Estimating the Costs Associated with Caring for Foster Children in the United States

BACKGROUND & PURPOSE: Federal policy provides payments to cover the cost of caring for children in foster care (e.g., food, clothing, shelter, daily supervision, school supplies, etc.). The methods for setting rates vary widely between states. There is a need for a model to estimate the costs associated with caring for children in foster care in the United States. The objectives of this longitudinal study were to (1) operationally define a child's basic needs as guided by federal regulations; (2) construct multivariate models to estimate the costs associated with caring for foster children; (3) construct adjustment formulas based on geographical variations in all states; (4) construct cost templates for each state based on the models; (5) construct cost of living adjustments using the CPI-U-RS inflation adjustments for all states. METHODS: To accomplish study objectives, data from the Consumer Expenditure Survey (CES) were used to estimate the average cost of goods in each category allowed by federal policy. The study then predicted each as a function of child age (0-4, 5-13, 14-18) for cost categories. Additional adjustments to the model were made using data sources not available in the CES to accommodate additional costs to care for foster children versus other children. Multiple regression analyses incorporated the adjusted weights for each category to compute rates for each state by age categories. Finally, results were adjusted for inflation by using the Bureau of Labor Statistics CPI-U-RS for 2008 and 2009 values. RESULTS: The national average of the calculated Foster Care Minimally Adequate Rate for Children (MARC) as of 2007 was $629 per month for 2-year-olds, $721 per month for 9-year-olds and $790 per month for 16-year-olds. After adjusting for inflation, these rates were increased to $669, $767, and $840 for each age group as of 2009. Results for each state were calculated and will be presented. As of 2007 the initially calculated MARC for each state was determined to be higher than actual reimbursement rates reported in all but 2 states. In some states, the calculated MARC rate was as much as 183% higher than the actual amount provided as reimbursement to foster families. CONCLUSIONS & IMPLICATIONS: Inadequate foster care reimbursement rates affect the quality of foster care when foster parents have insufficient resources to meet the basic needs of the children. Since initial results of this study were reported in 2007, at least 15 states have adjusted their reimbursement rates to be more consistent with the actual costs of caring for foster children. It is expected that inflation adjusted rates will provide continued guidance to state policy-makers charged with setting reimbursement rates for foster care. At least one state has already used the inflation adjustments to increase their foster care board rates. Overall, study findings suggest that at the federal level, enhanced precision in operational definitions of care categories would increase consistency in the way that states reimburse foster families. At the state level, policymakers should be encouraged to use results of this research to guide their rate-setting procedures.