
of stay and diversion. After several discussions it was
determined that the data were not yet available that could
validate this model as a basis for cost neutrality. Indiana and
HHS agreed to return to the original idea of a minimum growth
rate.
OMB objected strongly to the idea of allowing Indiana advance
funding in excess of the proportion (5%) that had been allowed in
the Ohio Demonstration waiver. Indiana offered the solution of
using the State's own TANF funds to provide upfront funding.
Discussions were held within ACF at the Central Office and
regional Office levels to determine that this was acceptable to
HHS. Indiana and HHS then agreed to limit upfront IV-E funding
to 5% and the State will fund the remainder with TANF funds.
The State and HHS agreed at that point that the substance of the
agreement was ready for the Terms and Conditions to be put into
Departmental clearance, once OMB concurred in the cost neutrality
formula. HHS' General Counsel has concluded that the approach
developed at that point is legally consistent with the cost
neutrality requirements of the statute.
April - present:
Governor O'Bannon wanted to announce the Child Welfare Waiver
Demonstration during April, national Child Abuse Prevention
Month. HHS officials believed that to be reasonable and
achievable. However, OMB began raising some new questions about
cost neutrality, and re-raising a number of questions which HHS
thought had been settled.
JUN-06-1997 14:09 FROM
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Recent interactions with OMB include the following:
1) There was a re-examination of the formula, looking for ways to
increase our confidence in its accuracy, and ways to reduce risk
to the federal government. The conversations and exchanges of
memos on this subject involved a fundamental mis-communication
between HHS and OMB which still does not appear to be resolved --
OMB has characterized the minimum growth rate as a "one-way bet. "
HHS maintains that the minimum rate is intended to protect the
State from being paid amounts that would be less than neutral if
it succeeds in reducing the number of children in care and the
length of time they are in care. This issue has tended to
obscure the basic purposes of the formula.
2) OMB requested considerable information which effectively
revisited a number of considerations which HHS and OMB (and HHS
and Indiana) had worked through before. The State was patient
and responsive to the renewed requests for data, but alarmed by
the implications. OMB has been re-analyzing data which the State
and HHS have supplied previously. This re-analysis has not yet
resulted in any additional ideas for resolving the Indiana cost
neutrality problem.
3) There was a series of proposals for alteration or revision of
the cost neutrality formula. This included a suggestion to
create both a ceiling and floor for the caseload growth rate
(responding to the one-way bet misunderstanding), to which HHS
and Indiana agreed. This did not resolve the problem for OMB,
however.
HHS, with Indiana's reluctant agreement, then offered to
negotiate a single rate, because OMB signalled at one point that
might be preferable. That has not produced agreement or any
apparent path to agreement, either.
4) There was also a series of suggestions involving concepts and
language used for cost neutrality in Medicaid waivers. HHS
worked on this, but concluded that it would be unwise to
establish baselines or project total costs or average costs
relying on Indiana's inadequate data base. Moreover, the child
welfare Demo and its purposes are sufficiently different from
most Medicaid waivers that this seems to HHS to be an
inapplicable set of concepts.
HHS has not succeeded in getting OMB to agree to participate in
discussions with the State, a practice associated with Medicaid
waivers that HHS feels might have been helpful in the case of
this child welfare Demonstration.
There were two efforts during this period to develop joint memos.
HHS and OMB identified the areas in which we are in agreement and
identified the issues that remain in dispute.
At present, HHS is unable to schedule a conference call with OMB
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do not want to open the door this wide. We are worried that
the effect of the precedent would be to make it very
difficult to contain costs and produce solid evaluations in
the other States with which HHS is negotiating (MI, NY, CA,
and GA).
In summary, HHS prefers to move ahead with the alternative
described at paragraph No. 2, above, because it is the best and
fairest approach we can devise, it will protect important Federal
interests, and it will enable Indiana to conduct a demonstration
which has great importance for HHS.
