Weekly Wonk: New Analyses Show How Medicaid Cuts Impact Children
Two new data drops, Financing Survey insights, and much more
We’ve got a lot for you this week, Wonks.
Today brings not one but two new original Wonk Data Drop analyses around Medicaid that you won’t want to miss.
Plus the latest on the Child Welfare Financing Survey from one of its authors, and more. But first, we’ve got an important update from Child Welfare Wonk.
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Double Data Drop: Why Medicaid Matters
Data drives Child Welfare Wonk. From the beginning we’ve brought you original data analyses that cut through the noise to surface what matters.
Now we’re scaling that effort; inviting sharp researchers to drop new data-driven insights you won’t find anywhere else.
These fast, focused analyses are made for decision makers; rigorous, fluff-free, and aimed at the underlying structural tensions that actually matter in policy decisions.
We’ve got two for you this week– the first on how Medicaid coverage for children will be impacted by the reconciliation bill, and the second about key trends in Medicaid spending on kids in foster care.
Wonk Data Drop, Part I: How The OBBBA Will Impact Children’s Coverage
Our model shows how new Medicaid rules reach far beyond their target, sweeping in children and families.
By Meredith Dost, PhD, and Robin Ghertner, MPP
The One Big Beautiful Bill Act made significant structural changes to Medicaid. One of those is the first-ever national community engagement requirements for certain adults, known colloquially as work requirements.
Topline discussions of work requirements have focused on who they impact directly, including “able-bodied"adults who do not have dependent children under the age of 14.
The Missed Story
That misses the policy’s indirect impact on children’s coverage. To our knowledge, no one has estimated how many children—especially those with chronic health conditions—could lose coverage. Until now.
Our first-of-its-kind projection modeling provides a ballpark sense of the scale of the impact on children’s coverage.
We estimate that community engagement requirements will lead to fewer children and parents enrolled in Medicaid, and that children with chronic health conditions and behavioral health issues will be especially impacted.
These losses will be primarily due not to ineligibility but increased administrative burden that can lead to otherwise eligible children losing coverage.
Like any projection model, ours rests on assumptions. This isn’t an exact forecast—it's an early signal to help leaders see more of what’s coming before it arrives.
Key Findings at A Glance
Here’s what we found, in brief. You can read the full analysis here.
Up to 68,000 children whose parents lose coverage as a result of the work requirements could end up losing coverage, too.
This includes up to 14,500 children with chronic health conditions.
At least 1.9 million children have a parent who is at risk of losing Medicaid coverage.
Children with chronic conditions and children who take psychotropic medications are more likely to have a parent at risk of losing coverage compared to their healthier counterparts.
Why Would Children Lose Coverage?
Medicaid coverage for parents and kids moves together. When parents are insured, their children are far more likely to stay enrolled—a dynamic known as the “welcome mat” effect.
Work reporting rules threaten to rip up that mat.
To keep coverage, parents must regularly prove they’re working or in an approved activity, often through complex reporting systems.
In states that have tried this, the lesson is clear: most losses come from red tape, not refusal to work.
When parents fall off Medicaid because of missed paperwork or system errors, their children’s coverage can fall with them—even when the kids still meet every eligibility rule.
Consequences Across Systems
The implications for behavioral health and child welfare systems here could be profound.
We know that an estimated 5 percent of children entering the child welfare system do so not for maltreatment, but to access behavioral health services.
A gap in coverage for this population may mean that children entering the child welfare system had never received needed diagnostic or treatment services, or had ongoing care disrupted—worsening existing conditions and making future treatment more complex.
Even when children retain coverage, the impact of a parent losing coverage can impact them.
For example, in 2023, 38 percent of entries to foster care were at least in part because of parental drug or alcohol use. Given data reporting issues, that percentage is likely much higher.
On paper, adults with a substance use disorder are exempt from work reporting rules. In practice, many may fall through the cracks—struggling to navigate reporting, unable to document treatment, or never having accessed it in the first place.
