Order Code RL33155
CRS Report for Congress
Received through the CRS Web
Child Welfare: Foster Care and
Adoption Assistance Provisions
in Budget Reconciliation
Updated January 5, 2006
Emilie Stoltzfus
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

---

Child Welfare: Foster Care and Adoption Assistance
Provisions in Budget Reconciliation
Summary
On December 19, 2005, the House approved the conference agreement to S.
1932 (H.Rept. 109-362), the Deficit Reduction Act of 2005. On December 21, 2005,
the Senate agreed to a slightly revised version of that agreement. The provisions
related to child welfare are the same in both the House and Senate versions of the
conference agreement. However, the Senate version of the Deficit Reduction Act
must now be approved in the House before any part of the measure can be enacted.
The conference agreement to the Deficit Reduction Act includes two child
welfare provisions that were not included in the Senate budget reconciliation bill (as
passed in November) but which had been included in the House version of the bill.
Those provisions, sometimes called the Rosales provision and candidates provision,
respectively, would 1) clarify individual eligibility for federal foster care and
adoption assistance programs (Title IV-E of the Social Security Act); and 2) limit
certain kinds of state claims for federal reimbursement of administrative costs under
the federal foster care program. The Congressional Budget Office (CBO) estimates
that together, these changes would reduce federal spending under the foster care
program by $577 million over five years and by almost $1.3 billion over 10 years.
The conference agreement also includes several child welfare provisions that
were not included in either of the earlier Senate or House-passed budget
reconciliation bills. Those provisions would 1) increase the FY2006 mandatory
funding available under the Promoting Safe and Stable Families program (Title IV-B,
Subpart 2 of the Social Security Act) to $345 million (from current $305 million);
2) provide $100 million in mandatory funds over five years (FY2006-FY2010) to
improve state courts’ handling of child welfare proceedings; 3) require court and
child welfare agency collaboration; and 4) clarify confidentiality rules with regard to
open child welfare court proceedings. These provisions would increase federal
budget authority for child welfare by $300 million over five years.
The conference agreement on the Deficit Reduction Act also includes provisions
related to federal reimbursement of costs for “targeted case management” (TCM)
under the Medicaid program (Title XIX of the Social Security Act). These provisions
were included in both the House and Senate reconciliation bills, and may limit the
ability of state child welfare agencies to use Medicaid TCM for children in foster
care. CBO has estimated the net federal savings for this change, all of which would
be to Medicaid (and not all of which would affect financing of services for children
in foster care), at $760 million over five years and $2.1 billion over 10 years.
Finally, the conference agreement on the Deficit Reduction Act does not include
House and Senate proposals that would have 1) extended the authority of the U.S.
Department of Health and Human Services (HHS) to grant child welfare waivers; 2)
amended the Higher Education Act to improve higher education access for youth
leaving foster care; and 3) authorized a discretionary student loan forgiveness
program available to child welfare workers. This report discusses child welfare
provisions in the budget reconciliation bill and will be updated as necessary.

---

Contents
The Rosales Provision or Clarifying Eligibility
for Federal Foster Care and Adoption Assistance . . . . . . . . . . . . . . . . . 2
The “Candidates” Provision or Limiting Eligibility
for Federal Matching of Foster Care Administrative Costs . . . . . . . . . . 4
Increase Mandatory Funding for the Promoting
Safe and Stable Families Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Grants to Strengthen Court Handling of Child Welfare Proceedings . . . . . . 7
Purposes of the grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Funding and state match . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Formula and entitlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Requirement to Demonstrate Collaboration Between
Courts and Agencies in Child Welfare Programs . . . . . . . . . . . . . . . . . 9
Use of Child Welfare Records in Court Proceedings . . . . . . . . . . . . . . . . . . 9
Targeted Case Management Services under Medicaid . . . . . . . . . . . . . . . . 10
What is Medicaid TCM? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Proposals Not Included in the Conference Agreement . . . . . . . . . . . . . . . . 13
Extend Child Welfare Waiver Authority . . . . . . . . . . . . . . . . . . . . . . . 13
Student Loan Forgiveness for Child Welfare Workers . . . . . . . . . . . . 14
Education-related Services and Aid for Foster Children
and Those Aging Out of Foster Care . . . . . . . . . . . . . . . . . . . . . . 14