TOTAL P.01
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DEPARTMENT OF HEALTH & HUMAN SERVICES
FVI
ADMINISTRATION FOR CHILDREN AND FAMILIES
Office of the Assistant Secretary, Suite 600
370 L'Enfant Promenade, S.W.
Washington, D.C. 20447
DATE:
April 22, 1997
TO:
Ken Apfel
Associate Director
Office of Management and Budget
FROM:
Olivia Golden
Acting Assistant Secretary for
clura A golden
Children and Families
SUBJECT: Cost Neutrality Issues -- Indiana Child Welfare Waiver
Demonstration Project
The Governor of Indiana wishes to announce the State's Child
Welfare Waiver Demonstration project this month (April is
National Child Abuse Prevention Month). Given the long process
we have engaged in with the State and our substantive excitement
over the proposal, we would like to accommodate him. HHS is
ready to recommend to the Secretary that she approve this
demonstration. Before we do so, however, we need to reach
agreement with you about how we will determine cost neutrality.
This memo lays out our proposal, which we believe protects
Federal interests at the same time it allows the demonstration to
proceed. Career OMB staff with whom we have been working tell us
that they cannot make this decision because the proposed formula
would require some reliance on projections. Therefore I am
asking for your concurrence in the cost neutrality arrangement
outlined in this memorandum.
As we expected when we met in your office in January to resolve
our differences over the Ohio Child Welfare demonstration, the
Indiana demonstration presents us with even greater challenges.
You will recall that in that meeting we outlined the general
purposes of the Indiana Demo -- to test the programmatic and
fiscal benefits of creating a greater capacity at the community
level to provide services for children who must be removed from
their families, or who are at risk of removal.
While there was general agreement that such a Demo could be quite
attractive, we were careful to make the point, with which OMB
staff concurred, that it would be difficult to devise a cost
neutrality formula for this project. We have now reached the
point at which the programmatic issues and the evaluation
questions are all resolved with the State and, we believe, with
OMB staff. We also have a proposed framework for reaching
agreement with the State on a cost neutrality formula, on which
we have been working diligently with OMB staff since last August.
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The formula, however, relies in part on a projection of costs
over part of the five-year life of the Demo. We agreed in
January that we would re-visit the Indiana cost neutrality
problem once we reached this point, so I am bringing it back to
you via this memo.
No doubt your staff (who have been very helpful throughout this
process) have briefed you by now, so I will restrict this memo to
the highlights, to let you know how much progress we have made
just to get to this point of final decision-making.
Background
Indiana is proposing a demonstration strategy that enhances
family preservation and family support services as it expands the
uses of title IV-E funds. The project, which has a special focus
on adolescents, would develop a new mix of services intended
principally for a subset of children who are currently placed in
residential care facilities. Indiana proposes to redirect funds
currently expended for children in restrictive high-cost
institutional placements (primarily out-of-State) to lower cost
community-based services. Case decisions would be made
collaboratively, at the local level, by the local judiciary and a
community partnership council, with State guidance.
There was general agreement in our January meeting that it is
desirable to learn such lessons as Indiana offers, and confirm
the experience of a State which wishes to make such a serious,
statewide effort. Indiana's proposal is unique: it provides our
best opportunity to learn about services for adolescents, and our
only opportunity to learn about the relative costs and benefits
of institutional facilities, an issue of great concern to States
and policy-makers. We expect to be able to test the following
important propositions:
1.) Children and their families will be better served when
children are placed in the most appropriate and least
restrictive environment;
2.) Outcomes for children and families will be better when,
providing first for the safety of each child, services are
provided while the families remain together and children are
maintained in their homes or returned home more quickly;
and
3.) The State, its counties, and the federal government
will derive significant economic benefit from the first two
propositions. Placement of children in the most appropriate
setting will mean, in Indiana, far less reliance on
expensive institutional placements. Preventing the need for
out-of-home care and reducing the time children spend in
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care can also lead to substantial reductions in State and
county expenditures. HHS would share directly in these
economic benefits, because they will reduce the claiming of
FFP under title IV-E. In addition, the State expects to see
economic benefit from its inclusion in this project of some
children in the juvenile justice system, and non-IV-E
eligible children in the child welfare system. The federal
government may also benefit from this aspect of the Demo
through reduced charges to or better use of certain Justice
Department funds, and non-IV-E HHS expenditures for mental
health, child protection, and similar purposes. We will
look to the cost-benefit analysis portion of the evaluation
to confirm and measure such benefits.
