As the movement to enroll Medicaid beneficiaries in managed care plans continues to spread, new populations and services are coming into the fold of managed care. Nearly three-quarters of the states are enrolling low-income adults and children into capitated managed care programs. More recently, some states have introduced managed care to other, more vulnerable populations such as children with special health care needs, adults with serious disabilities, and children in state custody. Although most of the programs enrolling foster children in managed care are still voluntary,1 the unique health and mental health care needs of these children pose challenges, both for managed care service delivery and managed care reimbursement.
The purpose of this paper is to explore issues related to setting appropriate capitation rates for the enrollment of foster children in managed care, and to suggest strategies for payment. Behind this purpose, however, lies a broader objective. If states are going to offer, or in some cases require, managed care enrollment for children in foster care, they need to consider how payment strategies will create incentives to improve the quality of services provided.