Last month, two members of the Ohio House of Representatives introduced legislation to fix payment rates for foster care statewide.
As covered previously in the Ohio Capital Journal, the bill is largely a response to rising costs in Ohio’s foster care system. According to Scioto County Commissioner Scottie Powell, the number of Ohio children placed in foster care has dropped 9% since 2020, but costs have increased by 68%, a $160 million increase over the same time period.
Scioto County Job and Family Services Director Tamela Moore Morton says that this is due to foster care providers increasing prices to take advantage of the short supply of providers. She says providers are able to ask for whatever they want to place children and the state and counties have little they can do about it since these children need to be placed.
Ohio House Bill 984 is essentially a price-control bill for publicly funded foster care placements. The bill will create a statewide rate-setting system for care provided by certified foster homes and residential facilities and will prohibit counties from paying more than that rate for services. The hope is that this bill will rein in excess costs of foster care placements in places where a limited number of providers are able to keep rates artificially high.
The market power story is a plausible one and the fact that at least one Job and Family Services director sees this happening on the ground makes this bill seem like a good idea. But there is a counterweight consideration that also matters when it comes to foster care payments: how payments impact supply.
Foster care is expensive. Caring for children, especially children with serious behavioral or mental health needs, requires staffing, supervision, specialized training, transportation, facilities, and crisis management. If reimbursement rates fall below the cost of providing that care, providers may stop accepting high-needs children, reduce capacity, or stop providing care altogether.
If current rates are higher than the cost of providing care because providers are exercising market power, H.B. 984 could save taxpayers a lot of money without reducing the quantity or quality of care. But if these rates reflect the actual cost of serving children with increasingly complex needs, capping rates could discourage new providers from providing care and stop existing providers from doing it.
The best way to find out which way the bill will behave would be to build evaluation into the proposal. The bill could require the Department of Children and Youth to establish a pre-implementation baseline and publicly report key measures six months, one year, and two years after the new rates take effect. By tracking the cost per child-day, provider supply, placement difficulty, displacement, placement stability, and number of exceptions granted to the bill, policymakers should be able to get a good idea after a few years whether the bill is reducing costs at no harm to the system or if it is restricting supply of care.
If costs go down without any changes to provider participation and placement waiting times and disruptions, then we would have good evidence that this bill is saving money at no costs to quality care for children. If, on the other hand, the number of providers plummets while refusals, placement times, out-of-state placements, and disruptions increase, then we know that supply is being constricted.
The fact is, we don’t know if H.B. 984 will save money or harm kids. But legislators can write the bill in a way so they can find out.
This commentary first appeared in the Ohio Capital Journal.