---

Child Welfare: Foster Care
and Adoption Assistance Provisions
in Budget Reconciliation
In December 2005, the House and Senate approved slightly different versions
of a conference agreement (H.Rept. 109-362) on their respective budget
reconciliation bills, the Deficit Reduction Act of 2005 (S. 1932). The agreement
includes a number of provisions related to child welfare that are identical in both the
House- and Senate-approved versions of the conference agreement. However,
because in its December 21, 2005 vote the Senate amended the conference agreement
that had earlier been approved in the House, the House must again approve the
agreement before it can become law.
A primary purpose of budget reconciliation is to make statutory changes that
reduce direct (or mandatory) spending out of the federal treasury.1 The largest child
welfare programs receive mandatory federal funding; certain changes to these
programs would be made by the Deficit Reduction Act of 2005.
The federal foster care and adoption assistance programs are open-ended
entitlement programs. This means that the statutory language (contained in Title IV-
E of the Social Security Act) commits the federal government to reimbursing states
for every eligible claim submitted on behalf of an eligible child receiving foster care
maintenance payments or an adoption assistance subsidy. Because of the open-ended
nature of this mandatory spending, any statutory changes that redefine who is eligible
to receive foster care or adoption assistance — or what kind of costs a state may
submit as eligible for reimbursement — should have a direct effect on the level of
federal spending in the program. In FY2004 (the most recent data available), federal
spending on the foster care and adoption assistance programs combined was
approximately $6.1 billion.
The federal Promoting Safe and Stable Families program (Title IV-B, Subpart
2 of the Social Security Act) provides capped mandatory funds (and also authorizes
discretionary funds) for states to offer services aimed at maintaining or reuniting
families and promoting and supporting adoption. A set-aside from the program’s
funding is used for grants intended to help state courts assess and improve their
handling of child welfare proceedings. For FY2005, mandatory funding of $305
million for the Safe and Stable program was increased by discretionary funding of
$98.6 million, for total program funding of $404 million.
1 For more information on the budget reconciliation process, see CRS Report RL33132,
Budget Reconciliation Legislation in 2005, by Robert Keith.

---

CRS-2
The Rosales Provision or Clarifying Eligibility
for Federal Foster Care and Adoption Assistance
As proposed by the President in his FY2006 budget request and included in the
House reconciliation bill (H.R. 4241)2, the conference agreement would rewrite the
eligibility provisions for federal foster care under Title IV-E of the Social Security
Act, and would also make related changes to the adoption assistance eligibility
provisions (also contained in Title IV-E). This proposal is sometimes called the
Rosales provision because it seeks to make moot a 9th Circuit U.S. Court of Appeals
decision, Rosales v. Thompson (321 F. 3d. 835). The Congressional Budget Office
(CBO) expects this provision to reduce federal outlays to the foster care program by
$397 million over five years (FY2006-FY2010) and $879 million over 10 years
(FY2006-FY2015).3
The Senate did not include the Rosales provision in the reconciliation legislation
it approved in early November. However, after an effort on the Senate floor by
Senator Conrad to strike this language from the final conference agreement failed,
the provision remained in the conference agreement approved in both chambers.4
Explanation of the Change. The proposed statutory provision would restate
eligibility for federal foster care in a manner intended to clarify the longstanding
interpretation of those provisions by the U.S. Department of Health and Human
Services (HHS), and thus to effectively overturn a 2003 court decision that disagreed
with that interpretation. Changes to the adoption assistance eligibility criteria were
made to conform with those foster care changes and to somewhat simplify the
eligibility test. As included in the conference agreement, the proposed change does
not prohibit payment of foster care maintenance payments to foster children living
with grandparents. However, it may make it less likely that children who lived with
2 Throughout this report the version of the reconciliation bill as it passed the House on
November 18, 2005 is referred to as H.R. 4241. This is done as an easy way to distinguish
that bill from the budget reconciliation legislation that passed the Senate on November 3,
2005 and was number S. 1932. Technically, however, as part of preparing for the conference
on these bills, the House adopted the provisions of H.R. 4241 in their own version of S.
1932 and thus the conference report refers to an agreement on differing versions of S. 1932.
3 Outlays measure the amount of money the federal government is expected to pay out in the
given year(s) — whether the obligation to make the payment was incurred in the current or
a previous fiscal year. The CBO may also estimate budget authority — or the amount of
money the law authorizes to be spent on a given program in the current or a future fiscal
year. The CBO budget authority savings estimate for this provision is $410 million over five
years and $895 million over 10 years.
4 Congressional Record, December 21, 2005, p. S140202-S140206. Senator Conrad sought
to use a provision of the Congressional Budget Act, commonly called the “Bryd Rule,”
which allows a Senator to use a “point of order” to seek to remove any “extraneous
provisions” in a reconciliation bill. Such extraneous provisions may include those that
produce a change in federal spending that is “merely incidental” to non-budgetary aspects
of the provision. In this particular case, the Senate parliamentarian apparently found that the
budgetary impact of the Rosales provision was more than “merely incidental” to the
legislative change. See Congressional Budget Act, Section 313(b)(1)(D).

