Fostering Children in Kansas is Big Business

Image created by Dr. Schwandt

I first published this discussion on February 22, 2020, in Getting “Left of Bang” in Foster Care. Due to its length, I wanted to publish a quick read to make sure some of the important points were not missed. More specifically, one of the foster care contracts in Kansas. Read the original article for more information (and links to the contract plus amendments).

The foster care system in Kansas is a disorganized mess ran by incompetent people. Their incompetence violates what is known as Campbell’s Law, developed by social scientist Donald T. Campbell, in that:

The more a metric is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.

Similarly, the system is also a perfect example of the Cobra Effect, which occurs when an attempted solution to a problem makes the problem much worse. I recommend reading / listening to Stephen J. Dubner as he provides a great discussion about this in The Cobra Effect. The discussion of the Cobra Effect comes up while Dubner interviews Vikas Mehrotra, a finance professor at the University of Alberta. Mehrotra stated:

So the “cobra effect” refers to a scheme in colonial India where the British governor, or whoever, the person in charge in Delhi, wanted to rid Delhi of cobras. Apparently, in his opinion there were too many cobras in Delhi. So he had the bounty placed on cobras. And he expected this would solve the problem. But the population in Delhi, at least some of it, responded by farming cobras. And all of a sudden the administration was getting too many cobra skins. And they decided the scheme wasn’t as smart as initially it appeared and they rescinded the scheme. But by then the cobra farmers had this little population of cobras to deal with. And what do you do if there’s no market? You just release them. And so this significantly, by a few orders of magnitude, worsened the cobra menace in Delhi.

Unfortunately, both Campbell’s Law and the Cobra Effect can be seen in foster care.

The most relevant information from the foster care contract with St. Francis Community Services in Getting “Left of Bang” in Foster Care.

If the stated goal is to safely reunite children with their families as soon as possible and foster care is viewed as a temporary arrangement for a child, then why are they not incentivized when permanency is achieved? As you can clearly see, a contractor is not paid when a child is reintegrated, adopted, placed in permanent custodianship; hence, a contractor is not paid when permanency is achieved.

Payments will cease (no payment will be made) for the service month in which one of the following events occurs:

a. The child is reintegrated with their family, i.e., returns to their home.

b. The child achieves Finalization of adoptive placement.

c. The child is placed in permanent custodianship.

d. The child is transferred to Department of Corrections. (This action nullifies the 12-month aftercare requirement).

e. The child is transferred to Tribal custody (This action nullifies the 12-month aftercare requirement).

f. The child is released from DCF custody for other reasons not specified above.

This leaves two potential unintended consequences:

1. The contractor will need to maintain a consistent rate of foster children to get paid;

2. The contractor will need to bring children in faster than they lose them to permanency. Here’s the funny part — this is the thing they are good at!

Making Millions in Foster Care

“It infuriates me to be wrong when I know I’m right.” — Moliere

As billing and payment increased, along with DCF operating expenses, so too did the average number of foster children in care (see Table 1).

Table 1. Average Number of Children in Care — Operating Expense — by FY — Image created by Dr. Schwandt

The payment for every out of home placement per month increased from $1,541.00 to Amendment 1 ($1,603.00) to $2,102.00. Even without the increase, if we were to use the FY20 average number of foster children in care, which is 7,513 children, then we would pay the contractor $12,043,339.00 per month. However, we would pay $3,748,987.00 per month more with an increase to $2,102.00, which would pay the contractor a significant increase over the year: $189,507,912.00 annually (compared to $144,520,068.00 annually at $1,603.00). This is an increase of $44,987,844.00.

Saint Francis might argue they reduced the monthly base rate from $823,850.00 per month to $750,375.00 per month. However, this decrease of $73,475.00 per month is nothing compared to an increase of $3,748,987.00 per month with the increase of the case rate for per out of home placement.

Even if we had fewer foster children in care, such as the average number of foster children in FY12 (5,182 children), we would still be paying the contractor a significant amount. For example, if we paid $2,102.00 for the number of children in care (5,182 children), then we would pay $10,892.564.00 per month and $130,710,768.00 per year.

Summary:

1. 45% increase in the number of children in foster care from FY12 to FY20.

2. 36% increase in the dollar value of each foster child in custody throughout the contract.

3. 31% increase in operating expenses throughout the contract.

4. Increase of $45 million annually throughout the contract.

Bottom line: there is a positive correlation indicating that when we pay more for foster care contractual services, the average number of children in care also tends to increase. As you can see in Figure 5, there is a positive correlation indicating that when the foster care contract increases, so does the average number of children in care.

Figure 5. Regression for Average Number of Children in Care vs. Foster Care Contract — Image via Minitab

One Foster Child = $26k

If we pay Saint Francis $2,102.00 per out of home placement per month for 12 months, then each child is worth $25,224.00. If we add the base monthly rate of $750,375.00 and divide that by the average number of children in foster care in FY20 (7,513 children), then we can add an additional $99.88 per child. If we then take $2,102 + $99.88 = $2,201.88 x 12 months = $26,422.56. Thus, every foster child is worth $26,422.56 for Saint Francis while they are in care. They are worth $0 to them once they leave care.

Compare this to paying the contractor $1,541.00 (monthly case rate at the initiation of the contract) plus $99.88 multiplied by 12 months, and you get $19,690.56 per child in care. This is a 34% increase in the dollar value for each child in care.

It should be no surprise after reading the verbiage in the contract that the FY average of foster children in Kansas is steadily rising every year along with DCF operating expenditures. Figure 6 is a perfect illustration of this trend. The more we spend to fix foster care, the more we incentivize each contractor to bring in more foster children — and it will get worse until we do one of two things:

1. End privatization in foster care; or

2. Change the verbiage and incentives in the contract (this one is common sense).

Figure 6. Average Number of Foster Children Compared to the Foster Care Contract — Image created by Dr. Schwandt

Figure 6. Average Number of Foster Children Compared to the Foster Care Contract — Image created by Dr. Schwandt

The Noise I Love to Hear

Finally, if this discussion offended you in any way, then let me leave you with a quote from Eric Cartman: America’s Favorite Little $@#&*% via NPR:

Question: “What sound or noise do you love?”

Cartman: “The sound of people who I don’t like crying because the tears running down their cheeks actually make a noise that’s like a sweet sound.”

Dr. Schwandt (Ed.D.) is an American author, L6S master black belt, and red teamer.

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