Medicaid is a key funder of behavioral health services for parents.
These parents losing coverage may mean losing access to the behavioral health care that could have kept a family together. As a result, more families may enter the child welfare system.
The Bottom Line
The reach of work requirements extends beyond their target population. Our data shows how children’s coverage becomes collateral.
Wonk Data Drop, Part II: Foster Care's Medicaid Exposure
What decisionmakers need to know about trends in Medicaid spending for children in foster care, as they prepare for Medicaid funding cuts.
Brett Greenfield, PhD and Robin Ghertner, MPP
Medicaid covers nearly all children in foster care. Knowing the cost of that care is critical for understanding the potential impact of Medicaid cuts on children’s access to care and states’ budgets.
The Congressional Budget Office estimates that the One Big Beautiful Bill Act will cut nearly $1 trillion in Medicaid funds over 10 years.
Our new analysis demonstrates how child welfare may be affected, diving into the relationship between Medicaid spending and foster care caseloads.
Here’s what we found, in brief. You can read the full analysis here.
On average, states with more kids in foster care spend more on Medicaid per child. But there are plenty of exceptions.
In 2021, the total amount of state Medicaid spending on children in foster care was on average $27.4 million.
A conservative estimate would range from $2.1 million (DC) to $144 million (California).
Medicaid spending per child in foster care also varies substantially.
We adjusted spending by population to allow direct comparison across states.
The per child spend on foster care also varies substantially.
States spent between $4,000 (Florida) and $99,000 (Alaska) Medicaid dollars for every 1,000 children in foster care.
Adjusting for the fact that children in foster care have higher needs with greater Medicaid spending, our analysis estimates states spend from around $8,000 (Florida) to almost $200,000 (Alaska) for every 1,000 children in foster care.
The middle state – New Hampshire – would spend $42,000 per 1,000 kids in foster care.
Medicaid spends more on kids in foster care and this population is required to be covered. Cuts in other services may also lead to more children in foster care.
Taken together, this means state leaders need to plan for increases in foster care Medicaid expenditures, absent any other funding or policy change.
When federal funds are squeezed, foster care may take up a larger share of state spending.
Show Me the Money: A Look at New Trends in Child Welfare Financing
How states are slowly rewiring child welfare budgets
Kristina Rosinsky,* Child Trends
*This work is my own and does not necessarily reflect the views of Child Trends
Child Trends has just released the latest Child Welfare Financing Survey data that covers state fiscal year (SFY) 2022.
This survey represents the only comprehensive source of information about how much child welfare agencies are spending, from what sources, and on what services.
The latest data give us insights into national and state-level trends as well as the early impacts of the Family First Prevention Services Act (FFPSA), the use of pandemic relief dollars, and other policy shifts.
Signal of a Shift Away from Out-of-Home Placements?
We are seeing early indications that states are shifting funds away from out-of-home placements.
In SFYs 2018 and 2020, states spent 46% of their total funding on out-of-home placements.
But in SFY 2022, this dropped to 43%. About half of that 3 percentage point change is going toward prevention.
Systems like child welfare are tremendously difficult to shift– think turning a cargo ship.
This seemingly small change may signal the beginning of a potentially significant shift toward keeping families together through services.
We will continue to track this over time to see if the trend persists.
Conserving Child Benefits
Another noteworthy trend involves the use of children’s Social Security benefits by child welfare agencies.
Income from various child benefits, like Supplemental Security Income and Social Security Disability Insurance, can be used by child welfare agencies to offset their costs. However, this practice is controversial.
On one hand, people argue that these are benefits to which children are entitled and children should not be charged for their foster care.
Others argue that without a fiscal incentive, child welfare agencies may not undertake the time intensive work to help children access these benefits in the first place.
In recent years, several states have enacted legislation to stop child welfare agencies from using child benefits to offset agency costs.