---

CRS-3
a non-parent relative before they were formally brought into foster care (and who are
in one of the 9th Circuit states), will become eligible for federal foster care assistance.
Eligibility for Title IV-E foster care and adoption assistance is multifaceted but,
with limited exceptions for adoption assistance, includes a link to the income,
deprivation, and resources tests as they were included in a state’s Aid to Families
with Dependent Children (AFDC) program, as that program existed on July 16, 1996.
(Congress repealed the AFDC program as part of the 1996 welfare reform legislation
that became P.L. 104-193.) HHS has historically maintained that the AFDC income,
deprivation, and resource tests must determine whether or not a foster child was or
would have been considered needy if that child had still been living in the home from
which he or she was removed for safety reasons (generally the home of the biological
parent(s)). However, this HHS interpretation of how to apply the AFDC eligibility
tests was challenged in California, and in March 2003, the 9th Circuit Court of
Appeals (Rosales v. Thompson, 321 F. 3d. 835) ruled against HHS. The 9th Circuit
court interpreted the law to permit, in some instances, a state to determine whether
a foster child would have met the AFDC tests while living in the home of a relative
instead of in the home of the parent (e.g., a grandmother or aunt who informally
cared for the child because the parents were unfit or unwilling).
Under AFDC program rules, a child living with a non-parent relative is virtually
always considered needy because the AFDC income, resource and other tests are
applied only to the child. This means that whether the non-parent relative is very
wealthy or very poor is not a consideration in determining a child’s eligibility for
federal foster care assistance; only the child’s personal income is considered.
Therefore, this reading of the law permits expanded eligibility for federal (Title IV-E)
foster care assistance if a child lived with a non-parent relative before being formally
placed in foster care (provided the child lives in a 9th Circuit state).5
HHS chose not to appeal the decision of the 9th Circuit. Instead, it notified the
nine states in the 9th Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana,
Nevada, Oregon, and Washington) that they should amend their Title IV-E state plans
to follow the eligibility logic of the Rosales decision. At the same time, HHS
notified all other states that they must continue to determine Title IV-E foster care
eligibility based on the traditional HHS reading of the law. Finally, the Department
sought a statutory change to bolster its longstanding interpretation of Title IV-E
(foster care and adoption assistance) eligibility rules, and to restore their uniform
application in all states.
Effect of Provision. All states in the 9th Circuit have amended their state
Title IV-E plans to provide for expanded Title IV-E foster care eligibility (as
permitted by the Rosales decision). Enactment of the statutory eligibility
clarifications in the conference agreement to the Deficit Reduction Act would mean
that children entering foster care in the 9th Circuit states would again be required to
5 Subsequently, the U.S. District Court for the Northern District of Georgia, in a ruling that
cited the Rosales decision (Harris v. Martin, 2004 U.S. Dist. LEXIS 17384), held that the
HHS interpretation of how the AFDC test should be applied was also too restrictive for
determining adoption assistance eligibility.

---

CRS-4
meet the eligibility criteria currently used in all states outside the 9th Circuit.
Children who remain in foster care and have previously been found Title IV-E
eligible because of the Rosales decision are unlikely to lose this federal foster care
eligibility if the agreement is enacted. However, for children entering foster care in
the 9th Circuit, the more limited eligibility criteria would apply. Accordingly states
in the 9th Circuit could see a decline in the share of children in their caseloads for
whom they may receive federal reimbursement for foster care costs. These states
would thus need to support a larger share of foster care children using state dollars
only (or possibly some other capped source of federal funding such as the Temporary
Assistance to Needy Families — or TANF — block grant). The exact expected
effect of this provision in each of the 9th Circuit states is unknown.6
Finally, the provisions included in the conference agreement on the budget
reconciliation bill would restate certain adoption assistance eligibility requirements
to conform with the foster care eligibility clarifications, and would somewhat
simplify the eligibility determination process for adoption assistance. Current policy
provides that, in cases where adoption assistance eligibility rests in some part on
AFDC eligibility, the AFDC eligibility criteria must be met at two points: 1) when
the child is removed from his or her home and placed in foster care, and 2) when
adoption proceedings are initiated. The conference agreement, as had previously
been passed by the House (H.R. 4241) would eliminate the second AFDC test. This
change is expected to simplify adoption assistance eligibility determination while
having little to no effect on the number of children found eligible.
The “Candidates” Provision or Limiting Eligibility
for Federal Matching of Foster Care Administrative Costs
The conference agreement on the Deficit Reduction Act would also limit the
ability of states to claim federal reimbursement of certain costs related to
administering their Title IV-E foster care programs. In January 2005, the
Administration published a Notice of Proposed Rulemaking (NPRM) that proposed
regulations similar to the statutory changes included in the conference agreement.7
Those statutory changes were included in the House budget reconciliation bill (H.R.
6 California is the only state where retroactive claims under this decision were permitted.
The state submitted additional Rosales-related claims for 1998-2003 that totaled $9.7
million in federal expenditures. Other than these retroactive claims, additional claims made
eligible under the Rosales decision are not reported separately by the affected states. For a
discussion of estimated effects of the Rosales provision on states in the 9th Circuit request
CRS Congressional Distribution Memorandum, “Estimated Effect of the Rosales Provision,
by State,” by Emilie Stoltzfus.
7 U.S. Department of Health and Human Services, Administration for Children and Families,
“Administrative Costs for Children in Title IV-E Foster Care,” 70 Federal Register 4803,
January 31, 2005. A number of these proposed changes were originally made by the
Administration as part of a “policy announcement” (ACYF-CB-PA-01-02, issued July 3,
2001). After many states objected to the characterization of the changes as a “clarification,”
arguing that instead they represented a reversal of current policy, the Administration delayed
the implementation of the most controversial policies included in that announcement and
said that it would use the formal regulatory process to achieve the same end.

