Texas should maximize its federal revenues for health and human services agencies.
BackgroundTitle IV-E of the Social Security Act provides federal payments to states for foster care and adoption assistance for children who must be removed from their homes. The law provides federal matching funds to pay many of the state's foster care program administrative costs, such as the cost of participating in court proceedings, case management, and overhead.
Even though reimbursement funds are available, many states, including Texas, are not always reimbursed for their administrative costs in cases in which the children do not ultimately enter foster care. States typically obtain more revenue from the federal foster care program by increasing the number of cases that are eligible for federal reimbursement. States can do this by improving how they determine eligibility, by keeping more complete case files with properly worded court orders that meet the federal program requirements, and by consistent administrative or judicial reviews.
For example, Massachusetts raised its percentage of children's cases eligible for reimbursement from 23 percent of all children receiving services in 1993 to nearly 65 percent in 1996.[1] Massachusetts also changed how it accounts for its essential program costs so that the state could claim full instead of partial reimbursement. Massachusetts received $58 million more in federal funds in the first year, $64 million in the second, and expects net additional revenues in the third year to reach from $88 million to $90 million.[2] Massachusetts also considers clients who are eligible for Medicaid and are either abused and neglected, or at risk of being abused and neglected, to be eligible for Medicaid case management services through the child protective services agency.
Protective and regulatory services
In Texas, the Department of Protective and Regulatory Services (DPRS) has the primary responsibility for administering the state's foster care and adoption assistance programs. In fiscal 1995, the department spent more than $207 million on foster care payments to foster parents and child care facilities.[3] In federal fiscal 1995, Texas received more than $50 million from the federal government in reimbursement funds.
For the quarter ending March 31, 1996, Texas spent more than $21.8 million to assist 6,089 children in foster care. Of these children, DPRS reported 3,699 children--only about 61 percent--received federal financial assistance. During the same quarter, Texas also spent about $7.2 million on administrative and training costs.[4] DPRS should re-examine its eligibility criteria and its cost allocation methods to bring additional federal reimbursements to the state's foster care program. DPRS, working with the Health and Human Services Commission, could expand its claims for case management services to all active cases qualifying for Medicaid.
Recent federal welfare reform legislation also expanded the number of child care facilities that could receive Title IV-E funds by allowing for-profit facilities to participate in the program. Before the reform bill was passed, only non-profit institutions could be reimbursed. In the quarter ending March 31, 1996, Texas had 699 children in group homes of which 344 were eligible for federal reimbursement funds under the new definition.[5] DPRS should investigate how many of these 344 children could receive assistance benefits or how much in federal reimbursement funds is available to cover the administrative costs associated with their cases. Foster care reimbursement, however, is not the only area that Texas state agencies should review to maximize their federal reimbursements.
Welfare reform
Before the federal welfare reform bill, DPRS, the Texas Department of Human Services (DHS) and Texas Workforce Commission (TWC) received funds from several federal programs, including Aid to Families with Dependent Children (AFDC), Emergency Assistance (EA), and the Job Opportunities and Basic Skills (JOBS) program. The reform package consolidated these three programs' funds into one block grant for the entire state. In 1997, the new block grant to Texas for these three programs will approach half a billion dollars.[6]
Under the new welfare system, Texas will no longer receive more federal dollars if the state spends more on these three programs. Texas will receive only the amount of the block grant. Agencies should shift their reimbursement claims, therefore, from block grants to programs that still offer open-ended matching funds, such as Title IV-E and Medicaid. By shifting their claims, DPRS, DHS, and TWC can obtain more federal reimbursement to cover both their direct costs--such as employee salaries--and indirect costs--such as rent and janitorial services.
For example, in addition to its foster care programs, DPRS spent $146.7 million in fiscal 1995 to provide a wide variety of family assistance services.[7] DPRS now claims reimbursements for many of those services from the EA program. By shifting its claims from the EA block grant to Medicaid, which offers federal matching money, the agency will receive additional federal funds.
