Health & Human Services

The Lonely Leap

So far, Kansas is the only state to have outsourced child welfare on a large scale. It is still grappling with the consequences.
by | July 2000

When Kansas decided to privatize a portion of its child welfare system, it sent out notices of informational meetings on the state's plans to those outside the social services department--such as family court judges--who would be affected by the change. But couched in dry, bureaucratic language, the state's heads-up gave no inkling how profound a change was in the works. And as a result, nobody showed up. "Short of putting a little bomb in an envelope and saying, `This is what will happen to the system you know,' I don't know what we could have done," says Joyce Allegrucci, who runs the state's Children and Family Policy Division.

Actually, it wasn't a little bomb that would have been required, it was a rather large one. Four years after the state handed family preservation, foster care and adoption services over to the private sector, the child welfare system in Kansas is still trying to settle down. Foster parents, front-line social workers, agency administrators and others remain disturbed by the experience and uncertain of their place in the new order. Some private contractors appear to be thriving; others are scrambling to stay afloat. And if the safety of the children who are the system's focus has undeniably improved, no one--other than staunch ideological proponents of privatization--is ready yet to call the new system a flat-out success.

This is worth noting, because Kansas is often Exhibit A for those who argue that the private sector is more adept at handling social welfare functions than government. It was the subject of a laudatory report by the Reason Public Policy Institute a year and a half ago, and conservative columnists have given Kansas favorable coverage over the past 12 months.

In fact, Kansas' new child welfare system probably will turn out to be an improvement over the old one. But it is also clear that looking at the situation through purely ideological lenses is a mistake. This is, in part, because the state collected little reliable data on either costs or outcomes before it relinquished its monopoly on child welfare, making it impossible to draw a rigorous comparison with what has happened since. It's also because so much has changed along with the shift in responsibility for child welfare services--from how much money is devoted to child welfare to how the state's universities train social workers--that it's difficult to say what improvements are due to privatization alone.

But most important, it's because Kansas' story isn't really about privatization: It's about a rushed, no-holds-barred effort to build a public-private social services system using managed-care principles, as well as its struggle to recover from the fallout. Other states either have eyed managed care and privatization and backed away, as in Kentucky, or have reshaped their approaches far more cautiously. Even Florida, which in 1997 passed legislation to privatize the state's entire child welfare system--including child protective services in some counties--has so far relied heavily on pilot projects to give it a sense of what's entailed before it leaps.

"Most states, if they've done managed care at all, did it on a much smaller scale and gathered data," says Charlotte McCullough, who deals with privatization and managed-care issues for the Child Welfare League of America. "Kansas was truly alone in doing it this way"--all at once, statewide, generating basic information on costs, risks and service models as it went along--"and it is the highest-risk venture we've seen in the child welfare arena." If state officials these days express confidence in where the system is headed, it is only after a difficult stretch of years that forcibly transformed both the state's own child welfare methods and its network of private service providers. That experience has taught participants outside state offices to be guarded in their optimism. "I don't think those of us in Kansas could tell you we're doing it all right or all wrong," says Judy Culley, who runs an emergency shelter for children based in Lawrence. "We're doing it different, and hoping that in the long run, we'll do it better."

There's not much doubt that the old child welfare system needed changing. It was widely seen as too crisis-oriented, too bulky, too duplicative, too uneven in providing services across the state, and too focused on processes rather than results. The consequences were that children taken from their homes remained in the foster-care system too long, and that judges were often reluctant to order kids removed because they didn't want them languishing. "We had a failed child welfare system in this state," says Melvin Neufeld, a Republican state representative who helped formulate the enabling legislation for the revamped system. Even Democrats agreed, and there was very little dissent when Republican Governor Bill Graves announced shortly after taking office in 1995 that he intended to re-create child welfare in Kansas.

Given the widespread perception that the existing system was a rank failure, it's not surprising that Graves put great pressure on the state's Department of Social and Rehabilitative Services, or SRS, to move quickly in creating a new one. But his urgency was buttressed by political pressure from the legislature, which in the wake of the 1994 elections had grown considerably more conservative and had little liking either for state-run social services in general or for SRS in particular. "SRS is the most vilified agency in the state," explains Gary Brunk, executive director of Kansas Action for Children, a Topeka-based advocacy group. "The agency is perceived not only as supporting welfare moms but as coming into homes and pulling kids out of them."

