Medicaid Options for Foster Care Children and for Children Receiving Adoption...

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This issue brief examines two issues:

(1) Should all non-Title IV-E adopted and foster care children be eligible for Medicaid?

(2) If so, is the Interstate Compact on Adoption and Medical Assistance (ICAMA) the appropriate means of doing so?

The 1985 Consolidated Omnibus Budget Reconciliation Act (COBRA) amended the Medicaid program. The amendments of interest here provide that children, covered by adoption assistance agreements with states other than the one in which they are living, are eligible for Medicaid in the states where they reside. The Interstate Compact on Adoption and Medical Assistance (ICAMA) imposes the same requirement on its member states and provides the administrative mechanism for interstate cases. COBRA also made it possible to extend Medicaid to children in state financed adoption subsidy programs as long as the states involved exercise the "state option" permitted under the law.

The COBRA amendments also provide that children in interstate foster care are eligible for Medicaid in the states where they are actually living. ICAMA, however, concerns only children under adoption assistance agreements. There is no specific mechanism for administrative implementation of interstate Medicaid eligibility for foster care children.

In federal-state adoption assistance, state adoption subsidy, and foster care programs, there are limitations on eligibility which exclude many children from Medicaid. The rules are complex and many would argue that they do not affect all children with essentially similar needs in the same way.

Present Coverage

Children whose Medicaid eligibility depends on their participation in the Title IV-E program of adoption assistance have met the AFDC program standards of a dependent and needy child as defined in the Social Security Act. Such children, according to the terms of the Act, are needy and "deprived of parental support or care" before they were removed from the parental home or otherwise entered into the status of state ward. In addition, certain financial criteria must be satisfied by the "family" unit from which they came with regard to the income and resources of the parent(s) and related minor children in the home.

In all cases the above noted basic eligibility standards for Title IV-E adoption assistance must be applicable to, or deemed to be met by the children in question. However, if the families of which the child were members had income and resources above the applicable limits, those children cannot qualify for Medicaid. This would be the case even if, as wards of the state, the children have no financial resources of their own. It does not matter that the parents or other persons from whom they are now separated no longer provide or have any legal obligation to provide, support or medical care for them.

Foster care children receive Medicaid whether or not their caretakers qualify for AFDC. Their eligibility depends on finding that they are dependent and needy children. It is also required that the family units from which the children came meet AFDC income and resource limits.

Congress created through COBRA a special exemption for many special needs children adopted pursuant to state subsidy programs. State subsidy children may qualify for Medicaid without the need to satisfy all the AFDC program requirements. Their eligibility requires the state which assists them under subsidy agreements to have selected the "state option" which allows the state to provide Medicaid. Eligible state subsidy children have a pre-existing need for special medical or rehabilitative care that would have precluded adoption if there were no medical assistance. According to Medicaid program regulations, eligibility under this option is directed at children under age 21 who do meet the AFDC income and resource standards, but do not meet some other program element, e.g., the children in question had not been deprived of parental support or care (42 CFR 435.222). Further, "reasonable classifications" of such children may also be covered, e.g., children adopted under a state subsidy program. The AFDC income and resource criteria may be applied so that the children's and not the adoptive parents', circumstances are the focus. To operate in interstate situations, both the subsidy state and the residence state must exercise the "state option." Neither federal law nor ICAMA requires a state which does not cover its own state subsidy children with Medicaid to provide it for children covered by a subsidy agreements from other states.

The foregoing discussion indicates that in some circumstances children in two of the three categories -- adoption subsidy and foster care -- are treated differently even though, as children with special needs, they have equal need for Medicaid.

Issue #1. Should All Non-Title IV-E Children Be Made Eligible for

Interstate Medicaid Coverage?

Children covered by Title IV-E adoption assistance and foster care and by state adoption subsidy agreements are eligible for Medicaid. Federal law, state law, amendment of the state Medicaid plan, acceptance of federal adoption assistance and Medicaid funds are the means through which eligibility is established. However, as noted earlier, children under state subsidy programs are not entitled to Medicaid without state election of the COBRA option in either intrastate or interstate situations. Further, children in state financed foster care are not accorded the benefits of Medicaid under current federal law.

The policy of assisting some children in all of these categories with Medicaid has been accepted by the federal government and the states. For Title IV-E adoption assistance children and state subsidy children, the policy rationale is that giving them Medicaid is an incentive to persons who may be interested in adopting them. Moreover, for foster care children, the provision maintenance payments (and other aid in some instances) have been accepted by federal and state governments as a public obligation. Nevertheless, for non-Title IV-E children who do not qualify for Medicaid -- state subsidy children or state financed foster care -- there is a question of whether to make them eligible and to incur the associated costs. The argument in favor of doing so is that the cost of medical care for all of these children is a public expense in any case because virtually all of the children are public wards. For example, encouraging adoption of IV-E eligible and state adoption subsidy children reduces public expenditures because the adoptive parents sustain the bulk of the total expenses for such children. Medicaid for non-Title IV-E children may or may not add to public expenditures; but, even in the cases in which it would add to state and federal costs, the aid helps to put children into suitable environments.

It can be argued that the adoptive parents of children who are not presently eligible for interstate Medicaid should know that there are costs as well as benefits when they decide to move to another state or when they accept a subsidy children from another state. However, this could also be an argument also for not covering any interstate cases -- a policy opposite to that now mandated by federal law.

Issue #2 How Should the Presently Ineligible Children Be Covered?

If the proper answer to Issue #1 is that the presently ineligible children should be covered, the question is how can it be done.

(1) One way would be to amend the federal law to include the presently ineligible children (both intrastate and interstate) in the federally mandated coverage. Federal funds would then be paid for all children in all of the categories (i.e., Title IV-E adoption assistance and foster care and state-financed adoption and foster care).

(2) If the first method were adopted, the only way that a state could avoid the result would be for the state to refuse federal money for its adoption assistance and foster care programs and, to some extent at least, for its Medicaid program. However, federal mandates are not entirely self-executing. Interstate implementing machinery is necessary. ICAMA is useful in fulfilling the present statutory obligations of states and would be even more useful in complying with expanded mandates.

(3) If federal law is not amended, or before it is amended, expansion of coverage to include Medicaid-type assistance for the now ineligible children (non-Title IV-E foster care and adopted children) would require the states to finance the benefits for these children without federal participation. Doing so would cost the states additional money (some more than others), but it would be useful in encouraging more adoptions of special needs children. The interstate aspects of such programs could be administered through ICAMA.

(4) Foster care presents a separate case. ICAMA does not now apply to foster care. Consequently, using ICAMA to assist in covering and implementing Medicaid for Title IV-E foster care children in interstate situations would require amendment of ICAMA and probably also of the state authorizing laws underlying ICAMA. However, if such amendments could be done, the interstate techniques and mechanisms of ICAMA could be used for both subsidy and foster care children.

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