Cost Neutrality
The challenge has been to develop a cost neutrality formula which
will give us a reasonable basis for determining how much to pay
the State in IV-E funds during the demonstration, despite the
fact that we do not have either random assignment of cases or
comparison counties available to us. The State's original
proposal was that cost neutrality would be determined entirely on
the basis of projections. As the result of extensive discussions
with the State, and frequent consultation with OMB staff, an
alternative cost neutrality framework has been developed which
relies on projections only for one portion of the formula.
Indiana's proposal appears on its face to offer a plausibly cost
neutral demonstration. The problem arises in analyzing the
structure of the demonstration and its evaluation in order to
determine how, accurately, to calculate the amount of title IV-E
funding to provide the State during the course of the
demonstration; that is, how much would the State have received in
the absence of a child welfare waiver demonstration project? It
is in constructing this payment formula that we have encountered
the need to rely, to a limited extent, on projection.
The methods used in most of the other child welfare Demos to
determine cost neutrality are not available to us here. Because
of the nature of this project we long ago agreed with the State
that random assignment of cases was not the appropriate method
for evaluating this Demo. That is true for a number of reasons,
chief among them the fact that assignments to placement are
approved and heavily influenced by judges, (and under the Demo by
judges in collaboration with some others) and removal decisions
are made by judges. We do not believe we can get a random
assignment design to operate in that environment, and the county
judges (who have become supporters of this project) confirm that
random assignment would interfere with the judicial discretion
required for the child safety decisions they make. Because the
State intends to conduct its demonstration project on a statewide
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basis, comparison counties are not available to us, either.
The cost neutrality problem in Indiana is compounded by the fact
that the State has inadequate historical data on which to base
projections, and no consistent patterns emerge in the data that
are available. (The new SACWIS, which is intended to change
that, is about to become operational in Indiana.) However, we
were able to devise a cost neutrality formula -- which HHS
regards as still open to any refinement that can further improve
our confidence -- which limits projections to a single element.
That element was chosen in part because it can be based on State
data which appear to be both reliable and consistent over the
past several years.
Three elements determine a State's foster care payments under
title IV-E: number of children in care (caseload) ; cost per
child; and proportion of children who are IV-E eligible. of
these three elements, the latter two can be known in real time as
the demo progresses. Indiana will determine the IV-E eligibility
of every child in care, whether they're in the demo or not, and
the State will derive an average cost from the actual costs of
children in care who are not in the Demo (in effect making a
control group for this purpose of all the other children in the
State). The third element, caseload, is specifically intended to
be affected by the demo, and therefore requires special
treatment.
Component 2 of the formula outlined below: a.) projects the rate
of growth of the foster care caseload, to determine what the
State's basis would have been for IV-E claiming in the absence of
the Demo; and b.) takes into account the effects on caseload by
setting a floor under the caseload calculation, in
acknowledgement that the caseload is expected to drop as a result
of the Demo, and if it does we will only allow it to drop so far.
In this way Indiana will not pay too great a financial penalty if
the number of cases in care is reduced. Similarly, the third
component of the formula acknowledges that as the State succeeds
in reducing the proportion of children who are in expensive,
high-cost residential placements, the average cost per child will
drop below what the State would have been claiming in the absence
of this Demo.
The formula has three components:
1.
Actual average costs.
The actual average title IV-E cost per child outside of the
demonstration is applied to the number of title IV-E
eligible children in the demonstration. This average cost
will be determined annually during the demonstration based
on actual costs incurred for IV-E eligible children not
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-5-
receiving services from the demonstration.
2.
Caseload adjustment when caseload growth falls below a
minimum growth rate.
Caseload growth has averaged around 18% each year for the
past 5 years. While the reasons for this growth are several
and difficult to distinguish, we believe that we can and
should agree on a minimum level of caseload growth below
which the State would be underpaid absent the demonstration.