We are seeing this shift reflected in spending data: the SFY 2022 data show a 22% reduction in child welfare agency expenditures of child benefits and family income (like child support) since SFY 2020.
This amounts to millions of dollars in child benefits no longer being used by child welfare agencies to pay for the cost of foster care.
It is an open question as to whether those funds are now being conserved for the child or their caregiver to support their transition back home and to adulthood, or whether the funds are simply not being accessed at all.
What This Means for Leaders
The data Child Trends just released can help child welfare leaders and partners take the financial temperature of their system and pinpoint areas that need further exploration.
No other source provides a comprehensive look at all the funding sources child welfare agencies are using and what they are spending those funds on.
State policymakers may see their state is using relatively little federal funding compared to similar states, and use that insight to maximize federal funds.
Advocates may see a significant decline in spending in a specific category and dig deeper to understand why that change occurred and how it is impacting families.
Philanthropy may spot opportunities for public-private partnerships related to system shifts that would benefit from outside capital.
We often find the data from the Child Welfare Financing Survey serves as the catalyst behind deeper explorations like these. So go forth and explore, fellow wonks!
As you review the latest products on the Child Trends website, do not hesitate to reach out; I’m always happy to chat about financing! (krosinsky@childtrends.org)
Wonkatizer: Signals of Potential Insurance Crisis, A New Political Filter for Grants
A new national survey by the National Organization of State Associations for Children and Association of Children’s Residential & Community Services shows child welfare service providers nationwide pointing to the potential liability insurance crisis we’ve previously elevated.
Here’s what they found:
Rapidly Rising Premiums. Average premium increases were 163% since 2019, and about half of providers had premiums double.
Market Instability. Nearly two-thirds of providers switched carriers in the last 5 years. Nearly two-thirds struggled to even get bids for coverage.
Significant Spending. Just the 327 agencies that responded to the survey spent over $200M on annual premiums.
The math signals challenges for provider stability at a moment of significant fiscal and policy complexity.
Why This Matters
Insurance companies are pricing child welfare as inherently catastrophic risk, regardless of individual track records.
This comes as jurisdictions face historic settlements over abuse claims.
Providers typically need coverage to operate, so this trend could signal disruptions to service availability or higher costs that will ultimately get passed on to public agencies.
What We Don’t Know
Whether this shift reflects consistent pricing in of new risks across all jurisdictions, or insurers spreading localized risks (like CA eliminating its statute of limitations on certain claims) across the county.
The Structural Fix
Providers have been arguing a federal fix is needed to stabilize the market. This survey will bolster that claim.
Federal Grant Process Gets Centralized Political Oversight
Significant new uncertainty for federal grants
On August 7, President Trump issued an Executive Order routing all federal discretionary grants through senior political appointees, with the power to kill them midstream if they stray from administration priorities.
The EO also bans funding tied to “anti-American values,” and aims to cap the amount of grant funds that go to overhead.
This also creates two major shifts to consider.
Lower Net Present Value
First, a long-term grant becomes worth less to you today.
If there’s a decent chance you might not actually receive every year of a grant that looks big on paper, it’s worth less to you in real life.
You plan like it’s smaller, spread funding across more sources, and front-load work.
Policy as Platform
Second, expansions of executive power persist.
Looking further into the future, presidents of both parties will have more tools to align the award of discretionary funding with their priorities.
Options for the Risk Exposed
Those with significant exposure to federal grant revenue have pivots to consider accelerating, including:
Portfolio Prophylaxis. Limiting exposure to any single federal discretionary funding stream or agency, and to elevate state/local funds and private revenue.
Show Your Work. Prospective grantees that have open protocols, clear replicability and auditable data processes are better positioned now.
Armor Contracts. Language that seemed boilerplate will be a focal point for negotiating; step-down termination costs, IP retention, and more.
FOA Fluency. Reading for screening words matters even more now.
Staffing Stability. Tying FTEs to federal funds becomes riskier.
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