California Group Home Rate Cases Upheld

An important case out of California, California Alliance of Child and Family Services v. Allenby, reached its conclusion April 5, 2011, when the 9th Circuit Court of Appeals affirmed two lower court decisions in favor of the California Alliance of Child and Family Services.

California Alliance of Child and Family Services is a member of the Alliance for Children and Families.

Advocates had been following the case, which had produced two earlier decisions, informally called “Alliance I” and “Alliance II," which held that the California Department of Social Services had to increase the state’s payment to group home providers. The case could motivate providers in other states to seek rate increases.

The court, in the final Alliance decision, declined to publish their opinion, saying it does not set precedent since it focused very narrowly on specific issues. The earlier Alliance cases, which were published, are not binding on courts outside of the jurisdiction in which they were decided, but they did produce analysis which could be used to frame arguments for higher rates in other states.

What the Federal Law Says

The governing federal law, the Child Welfare Act, says that in order for states to receive federal dollars they must have in place a plan approved by the Department of Health and Human Services.

The plan must cover the “cost of care,” which means the cost of foster care maintenance, specifically defined by law, and which includes enumerated items such as food, shelter, and reasonable travel for the child to remain in the school of origin when the child was removed.

The federal law does not mandate a formula for calculating the cost of care and states differ on how they reach the specific dollar amounts estimated to cover the required items. For institutional care, foster care maintenance includes reasonable costs of administration and operation.

How the Courts Interpreted the Federal Law

The California plan, codified in state law, contemplated a rate increase tied to inflation, which the state had not fully implemented.

The state won at the trial level. On appeal, they argued that though the increase hadn’t been fully implemented, they were providing 80 percent of the cost of care, which constituted substantial compliance.

The court recognized that substantial compliance, rather than strict compliance, is acceptable, but found that 80 percent was insufficient. The case was remanded to the trial court, which found that California had not covered the cost of care, since they had not complied with their own plan to provide periodic increases.

This series of cases is referred to as Alliance I.

Alliance II involved a parallel series of cases involving the state’s attempt to reduce rates.

After the trial court enjoined the state from making a rate reduction, the state argued that they could reduce reimbursement rates for nonfederally-eligible children. The court held that since all children (federally- and nonfederally-eligible) receive the same services, the lower rate dilutes the quality of services to which federally-eligible children are entitled, and so the scheme is unacceptable.

The appeals court in Alliance I agreed.

Those two decisions, Alliance I and Alliance II, are left intact now that the appeals process is over. The two cases mandate that California must, under their current plan, make the required periodic rate increases and must reimburse federally- and nonfederally-eligible children at the same rate.

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