---

CRS-5
4241) but were not included in the reconciliation bill that passed the Senate in
November.
In sum, this provision would put in statute a definition of “candidate for foster
care” that is more narrow than previous HHS policy, and which consequently would
limit the ability of states to receive federal reimbursement for foster care
administrative costs made on behalf of certain children. CBO estimates that these
provisions will reduce federal outlays for the Title IV-E foster care program by $180
million over five years (FY2006-FY2010) and $411 million over 10 years (FY2006-
FY2015).
Explanation of the Change. Under current law, states are permitted to seek
federal reimbursement (a 50% match) for any eligible administrative costs necessary
for the “proper and efficient” operation of their foster care programs. Among other
things, Title IV-E administrative costs are defined to include payment for time spent
by a social worker finding and making a foster care placement, as well as ensuring
that the child’s placement setting and permanency goal (e.g., reuniting with family
or adoption) are reviewed at federally specified intervals, and that other federal case
review protections are afforded each child in foster care.
In general, these administrative costs may only be reimbursed if the child on
whose behalf the costs are incurred meets the federal Title IV-E eligibility
requirements for foster care maintenance payments. Those eligibility requirements
include a stipulation that the foster child must be living in a family home or other
eligible child care institution that is licensed by the state to provide foster care.
However, some states now make Title IV-E administrative claims (only) for costs
incurred on behalf of children who meet all of the Title IV-E foster care eligibility
requirements except that they are placed in an unlicensed setting. These claims have
been specifically permitted by a 1993 memorandum from HHS, which suggests that
these children could be considered “candidates” for Title IV-E foster care because the
possibility exists that they might be moved to an eligible setting.8 HHS now argues,
however, that the 1993 memorandum has been too broadly interpreted and that parts
of it are inconsistent with the statute. Specifically, it asserts that a child already
placed in foster care may never be considered a candidate for foster care.
In the January 2005 NPRM, the Administration conceded that a complete
prohibition on Title IV-E administrative claims for placement of otherwise eligible
foster children in homes of unlicensed relatives might be contrary to the federal
law/policy that encourages states to place a foster child with relatives. Further, in
recognition of the fact that states cannot be expected to have a ready pool of relatives
licensed to provide foster care, it proposed to allow continued Title IV-E
administrative claims for otherwise eligible children placed in unlicensed relatives’
homes but only for the length of time it normally takes the state to license a foster
family home. The conference agreement adopted the language of H.R. 4241, which
largely followed the Administration’s proposal (although it would provide that states
may make such claims only for as long as the length of time it normally takes a state
to license a home, or up to 12 months — whichever is shorter). Both the NPRM and
8 The 1993 memorandum is briefly discussed in ACYF-CB-PA-01-02, issued July 3, 2001.

---

CRS-6
the statutory language included in the conference agreement would also stipulate one
additional instance in which a state might continue to make Title IV-E administrative
claims (but not Title IV-E maintenance payments) on behalf of an otherwise eligible
foster care child placed in an ineligible setting. These administrative claims could be
made on behalf of a child placed temporarily in a setting such as a juvenile detention
home or certain psychiatric hospitals (ineligible settings under Title IV-E) — but
only for one calendar month and only if the child was subsequently moved back to
an eligible setting.
Finally, the changes included in the conference agreement would restate current
Title IV-E administrative claims policy that permits states to make claims on behalf
of children who are not yet in foster care but who are considered at imminent risk of
removal from their homes. Such children are now considered by HHS as “true”
candidates for foster care, and in need of pre-placement services (required under Title
IV-E) to prevent their removal from their homes. However, the conference
agreement (like H.R. 4241 and the NPRM) would newly provide that in order to
make these Title IV-E administrative claims, the state must redetermine, no less often
than every six months, a child’s status as a candidate for foster care.9
Effect of the Provision. The primary federal savings from this proposed
change are expected to come from a state’s reduced ability to make administrative
claims for children placed in unlicensed relatives’ homes. States that previously
made such claims on an indefinite basis would now need to use state funds to meet
these administrative costs, or to license relatives’ homes — in which case they would
be able to continue to claim federal matching funds for administrative costs and
would be able to claim federal matching funds for their foster care maintenance
payments as well.
States and some child welfare advocates argue that many relatives do not wish
to subject themselves to the governmental intrusion necessary to receive a foster care
license. All foster family home licensing requirements are established and maintained
by state authorities, and typically include requirements related to the physical and
family environment of a home, as well as training requirements. Under current
federal child welfare policy, states are required to apply the same licensing standards
to both relative and non-relative foster homes. However, they are permitted — but
only on a case-by-case basis — to waive a given licensing requirement if doing so
will not endanger the child (e.g., a state may waive a requirement that a bedroom be
of a certain size or that a foster child have his or her own bedroom).
The exact number of states affected by this proposed legislation (and regulation)
is not known; however, the degree of impact is expected to vary widely by state. In
a survey of the states conducted by the HHS Administration for Children and
9 Some states have sought to make Title IV-E administrative claims for a more general
population of children who were not yet placed in foster care. However, over the past
number of years, HHS has moved to disallow this kind of Title IV-E claim and, in this
instance, the Department’s view of “true” candidates has prevailed. See, for instance, HHS
Departmental Appeals Board, Appellate Division, Decision No. 1899 (November 25, 2003),
regarding disallowance of Title IV-E administrative claims made by the Missouri
Department of Social Services.

