Trading at the child-care bazaar

Governments, agencies and parents haggle over the price of caring for kids

TROY - Dejuan is a skinny, 11-year-old kid with what stockbrokers callgreat "upside potential."

Not only will he never go home to his crack-addicted father, he is atroubled kid who can be difficult to handle. In the economics of foster care,that makes him a valuable commodity.

Children such as Dejuan can generate hundreds of thousands of dollars ingovernment-assistance payments during the years they are in care. That revenueis the fuel that drives the giant engine of foster care.

In Dejuan's case, the revenue flowed to Specialized Alternatives forFamilies and Youth, (SAFY), the private, non-profit foster-care agency thatwon the contract from a county agency to care for him. SAFY kept part of thepayment for administrative costs and gave a portion to a foster parent. Undersuch a system, the less that agencies spend on caring for a child, the morethey can earn in revenue.

SAFY placed Dejuan in a house in Troy that real-estate ads would bestdescribe as a `fixer-upper.' His bedroom is an enclosed patio with a baremasonry floor. The curtain over the only window is a black, plastic garbagebag that blocks out sunlight. The twin fluorescent lights don't help. They areburned out. It is a cost-effective room.

To describe how such children as Dejuan are turned into revenue sources forthe nation's foster-care industry is to describe a bazaar where those involvedin the trade haggle over prices.

Even when social workers, foster parents and others have good intentions,the system encourages bargaining over children. As billions of dollars floweach year from

-- the federal government through public and privateagencies, the players negotiate a larger share of the payments that come withthe child.

It is in some ways a lawless system. The federal governmentsubsidizes care for foster children, most of whom come from low-incomefamilies. But by its own admission, Washington's control over billions ofdollars in subsidies is, at best, shaky. Some states, which cheat, get toomuch money while others get too little.

The Texas Youth Commission, forexample, has a contract to pay SAFY $58 a day for each child in SAFY's care.Of that amount, SAFY must spend $30 on a child's food, clothing and shelter.It keeps the balance for administration and training.

But a youth commissionfinancial official acknowledged that the state tells the federal government amuch different story when it applies for subsidies. It tells Washington thatit spends $52, not $30, for the child's food, clothing and shelter.

As aresult, Texas takes in significantly more federal dollars than it shouldbecause money spent on direct care is reimbursed at a higher rate than moneyspent on administration.

Texas is by no means unique. Earlier this year, Ohioauditors examining foster-care records in Montgomery County found a similarpractice. State officials were reporting administrative expenses as moneyspent on foster children and getting back more money from the federalgovernment as a result.

State auditors estimated that the federal government,which reimburses counties for foster care, overpaid the county $3 million inone year. The auditors also estimated that they would find more overpaymentsif they examined Ohio's other 87 counties.

Texas or Ohio might have to payback the money. Or then again, maybe not.

Michael Kharfin, a spokesman for theU.S. Department of Health and Human Services in Washington, D.C., said stateshave a history of violating foster-care reimbursement rules, then convincingCongress to let them slide.

"States don't like to have to fork over money,"Kharfin said. "They did seek congressional intervention so they wouldn't haveto pay those dollars back."

With so many states escaping penalties, Kharfin'sagency in 1993 stopped conducting in-depth audits on how states spend federalfoster-care dollars. Instead, the department is trying to establish lessconfrontational ways to persuade states to comply.

Meanwhile, foster-carecaseloads are exploding, pushing more troubled kids into the system. And withmore children than they can handle, state and county government agencies arerelying more on private foster care agencies to take in the most difficultkids.

Private agencies find and train foster parents willing to take inchildren who may be suicidal, delinquents, arsonists, or have other emotionaland medical problems. In return, private agencies may charge governments asmuch as $300 per child, per day.

"Most of the time, private agencies are paidon a per-diem basis. They are paid to keep the beds filled (with fosterkids)," said Richard Wexler, director of the National Coalition for ChildProtection Reform in Washington, D.C. "In foster care, as in anything else,what gets paid for gets done. Foster care gets paid for."

Those who havestudied this private system say private foster-care rates are as negotiable asanything else in the bazaar.

"(Foster-care rates) are astoundingly differentfrom one part of the country to another," said Charlotte McCullough, whostudies these rates for the Child Welfare League of America. "A lot of theseagencies have historically been successful in negotiating what their rate isgoing to be."

Even in the same community, she said, you might find one agency being paid 20percent to 30 percent more than another agency providing essentially the sameservices.

"They have just been better at negotiating a higher rate,"McCullough said.