Another example of how Texas can earn additional federal revenue is DHS's social and day care services to the elderly and disabled. DHS now relies on either state general revenue or Title XX capped federal funds to pay for these programs, but could increase its funding for these services by claiming reimbursements from Medicaid.
Grants for rehabilitative services
A 1990 amendment to the Medicaid program provided a broad definition of rehabilitative services. Many states have interpreted this provision to include many services that their state agencies provide, and these states have obtained Medicaid reimbursement. DPRS, the Texas Department of Mental Health and Mental Retardation (TXMHMR), and the Health and Human Services Commission (HHSC) have been studying the funding option, but have not yet created a mechanism to obtain Medicaid reimbursement for the rehabilitation services the state provides to children. One possible way that DPRS may be able to meet federal requirements for Medicaid reimbursement is for DPRS to contract with TXMHMR as a provider of rehabilitation services to the children in its care.
Recommendations
A. State law should require the Department of Protective and Regulatory Services (DPRS) to increase its Title IV-E reimbursements by submitting reimbursement claims for additional administrative costs associated with the state's foster care program. DPRS also should submit additional reimbursements claims for children in for-profit child care facilities.
At the time of this report, DPRS had not included additional federal revenues from non-profit child care facilities in its Legislative Appropriations Request. In addition, DPRS should expand its claims for IV-E eligibles and work with the Health and Human Services Commission (HHSC) and the Comptroller's office to implement broader case management and rehabilitation services. There may be other opportunities to use a broader definition of case management services at DPRS and Texas Department of Human Services (DHS). HHSC, in coordination with the Comptroller's office, should initiate a review of those programs to determine the applicability of expanded case management and rehabilitation services to DPRS and DHS programs.
B. The General Appropriations Act should require the Texas Department of Health to cooperate with the Comptroller's office in its efforts to identify additional federal revenues.
In coordination with the Comptroller's office, the Texas Department of Health should be required to review and to implement any recommendations not requiring legislative actions as quickly as possible during fiscal 1998 and 1999. HHSC should assist in the implementation of the recommendations.
Fiscal Impact
The amount of additional federal reimbursements Texas can receive if the state implements the above recommendations cannot be fully estimated. At a minimum, however, the state can save $8.6 million during the 1998-99 biennium by taking full advantage of federal Title IV-E and Medicaid reimbursement programs. To achieve the savings, the appropriations of general revenue to DPRS should be reduced by the following amounts.
Fiscal Year Savings to the General Revenue Fund 1998 $2,883,000 1999 5,766,000 2000 5,766,000 2001 5,766,000 2002 5,766,000
Footnotes[1] Texas Comptroller of Public Accounts, "Selected Federal Revenue Opportunities for Texas Human Services Agencies," by Kenneth F. Hoffman, Incorporated (Highland, Illinois, August 28, 1996), pp. 15-16.
[2] Interview with Teresa Kinsella and Susan Masciolic, Massachusetts Department of Social Services; and Dennis Bothamley, Andersen Consulting LLP, June 25, 1996.
[3] Texas Department of Protective and Regulatory Services, 1995 Annual Report (Austin, Texas, January 1996), p. 79.
[4] Texas Department of Protective and Regulatory Services, "U.S. Department of Health and Human Services, Administration for Children and Families, Form No. IV-E-12, State Quarterly Report of Expenditures and Estimates," Austin, Texas, December 31, 1994; March 31, June 30 and September 30, 1995. (Federal reporting forms.)
[5] Texas Comptrolller of Public Accounts, "Selected Federal Revenue Opportunities for Texas Human Services Agencies."
[6] "State-By-State Welfare Funding & Payments," Dallas Morning News (October 9, 1996), p. 7A.
[7] Texas Department of Protective and Regulatory Services, 1995 Annual Report, p. 79.
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