---

CRS-7
Families (ACF), close to half of the states (24) indicated that the policy would have
an annual financial impact ranging from $200,000 at the low end to $79 million at
the highest; 15 states indicated there would be little or no financial impact and 2
states were uncertain if there would be any impact. Information was not available
from the remaining states. A total of 16 states responded to a survey by the
American Public Human Services Association (APHSA). Eight states estimated an
annual financial impact of $80,000 to $20 million; two states estimated that the
impact could range as high as $21 million to $100 million annually; five reported no
anticipated impact, and one reported uncertain impact.10
Increase Mandatory Funding for the
Promoting Safe and Stable Families Program
The conference agreement on the Deficit Reduction Act would increase the
FY2006 mandatory funding level for the Promoting Safe and Stable Families
program to $345 million from the current level of $305 million. Combined with the
$89 million in discretionary funds appropriated for the program in FY2006,
enactment of the Deficit Reduction Act would increase the federal FY2006 funds for
Safe and Stable to $434 million, $40 million more than current law.11 Neither the
House nor the Senate version of reconciliation legislation proposed this funding
increase.
While the conference agreement to the Deficit Reduction Act increased
mandatory funding for FY2006 only, under CBO budget scoring rules this higher
level of mandatory funding is assumed in future baselines. Thus the five-year cost of
this provision totaled $200 million. Further, if Congress chooses to reauthorize the
Promoting Safe and Stable program before its FY2006 expiration, mandatory funding
of $345 million would be available for the program (in each fiscal year) without
scoring additional costs.
Grants to Strengthen Court Handling
of Child Welfare Proceedings
The conference agreement to the Deficit Reduction Act would amend the Court
Improvement Project (authorized under Section 438 of the Social Security Act) and
provide funding for two new grant programs aimed at strengthening the performance
10 These surveys are cited at 70 Federal Register, 4806, January 31, 2005. Also, at the time
of the July 2001 policy announcement, which would have made changes similar to those
included in H.R. 4241, 14 states submitted a formal objection to HHS, including a legal
analysis of the proposed policies. Those states, AZ, CA, IL, IA, KS, LA, MI, MN, MO, OH,
SD, VA, WA, and WI, might be among those that expect to experience loss of federal funds
if this legislative change were enacted.
11 P.L. 109-149 appropriated $90 million in discretionary funds for the Safe and Stable
program and $305 million in mandatory funds. However, the discretionary amount will be
reduced to an estimated $89.1 million by the 1% across-the-board cut in discretionary
accounts included in P.L. 109-148. The provision regarding FY2006 Safe and Stable
funding in the conference agreement to the Deficit Reduction Act would not change the
FY2006 discretionary funding available for the program.

---

CRS-8
of courts on behalf of children who have been abused and neglected, including those
in foster care and those waiting to be adopted. These provisions were not included
in the House or Senate version of the reconciliation bill. However, grant programs
with similar or related purposes were proposed by the bipartisan Pew Commission
on Children in Foster Care in its May 2004 report and in legislation introduced earlier
in 2005 (S. 1679 by Senators DeWine and Rockefeller and H.R. 3756 by
Representative Schiff). No formal CBO cost estimate is available for the provision
but the statutory language appropriates $100 million for these grants over five years
(FY2006-FY2010).
Purposes of the grants. The current Court Improvement Program, which
state highest courts may use to assess and improve their handling of child welfare
proceedings generally, is authorized through FY2006; the conference agreement to
the Deficit Reduction Act does not extend this authorization. However, for FY2006-
FY2010 state highest courts could also choose to apply for separate Court
Improvement grants aimed at 1) improving their timely and complete action on
behalf of foster children (via improved data collection) and, 2) providing training to
judges, attorneys and other legal personnel in child welfare proceedings.
Applications. Under the provisions of the conference agreement to the Deficit
Reduction Act, state highest courts would be required to apply separately for one or
more of these grants and would need to meet both general and specific application
requirements. An application for any of the three grant programs would need to
demonstrate “meaningful and ongoing collaboration” between the courts, the state
child welfare agency (or any other agency under contract with the state child welfare
agency to administer child welfare programs authorized under the Social Security
Act), and Indian tribes (where applicable). Further, as is required for receipt of
current Court Improvement Program funds, in each of the grant applications, a state
highest court would need to supply any additional information or assurances that
HHS chooses to require.
Separately, in order to receive funding specifically related to improving timely
and complete actions on behalf of children, a state highest court would have to
include a description of how the court and the child welfare agencies on the local and
state levels jointly plan for the collection and sharing of all relevant data and
information. And, finally, state highest courts seeking training funds under the Court
Improvement Program would need to submit an application demonstrating that at
least part of the grant funding would be used for cross-training initiatives jointly
planned and carried out with the state child welfare agency (or an agency under
contract with the state agency to administer child welfare program(s)).
Funding and state match. In addition to the Court Improvement Program
funding contained in current law (a set-aside out of regular Promoting Safe and
Stable Families funds)12 the conference agreement to the Deficit Reduction Act
12 Current law authorizes, through FY2006, a Court Improvement set-aside of $10 million
out of the mandatory Safe and Stable funding plus 3.3% of any discretionary funds
appropriated for that program. In FY2005 a little more than $13 million was made available
(continued...)