Like any good broker, private foster-care agencies have tobuy low and sell high. Private agencies that convince the government a childneeds intensive services get more money.

"First you have to have an idea ofwhat type of child you are dealing with, what level of care he or she needs,"said Steve Mansfield, SAFY's attorney and executive vice president ofoperations. "If I am the county, I am going to say, `not much.' If I am SAFY,I am going to say, `Oh, my God, the kid needs a lot of help.' It's anegotiation."

On the other end of the deal, to make money the agency mustconvince foster parents to take in children for the least amount possible. Inthese negotiations, parents say the private agency has the edge. Manyfinancially strapped parents will accept lower per diems because they need themoney.

The agency controls the supply of foster children and all theinformation about those children. If an agency thinks a parent is asking fortoo large a share of the per diem, it can simply drop the parent from theprogram. For parents, many of whom rely on the extra income, that is a potentthreat.

The foster parent who took in Dejuan said SAFY temporarily stoppedsending him children after he pushed for higher rates. However, when theagency couldn't find a home for Dejuan, who had a history of setting fires,SAFY agreed to place him at the man's home in Troy. The Dayton Daily News isnot identifying Dejuan or the foster parent to protect the 11-year-old.

ForDejuan, SAFY collected $90 a day from Hamilton County and paid his fosterfather $42.50, the man said. He said foster parents don't get their fair shareof the per diem. "When you have tough kids like the ones they send you, you'renot making any profit. You have to pay for food and everything else," he said.

SAFY's attorney isn't sympathetic. "If he doesn't like his rate, there areother agencies," Mansfield said, shrugging. "It's a free-enterprise system."

While the foster parent and the agency split the government's per-diempayment, it is anybody's guess how much will actually be spent on the child.

SAFY uses its share to administer the program and train the parents, Mansfieldsaid. He said those costs add up quickly.

"We have to track the money so wehave to have a financial department. We have to hire the caseworkers. Thecaseworkers have to be supervised. They have to have a local office. They haveto have a secretary in the local office. Foster parents have to be recruited.They have to have desks, office space, computers," he said. "It just goes onand on and on."

Still, SAFY's per-diem payments helped the agency accumulate more than $5million in assets and cash by the end of 1997, records show. Mansfield saidSAFY, which currently operates in seven states and is poised to beginoperations in three more, uses hundreds of thousands of dollars from its`surplus' when it expands into other states.

Mansfield said it costs $200,000to $250,000 each time SAFY starts an operation in a state because it takes twoyears or more to place enough kids to start making a profit.

Agencies aren'tthe only ones keeping significant portions of the per-diem payments. Fosterchildren and others say some financially strapped parents spend foster-caremoney on everything from new clothes to furniture, leaving kids to fend forthemselves.

Nicholas Morris, 22, who entered foster care when he was 9 yearsold, said his first foster parents had five foster children, plus two kids oftheir own. He suspects money was the family's reason for taking in fosterchildren.

"We got hand-me-downs and real cheap clothes and then they'd go tothe mall and buy their daughter Guess jeans and nice clothes," he said. "Youget a lot of anger out of that."

Dejuan could have ended up being shippedfrom home to home, but he may be one of the lucky children in foster care.

Each night, his father sleeps on a battered couch in a small room just outsideDejuan's door. During the day, the two spend a lot of time together in thisroom with its bits of faded brown carpet covering a concrete floor and an oldbarber chair in a corner under a creaky air-conditioner.

The father keeps thisvigil to make sure Dejuan does not slip away or get it in his head to startanother fire.

The man is immensely proud of his home, purchased decades agofor $10,000, and he points out architectural details and new wallpaper.

He isalso proud of himself and his ability to raise children. After he and his wifeparted, he said, he raised his four children on his own.

Now he is raisingDejuan. After first taking in the boy as a foster child, he adopted him inApril. Dejuan's room may be dark and sparsely furnished. He may have few toys.But he has a father who cares for him enough to give him something he neverhad before. Today he is beyond the reach of foster care.

Dejuan, a soft-spokenboy with sad eyes, looked around.

"It's more better than where I was," hesaid.

Sidebar:

CRIMINAL RECORD DOESN'T DISQUALIFY FOSTER PARENTS
Child advocates say it's a symptom of misdirected system
By Debra Jasper and Elliot Jaspin - DAYTON DAILY NEWS
Published: Tuesday, September 28, 1999, Page 4A

Part 4:

Incentives for reform ar few and feeble
Flow of government cash overwhelms the urge to overhaul
By Debra Jasper and Elliot Jaspin - DAYTON DAILY NEWS
Published: Wednesday, September 29, 1999, Page 1A