Although there was a clear sense among SRS officials that the agency simply did not know enough about how to purchase social services, how much to pay for them or what realistic goals might look like--"We knew we were on the fast track, and we kept saying that we needed to slow down," says one agency official--they were told to press ahead anyway. As Brunk's organization wrote in a 1998 report, "The politics of the Kansas child welfare situation did not afford a long planning and preparation period. The Kansas attitude seemed to be `transition now and work out the details later.'"

What SRS eventually came up with was a system that divided the state into five regions, each of which would have private "lead agencies" and their subcontractors delivering family preservation, foster care or adoption services; SRS itself would administer the contracts, control child protective services--that is, its workers would investigate charges of abuse and neglect--and maintain ultimate responsibility for each child in the system. Private agencies could bid on one or more regions for family preservation and foster care; the adoption contract would be statewide. They would be paid a set amount for each case they handled, and they were expected to meet a set of standards--often the best-guess estimates of SRS staff as to what was realistic--for child safety, how often children in foster care were moved, how quickly they were returned home or adopted and so on. Private agencies that were awarded the four-year contracts had four months to get themselves in shape before the state handed over its cases.

If state child welfare officials felt they didn't have enough time to prepare, this was equally true for the contractors, especially in foster care. In the four months they were given, they had to hire staff, train them, figure out how they were going to provide particular services--everything from counseling families to providing clothes to foster children--and get their networks of subcontractors established. "To re-create the state system in four months," says Culley, "was unworkable." Certainly, it was traumatic.

To begin with, both the state and the state's foster-care providers had assumed that SRS social workers would simply transfer to the private sector, along with their cases. That did not happen. "A lot of the state workers chose--we don't know why--to make a career change and leave child welfare altogether," says Marianne Berry, associate professor of social welfare at the University of Kansas. "The anecdotal evidence is that people just got out of the business of child welfare."

The result was that the system was flooded with social workers right out of college. Private agencies were desperately recruiting from every social-work program in Kansas and elsewhere. Inevitably, the quality of the work done with families dropped. As an administrator at one of the lead agencies puts it, "We were sending 22-year-old social workers in and saying, `Fix this family.'"

The large number of inexperienced workers on the front lines proved upsetting in more subtle ways: For the first few years, at least, it caused people working within the system to lose their faith in other parts of it. "A lot of relationships got damaged," says Judy Culley. "To have everything not in place, and then have people upset because services were not being provided, then people started not trusting each other. It was painful--for every part of the system."

This was especially true for the judges who had the final say on what happened to children and families in the system. "Two days after the transfer [to private providers]," says District Court Judge Jean Shepherd, who oversees cases in Douglas County and was a leading critic of the privatization process in its early years, "we had workers in who had that deer-caught-in-the-headlights look. They were not at all equipped for questions like, `What's the case plan for this child?'" This, in turn, had troubling financial implications for the private providers.

The problem was, unlike managed health care, where HMO administrators or a committee of doctors can decide in each case when to curtail services, in child welfare that decision is made by the judge in charge of the case. So when providers went into court suggesting that a child was ready to be reunited with his or her family, the judge-- who had not been part of the planning for the new system, and who lacked confidence that the social workers and private agencies were on top of things--could order them to continue services or even to provide new services, regardless of whether the agency had run through its budget for that particular child or not. Foster-care providers found their costs far exceeding what they had budgeted.

There were other reasons foster-care providers found themselves stretched. For one thing, says the Children and Family Policy Division's Allegrucci, who was a private consultant at the time, the state had little understanding of how to set reimbursement prices for the services it wanted delivered: Under state contracting laws, the private experts who could have helped figure things out were forbidden from bidding if they gave their advice. And so, she says, "The state wasn't exactly clueless in how to price services, but it didn't have many clues." Moreover, many of the private agencies in the state were afraid that national for-profit providers would try to muscle in on the contracts, so they bid low. The combination, over the past four years, added up to huge financial losses.

But the state also learned from the experience. Twice, the legislature voted millions of additional dollars to make up for providers' shortfalls, and SRS played with various ways of apportioning the risk that any given case would prove to be more expensive than the average. "What we wanted," says Don Jordan, director of operations for the Children and Family Policy Division, "was to share the risk, because if the state takes it over completely, then private providers have no incentive to manage the system." In the second round of contracts, which began this month, providers are no longer paid a capitated rate, but rather on a per-case, month-by-month basis, so that children who need special services or whose cases take longer to resolve will no longer pose a risk to the private agencies' fiscal health.