---

CRS-9
would provide $100 million in mandatory funds for Court Improvement over five
years (FY2006-FY2010). The two new grants would each be funded at $10 million
in each of those years. And, as is the case with current Court Improvement funds, as
a condition of receiving the grant, the state highest court would be required to supply
at least 25% of the funds used for the purpose of each grant.
Formula and entitlement. Under current law, each state highest court with
an approved application under the current Court Improvement Program grant
program, is entitled to receive a minimum grant of $85,000 and a portion of any of
the remaining set-aside funds that is equal to its state’s share of individuals under 21
years of age (compared to all states with an approved application for the grant). The
conference agreement to the Deficit Reduction Act would apply this same formula
to each of the new grant programs. Thus, if a state highest court successfully applied
for all three grants, it would receive three minimum allotments of $85,000 and a
share of the remaining funds for each grant program based the size of its population
under 21 years of age (relative to all states whose highest court has an approved
applications for each of the grants).
Requirement to Demonstrate Collaboration Between
Courts and Agencies in Child Welfare Programs
The conference agreement to the Deficit Reduction Act would require (as a
condition of eligibility for funding under the Child Welfare Services program, Title
IV-B, Subpart 1 of the Social Security Act) that a state must demonstrate
“substantial, ongoing, and meaningful collaboration” with state courts in developing
and implementing the state plan for Child Welfare Services, the state plan for the
Promoting Safe and Stable Families Program (Title IV-B, Subpart 2 of the Social
Security Act), the state Adoption Assistance and Foster Care plan (under Title IV-E
of the Social Security Act), and any Program Improvement Plan13 that may be
required. This provision was not included in either the House or Senate version of the
reconciliation legislation but was proposed by the bipartisan Pew Commission on
Children in Foster Care in its May 2004 report. Further legislation introduced in 2005
(S. 1679 by Senators DeWine and Rockefeller) sought similar legislative changes.
Use of Child Welfare Records in Court Proceedings
The conference agreement on the Deficit Reduction Act would amend the state
plan requirements for foster care and adoption assistance (Section 471 in Title IV-E
of the Social Security Act) to clarify that required confidentiality provisions related
to information about the children served do not limit the ability of a state to
determine its policies regarding public access to court proceedings on child abuse and
12 (...continued)
for the Court Improvement Program.
13 A Program Improvement Plan (PIP) must be developed and implemented by a state if a
federal review of that state’s child welfare practice (via the Child and Family Services
Review, CFSR) indicates that the state is “not in substantial conformity” with all of federal
child welfare policy.

---

CRS-10
neglect or other child welfare related court proceedings — except that the policies
must, at a minimum, ensure the safety and well-being of the child, parents, and
family. This provision was not included in either the Senate or House version of the
reconciliation bill but it is consistent with similar clarifying language added to the
Child Abuse Prevention and Treatment Act (CAPTA) in 200314 and is substantively
identical to language introduced this year in the Senate (S. 1679 by Senators DeWine
and Rockefeller).
Targeted Case Management Services under Medicaid
The conference agreement on the Deficit Reduction Act includes statutory
language (previously included in both the House and Senate versions of the
reconciliation bill) that intends to clarify when states may make Medicaid claims
related to optional targeted case management (TCM) services. The statutory
clarification extends to claims made on behalf of any Medicaid-eligible individual
who may also be served by another federal or state program (e.g., juvenile justice,
foster care, or special education), but it provides special details regarding
unallowable claims on behalf of Medicaid-eligible foster care children. The
conference agreement further provides that HHS must issue formal regulations to
implement this clarification. Neither the House or Senate version of the reconciliation
bill required HHS to issue regulations.
The Administration called for clarification with regard to TCM claims in its
FY2006 Budget request and in legislative language it later sent to Congress for
consideration. However, the language included in the conference agreement to the
Deficit Reduction Act is significantly different from that offered by the
Administration, and it appears to be less restrictive to state TCM claims. CBO
estimates that the changes would shift some costs to the federal foster care program
— increasing federal Title IV-E foster care spending by $350 million over five years
(FY2006-FY2010) and $940 million over 10 years (FY2006-FY2015). This
increased foster care spending would offset savings to the Medicaid program; the net
federal savings are consequently estimated at $760 million over the same five years
(FY2006-FY2010) and $2.1 billion over 10 years (FY2006-FY2015).15
What is Medicaid TCM? Medicaid (Title XIX of the Social Security Act)
is an open-ended entitlement to states. States may seek federal matching payments
for medical assistance offered to Medicaid-eligible individuals. Children who are
eligible for federal foster care (Title IV-E eligible) are automatically deemed eligible
for Medicaid, and most other foster children (non-Title IV-E eligible) are presumed
to qualify for Medicaid under other (low-income and/or disability-related) Medicaid
eligibility criteria. Further, under Medicaid law, case management is an optional
benefit that states may offer Medicaid beneficiaries, and it includes services to assist
14 The amendment was made by the Keeping Children and Families Safe Act (P.L. 108-36).
15 The Administration estimated savings to Medicaid of $2.0 billion over five years for its
proposal to limit TCM claims. In addition, it estimated savings of $1 billion over five years
from a proposed reduction in the federal matching rate for TCM services. (This matching
rate reduction was not included in either the House or Senate reconciliation bill and is not
in the conference agreement.)

