Last week we reported that major litigation in California had come to a close when the appeals were exhausted. The series of resulting decisions (referred to as Alliance I and II) requires California to raise its group home rates.  More rate increases are expected to occur in California. On the heels of Alliance, a group of California foster parent organizations brought a related case, California State Foster Parent Association et. al. v. Wagner, arguing that the state’s foster care reimbursement rates failed to adequately cover the cost of foster care maintenance.  That case is still pending while California redesigns its plan to comply with the federal law.

The foster parent groups prevailed in the lower court, and won a subsequent challenge to their right to bring the suit.  They contended that, in setting the foster care rates, the state had not complied with the Child Welfare Act, which says that the states must submit a plan for covering the cost of foster care maintenance, which includes enumerated items such as food, clothing and shelter. The plan must be approved by HHS (The Department of Health and Human Services).

The court findings support the conclusions that both the procedure the state used to arrive at the rates, and the rates themselves, violated the federal requirements, in that:

•The state, in arriving at the foster care rate, failed to take into account the cost of the specific enumerated items required under the Child Welfare Act.
•The rates were set by the legislature in consideration of budgetary factors, without considering the specific enumerated costs contained in federal law. 
•The foster parents produced evidence that the state rates had fallen to 29 to 40 percent below the actual cost of providing the enumerated items. The state did not produce evidence to refute that assertion.
•The fact that the plan was approved by HHS did not make it necessarily compliant with federal law.

The foster parent organizations also made the policy argument that lower reimbursement rates would reduce the number of foster families, forcing the unnecessary institutionalization of children.  The court commented that lower reimbursement leading to a reduction in the number of available families was “basic economic logic.” 

In reaction to the litigation, California has done a cost study which takes into account the specific items, as required by law. They are expected to introduce rate increases July 1st.