As difficult and chaotic as the transition to a public-private system proved to be, it taught officials at the Children and Family Policy Division any number of things. One, clearly, was what it actually cost to run the child welfare system. In 1995, when the governor first began talking about revamping child welfare, the state was spending about $58 million on foster care and adoption services combined. For next year, it has approved $83.5 million for foster care alone, and another $22.5 million for adoption. No one involved with child welfare in Kansas is blind to the irony. "If the system as constructed before had the benefit of the resources we have now, it doesn't take a rocket scientist to see that it would have been a different system," says Melissa Ness, vice president of services and advocacy at the Kansas Children's Service League, which has the statewide adoption contract for the next four years. "But would the old system have gotten those resources? Not in my lifetime."

Just as important was that, in developing the new round of contracts, state officials had a far clearer idea of what particular services ought to cost--and therefore are fairly confident that they will not have to bail out private agencies in the future. In sometimes contentious negotiating sessions, they suggested to private agencies what they thought a reasonable reimbursement might be, but didn't dictate it. "We were clear with them that these had to be bids that they had a management plan to implement, and that they had to feel confident the organization could deliver those services at that price," says Jordan.

Moreover, with four years' worth of experience following the service models that different providers in different regions offered, Allegrucci, Jordan and their colleagues were more prepared as they negotiated the second round of contracts to pay attention to just what services they were buying. They found, for instance, that the foster- care contractor with the service model that common wisdom in the field suggested was the best--a heavily clinical approach making extensive use of expensive residential care, with therapists and behavioral specialists available to foster children--wound up not only spending the most but also keeping children in foster care the longest. By contrast, a contractor in another region based its system on family foster-care providers, which proved both to be more cost-effective and to move kids out of foster care more quickly.

And finally, SRS has begun to sort out its own place in the system. In particular, its workers, freed from the daily burden of carrying the entire child welfare system themselves, have grown a bit more reflective. This led them to realize that they had been giving short shrift to so-called "family services," or services designed to keep families from entering the system in the first place; the agency is now paying more attention. "What we've found," says Kandy Shortle, who oversees both child protective and family services for SRS, "is that there are many kids coming into care who could and should be served in their own homes and communities."

Still, if SRS is now far more sure of itself in telling private providers what it thinks the system ought to look like, out in the field there are plenty of issues to be resolved. For one thing, private social service agencies--many of them with a long history in Kansas--have come to realize that while they may be colleagues in theory, under the new system they are also competitors, overseers and underlings, depending on how the bidding process turns out. "The relationship between and among private agencies has been thrown into the air," says the director of one nonprofit that subcontracts with lead agencies. "Everyone's very polite, but it masks deep fissures-- we're no longer all in this together."

This can make things difficult when a subcontractor feels that its methods are being subverted by the lead agencies it depends on for contracts. "I believe relationships are what heal people," says the director of one residential facility for troubled teenagers. "With privatization, the pressure is on us to take kids, because we want to be seen as a player. But the rapidity with which children come and go now threatens the opportunity to use relationships to heal them. I think the new system has devalued the knowledge that I and others have about the best needs of children."

Foster parents find themselves in a similar position. They have struggled with inexperienced social workers, as well as with private providers that have been slow to pay them and ignored their insights into the children they've been asked to care for. "The agencies control the foster parents: If you don't do what you're told, they just have to say you're out of compliance," says one foster parent in the Kansas City suburbs. "Foster parents are real shaky about what they say, because they're worried they'll suddenly get their license revoked for not being a team member."

And even now, the social workers on the front lines generate concern among more experienced professionals who come in contact with them. "If there's a kid who has a special-education component when a social worker brings him to enroll, we have to have a hard copy of the educational program for this kid; otherwise we can't enroll him," says a counselor at a middle school in the Topeka area. "When SRS did it, the social workers knew the information they needed. Now, I find young social workers who haven't a clue what the kid's educational background is, let alone what his needs are. They're 24 years old and they're doing the best they can, but they're under-trained and under- experienced."

Despite all this, there is widespread agreement that the new system is beginning to produce promising numbers. Family preservation efforts have been successful at reducing the number of families who are ordered to surrender their children to foster care. The number of kids remaining in foster care for more than a year has been shrinking, although not as rapidly as SRS had initially hoped for. And perhaps most important, some 99 percent of the kids who come to the attention of SRS remain safe once they have done so.

"We have yet to see what the potential is for this system," says Judy Culley. "It's possible it could be really good, that it really could be a more child-friendly child welfare system. But we'll have to wait a while to see."

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Rob Gurwitt  |  Former Correspondent
robg@valley.net

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