---

CRS-11
them in gaining access to needed medical, social, education, and other services. The
term “targeted case management,” or TCM, refers to situations in which these case
management services are not provided statewide to all Medicaid beneficiaries, but
rather are provided only to specific classes of individuals or “target” groups (e.g.,
people with AIDS or those with developmental disabilities, children who are abused
or neglected, or children in foster care).
For FY2002, across all states the estimated total federal share of TCM
expenditures for all targeted groups was $1.3 billion, of which $171.5 million was
reimbursed on behalf of costs incurred for 165,265 foster care children.16 States
varied widely in the use of TCM services for children in foster care. Nine states
(including the District of Columbia) showed no TCM claims for foster care children
in FY2002. Among the states that did submit Medicaid TCM claims for foster care
children, the estimated federal share was under $1,000 in two states, more than
$1,000 but less then $100,000 in 11 states, and more than $100,000 but less than $1
million in 10 states. Among the remaining 19 states, the federal share of TCM claims
for foster care children ranged from $1.1 million in West Virginia to $38.9 million
in Texas.17
Explanation of Change. Current law defining TCM is broadly written, and
there have been conflicting policy directives in regard to how TCM claims may be
made on behalf of Medicaid-eligible individuals, particularly if an individual might
also be able to receive related/same services under another state or federal program.
The provisions included in the conference agreement to the Deficit Reduction Act
seek to enact policies outlined in a January 19, 2001 letter to state Medicaid directors
and which was co-signed by federal Medicaid and Child Welfare administrators. The
policy letter, which explicitly addressed only the issue of Title IV-E eligible foster
care children and allowable TCM claims, would be written into statute by the
conference agreement on the Deficit Reduction Act of 2005 in a way that would
address TCM claims for a variety of populations (including non-Title IV-E eligible
foster care children). The provisions, however, continue to give special attention to
foster care-related claims generally.
The conference agreement on the Deficit Reduction Act would provide a more
detailed definition of TCM that would include assessing a person’s need for services,
developing a care plan, referring individuals to services, and monitoring and
followup of service use. It would reiterate that TCM services do not include
reimbursement for any of the underlying services costs (e.g., mental health
counseling), and further that in the specific case of foster care, TCM would not
include services that are part of the “direct delivery” of foster care. The legislation
(like the policy letter it seeks to codify) provides illustrative examples of these foster
care services (research gathering and completion of documentation required by the
foster care program, assessing adoption placements, recruiting or interviewing
potential foster parents, serving legal papers, conducting home investigations,
providing transportation, administering foster care subsidies, and making placement
16 FY2002 Medicaid Statistical Information System (MSIS). The definition of “foster care
children” for MSIS includes children in foster care and those receiving adoption assistance.
17 Ibid.

---

CRS-12
arrangements). Additionally, the provisions would assert that Medicaid can be billed
only for case management or TCM where “there are no other third parties liable to
pay for such services, including as reimbursement under a medical, social, education,
or other program.” Finally, the statutory language in the conference agreement would
stipulate that states may use accepted federal cost allocation methods to ensure costs
are appropriately billed to the proper program.
Under the Bush Administration, CMS has backed away from the TCM policies
in the January 2001 letter, and has increasingly suggested — via denials of state plan
amendments seeking to provide TCM services to foster care children (or abused and
neglected children broadly) — that the kinds of services provided by Medicaid TCM
are integral to the foster care program and therefore the financial responsibility of the
child welfare agency rather then Medicaid.
Effect of this Provision. The provision in the conference agreement to the
Deficit Reduction Act asserts that states may allocate costs of Medicaid TCM
services to children in foster care. This is contrary to current CMS policy (as
provided in the State Medicaid Manual), which does not allow states to use cost
allocation when making claims related to Medicaid services, but is in keeping with
the January 2001 policy letter on TCM claims for Title IV-E eligible foster care
children. In this sense, the legislative language in the conference agreement would
seem to clarify conflicting policy statements in a way that supports rather than limits
TCM claims for foster care children.
At the same time, the proposed statutory provision would further assert that
Medicaid may not be billed for TCM services if there is another party liable for the
cost of such services, including as reimbursement under a “medical, social,
education, or other program.” Exactly how this “third-party liability” language
would be implemented — which primarily restates general third-party liability
provisions under current Medicaid law — is unclear. In his brief statement regarding
a proposed (but failed) amendment to strike the TCM provisions from the budget
reconciliation bill that passed the Senate in November 2005, Senator Reed expressed
the concern that the language would “force” payment for TCM services by “third
parties, States or others,” resulting in reduced services and increased costs to states.
In response, Senator Grassley said that the legislative proposal simply sought to
codify a policy originally proposed by the Clinton Administration.18 The conference
agreement does not significantly alter the third party liability language included in the
earlier House or Senate bills.19
The CBO estimate of savings for this provision is based on the assumption that
states — with regard to foster care and other programs (e.g., juvenile justice) — have
too broadly billed the provision of TCM services to Medicaid. This is in keeping with
18 See discussion of Amendment No. 2409 in the Congressional Record, Nov. 3, 2005,
p. S12321.
19 However, unlike either the House or Senate versions of the reconciliation bill, the
conference agreement stipulates that the new language does not affect the prior law
application of third party liability with regard to programs or activities of the Indian Health
Services Act or those carried out under Title XXVI of the Public Health Services Act.

