Supply-Induced Demand and Black/White Differences in the Use of Congregate Care

Background and Purpose:  Racial disparities in child welfare systems are well documented. Compared to white children, Black children are more likely to be reported as maltreated, more likely to have a maltreatment report substantiated, and more likely to be placed in out-of-home care.  Black children also leave foster care at slower rates.  Although these particular disparities are widely acknowledged and well-researched, other forms of disparity have attracted far less attention. For example, although Black children are 35% more likely than whites to be placed in congregate care, little is known about why this is so.  Because the clinical benefits of congregate care are uncertain, Black/white differences in the use of congregate care warrant more focused scholarship.

Methods:  To understand Black/white differences in the use of congregate care more thoroughly, we adopt a two-stage model.  Stage I examines the relationship between the supplyof congregate care and the demand for congregate care measured as the number of congregate care admissions.  To measure whether demand is supply induced, we adopted a method, called convergent cross mapping (CCM), that tracks the relationship between admissions and discharges over 758 weeks (Sugihara et al., 2012).  Theory predicts that if demand is supply induced, admissions and discharges rise and fall together.  We hypothesize that children in counties where the supply effect is strong will be more likely to go into congregate care, all else being equal.  For Stage II, we built a multilevel model that predicts placement into congregate care.  Placement into congregate care refers to whether a teenager entered congregate care. Individual-level covariates include race, age, history of placement, and gender.  At the county-level, we use a measure of urbanicity, population-level measures of social disadvantage, and the supply effect from the stage I analysis. We also included state fixed-effects to account for between-state differences in congregate care utilization.

Results:  Our analysis was organized around supply effects and Black/white differences in congregate care utilization.  From the stage I analysis, we found strong evidence for supply induced demand: admissions and discharges are strongly coupled.  CCM coefficients, which are analogous to correlation coefficients, vary from .2 to .8.  The second stage linear regression shows that Blacks are 35% more likely to enter congregate care.  In the saturated multi-level model with supply effects included, the Black/white difference is reduced to 4 percent because the supply effect raises the likelihood of being placed in congregate care by 80 percent and Black children are more likely to live in counties where supply effects are strongest.

Conclusions and Implications:  Supply effects imply that the supply of congregate care beds increases demand for those beds.  Our results suggest that where the supply effect is strong, entries to congregate care are more likely.  Results also show that Blacks live in counties where supply effects tend to be strongest.  Efforts to reduce disparities often focus on decision-making processes.  However, our findings suggest that efforts to reduce disparities must also consider policies that address the supply of services in order to mitigate the supply effects.