This is because the Demo, once it starts to operate, should
be keeping children from coming into foster care at all, and
returning children home faster. Either effect of the Demo
would reduce the number of children for which the State
would otherwise be claiming FFP, and would result in paying
the State less in federal IV-E funds than would have been
paid absent this demonstration. The adjustment factor would
be applied only if the overall IV-E caseload in the State
falls below this agreed upon minimum.
The current HHS proposal is a growth rate of 10.89%, which
would in effect freeze the growth rate at FY '96 levels.
Growth rates averaged 18.42% over the period FY '91 -'96,
and 10.89% is the lowest annual rate in that period.
However, since the growth rates are trending downward, we
discussed with OMB staff an improvement in the formula that
would enable us to take into consideration several more
quarters of data, which would both increase our confidence
in the projection and reduce the period of time over which
HHS is exposed to the operation of the minimum growth rate
element of the formula. We believe we could get the State
to agree to a modification such as that.
3.
Adjustment for demonstrated reductions in residential
placements.
The formula further provides the State an adjustment to
federal funding when it can demonstrate an actual reduction
in the percentage of the foster care caseload being served
in higher-cost residential placements. Again, this is a
measure of an effect of the Demo which reduces the State's
FFP below the level to which Indiana would have been
entitled absent the demonstration. This percentage has been
stable over the last five years and can be measured in real
time.
One other serious cost neutrality issue has been solved by the
State on its own initiative and using its own resources. This
demonstration relies heavily on initial investments both for
developing local capacity and for including in the service
population children who are not IV-E eligible. Except for a
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small amount of advance funding HHS will make available (a limit
of 5% over cost neutrality in the early quarters) the State will
provide the advance funding using local and State resources.
Precedents
ASMB staff in the Department, in reviewing this memo, have
reminded us that the cost neutrality formula for every Medicaid
waiver has involved projections. This is consistent with what
OMB staff told us at the January meeting in your office.
Your staff have been concerned about whether the terms required
to approve one State's demonstration project become a precedent
for other States. This was a concern in the Ohio case, and in
fact Indiana did ask to be approved for a very large amount of
advance funding above cost neutrality. However, HHS negotiators
declined to agree, offering only a time-limited advance in the
range of the 5% approved for Ohio. It was in response to this
decision that Indiana re-considered and, to the State's credit,
devised a solution using State and local funds.
of the States pending approval, we think that none will present a
persuasive case for basing cost neutrality on projections. We
already have agreement with California to use random assignment,
we expect Georgia to use random assignment, and none of the other
possible waiver States (Michigan, New York, California, Georgia)
is proposing a statewide demonstration. We can therefore expect
to base cost neutrality formulae on comparison counties (as in
the NC, OR, and OH Demos) or on random assignment in some of the
remaining States.
Decision-Making
Your staff have the complete set of Draft Terms and Conditions
for Indiana. While they and HHS staff might find some marginal
improvements to make in the formula, we have reached the point at
which your staff need an indication from you that the approach we
have laid out is acceptable at the conceptual level, in order to
complete the review and comment process. We would like to
resolve this matter this week. Carol Williams has been in touch
with you and with your staff to alert you that we need to move
fast, and to suggest that we schedule a meeting right away, if
you think we will need a meeting or a conference call to resolve
the issue.
MAY-08-1997 17:59 FROM
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FACSIMILE TRANSMISSION
Office of the Assistant Secretary
The Administration for Children and Families
DATE:
TO:
Jennifer Klein
Telephone:
456-2599
456-2878
Fax:
Number of Pages (excluding cover):
FROM:
Samara Weinstein
Special Assistant to the
Assistant Secretary for Children and Families
Telephone: (202)401-6953
Fax:
(202)401-4678
MESSAGE
Attached please firid earlier memo from
Olivia to ken on the Indiana child
Welfare waiven
thanks for your help!!
Samara
7
Department of Health and Human Services
Administration for Children and Families
370 L'Enfant Promenade, S.W., Washington, D.C. 20447
Phone: (202) 401-9200
/