---

CRS-13
the Administration’s assertion that states have been shifting costs from foster care,
and certain criminal justice and education programs to Medicaid. In particular, CBO
believes that some states will move some of the claims they currently bill as
Medicaid TCM to foster care administrative claims under Title IV-E, if the proposed
changes are enacted. However, as CBO also estimates net savings to the federal
treasury ($760 million over five years ; $1.3 billion over 10 years), it apparently does
not believe that all of these claims may be made under Title IV-E. In sum, the effect
of this legislative proposal is uncertain, but is believed — as is suggested by net CBO
savings — to reduce access to Medicaid TCM claims for a range of populations,
including particularly Medicaid-eligible foster care children.
Proposals Not Included in the Conference Agreement
Reconciliation legislation, passed initially in the Senate (S. 1932) and the House
(H.R. 4241) also included several other provisions relevant to child welfare, but for
which no significant budget effect (savings or cost) was estimated or expected. These
provisions, which would have extended the authority of HHS to issue waivers of
federal child welfare policy through FY2010 (House bill only), authorized a federal
student loan forgiveness program for child welfare workers and others (House bill
only),” and amended the Higher Education Act in ways intended to encourage greater
access to youth aging out of foster care (primarily included in the Senate bill) were
not included in the final conference agreement. A brief summary of the deleted
provisions follows.
Extend Child Welfare Waiver Authority. Congress has granted (through
March 31, 2006) authority to HHS to approve new waivers of some federal child
welfare program requirements (included in Title IV-B or Title IV-E of the Social
Security Act). The waivers are intended to allow states to demonstrate innovative
programs for the delivery of foster care and other child welfare services. Congress
has temporarily extended this waiver authority numerous times as part of short-term
reauthorizations of the Temporary Assistance to Needy Families (TANF) block grant,
including most recently in P.L. 109-161 (signed by the President on December 30,
2005). If enacted, the Deficit Reduction Act, would reauthorize the basic TANF
block grant through FY2010 but it would not extend child welfare waiver authority
past March 2006.20
The House reconciliation bill (H.R. 4241) would have extended (through
FY2010) HHS authority to grant child welfare waivers, would have removed the
limit on the total number of demonstration programs HHS may approve in any given
year (set at 10 by current law) and would have made other changes related to the
approval of waiver projects and availability of information about the projects.21 These
20 These temporary reauthorizations have also been used to continue mandatory funding of
the national random sample study of child welfare (Section 429A of the Social Security
Act). The study has been implemented by HHS as the National Survey of Child and
Adolescent Well-Being (NSCAW). If enacted, the Deficit Reduction Act, would
appropriate funds for the national random sample study of child welfare through FY2010.
21 The child welfare waiver provisions of H.R. 4241 were identical to those included in H.R.
(continued...)

---

CRS-14
provisions were not in the Senate reconciliation legislation and were not included in
the conference agreement on the Deficit Reduction Act.
Student Loan Forgiveness for Child Welfare Workers. H.R. 4241
would have authorized the Department of Education to repay up to $5,000 in student
loan debt if an individual has worked full-time for five years in one of several “areas
of national need” — defined to include child welfare workers.22 This provision was
not in the Senate reconciliation legislation and was not included in the conference
agreement on the Deficit Reduction Act of 2005.
Education-related Services and Aid for Foster Children and Those
Aging Out of Foster Care. Both the House and Senate reconciliation bills (using
slightly different language) would have amended the Higher Education Act to clarify
that youth in foster care (or formerly in foster care) on his/her 18th birthday are
included in the definition of “independent student.” (The definition is used for
purposes of determining eligibility for federal student financial aid.) This clarifying
change was not included in the conference agreement on the Deficit Reduction Act.
Proposed TRIO Program Amendments. The Higher Education Act
authorizes a range of grant programs, collectively called the Federal TRIO programs.
These programs are designed to identify potential post-secondary students from
disadvantaged backgrounds, to prepare these individuals for post-secondary
education, to provide certain support services to them while they are in post-
secondary education — and to train individuals who provide these services.
Collectively, the programs are authorized to provide a wide range of services, such
as tutoring, financial aid, personal or career counseling, mentoring, exposure to
cultural activities and educational institutions, academic advising, and financial
literacy training. The Senate reconciliation bill would have amended a number of
these programs to help ensure that youth in foster care and those leaving the foster
care system because of their age (typically the 18th birthday) are served by these
programs. These changes were not included in the conference agreement to the
Deficit Reduction Act.
21 (...continued)
240, omnibus welfare reform legislation proposed in the House earlier this session and
incorporated into H.R. 4241. Earlier this year, the Senate Finance Committee reported
welfare reform legislation (S. 667) that would extend through FY2010 HHS authority to
grant child welfare waivers but would make no other changes to the this waiver authority.
22 Several other bills introduced in this Congress would provide separate loan forgiveness
programs for child welfare workers and/or for attorneys practicing in the field of child and
family law. These include H.R. 127, S. 1431, S. 1679, and H.R. 3758.

---