Privatization fails: Nebraska tries again to reform child welfare

In 2009, Nebraska privatized its child welfare, now critics say it hasn't worked

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Jenea VanEvery with her 3-year-old son, Josiah.

Kristin Streff

Foster parent Jenae VanEvery got a call around midnight one day in September 2011 asking if she could take in two sisters — ages 2 and 3 — who had been found living in filth and squalor by Lincoln, Neb. police.

The children were in the custody of the non-profit group KVC, one of the private contractors the state of Nebraska had hired after deciding in 2009 to privatize its child welfare system. VanEvery agreed but said she could not pick up the children until the next afternoon.

When VanEvery and her husband arrived to pick up the children, they were sleeping in a back room – still wearing the urine- and-feces-covered clothing they had on when police took them the day before.

“When we walked in, the 3-year-old woke up and jumped into my arms. I was taken aback by the strong aroma coming from her. It made my eyes water, and it was hard to breathe,” VanEvery said. “When we arrived home, we took them straight to the bathroom.  The 3-year-old had a cable-knit sweater … that … had rubbed her shoulder blades raw because it had become so saturated in urine and feces that it dried incredibly stiff and rough.

“Her shoes were covered in feces — inside and out,” VanEvery said. “My husband took the clothes straight to the clothes washer, and I started giving them a bath.  I had to change the water twice.”

It apparently had been so long since the children were bathed that “they freaked out when I turned the water on,” she said. “This was very scary for them.”

As it was for VanEvery: How, she thought, could caseworkers allow the girls to remain so filthy while in their care?

A Public Failure

VanEvery told her story last January during a series of hearings before the Nebraska Legislature’s Health and Human Services Committee — the beginning of the end of Nebraska’s largely failed experiment to privatize its ailing child welfare system.

Nebraska isn’t the only state to try privatizing its child welfare system. Florida and Kansas, to differing degrees, launched such efforts in the recent past. But the Nebraska experiment serves as a cautionary tale for any public system considering outsourcing, especially those dealing with the welfare of vulnerable people.

Privatization is the change of public or government services to a private enterprise — a company or non-profit. The shift of public services to the private sector has been under review for the last 20-plus years, stemming from an assumption that private companies can help governments save or make money by doing jobs better or more efficiently. But as the Nebraska exercise showed, privatization isn’t a magic solution in and of itself.

Across the board, lawmakers, foster parents and child advocates now say Nebraska’s privatization effort failed because it was ill-conceived, rushed, and inadequately funded. They also say often the caseworkers hired by the private companies had caseloads that were too heavy and in many cases did not have enough training to deal with the complexities of the welfare system.

Said state Sen. Heath Mello of Omaha: “Ultimately, the ... initiative failed because there was never a strategic plan serving as the blueprint on how to reform the system … The entire episode became an experiment on what not to do when trying to reform state government.”

Gail Steen, a Lincoln attorney who has served as a guardian ad litem, told lawmakers that it would take a lot of money to fix things. “We have to figure out a different way of doing the same thing,” she said. “I think it’s ridiculous to call it reform when we’re doing the exact same thing with just different people. That’s not a reform; it’s just a burden shift. We have to figure out how we’re going to do it differently.”

Moving Around Deck Chairs

When Nebraska began its grand experiment to shift much of the responsibility for running its ailing child-welfare system to private contractors in June 2009, state officials hoped the plan would enhance the efficiency and accountability of child welfare services while controlling costs.

It didn’t.

In fact, the whole thing was such a dismal failure that state lawmakers passed a sweeping package of bills earlier this year aimed at fixing the system.

State Sen. Kathy Campbell of Lincoln, who chairs the Legislature’s Health and Human Services Committee, condemned the privatization effort as lawmakers stepped in. “The state of Nebraska has the legal responsibility for children in its custody,” she said. “The state cannot contract away this responsibility.”

But as Sen. Campbell and her colleagues were still hammering out the details of that child welfare legislation, Richard Wexler, executive director of the National Coalition for Child Protection Reform, issued a report describing Nebraska’s efforts as “moving around the deck chairs” on a sinking ship.

Wexler blasted Nebraska for removing children from their homes at more than twice the national rate:  7.5 per 1,000 children in 2010, compared to the national average of 3.4 removals. Wexler said that lawmakers and others should have been addressing that issue before debating whether the state should continue using private contractors for its child welfare system. 

Wexler said children do better with their own families than in foster care. But instead of helping families deal with the issues of poverty and substandard living conditions, he said Nebraska was using a “take the child and run mentality.”

Of all the children in foster care in Nebraska in 2010, 19 percent were there because of allegations of physical abuse—from excessive corporal punishment to torture, Wexler said. Seven percent were in care because of sexual abuse.

But 58 percent were in care because of what was categorized as “neglect.”

“What is “neglect?” Wexler asked. “In Nebraska, it‘s the failure of the parent to provide for the basic needs or provide a safe and sanitary living environment for the child. A definition that broad can include some extremely serious maltreatment — such as, say, deliberately starving a child, or locking him in a closet all day.

“But it also is a perfect definition of poverty,” Wexler said. “And the confusion of poverty with neglect is the single biggest problem in American child welfare.”

“Either Nebraska is a cesspool of depravity, with more than triple the child abuse of the nation as a whole, or Nebraska is tearing apart a whole lot of families needlessly,” Wexler said.

Carolyn Rooker, executive director of the advocacy group Voices for Children in Nebraska, said: “Out-of-home care is necessary in some cases of child maltreatment, but data suggest it has long been overused in Nebraska,” she said. “Out-of-home care is a scary place for kids, and it should be used only in those cases when it is absolutely necessary,” Rooker said.

Child welfare experts cite several reasons for the high rate of child protective services in Nebraska. Advocates say the state has historically spent far more money on children after their removal from their homes than on prevention and family preservation. 

Also, many say, a Nebraska law that gives only law enforcement personnel and the courts the authority to remove a child from a home may help explain the high rate of removals.

Problems Not New

Nebraska’s child welfare woes didn’t start with privatization. The problems festered for decades.

Some 10 years before the 2012 Legislature passed the series of measures prompted by the privatization mess, the U.S. Department of Health and Human Services released a report saying, among other things, that Nebraska failed to achieve “substantial conformity” with any of the seven safety, permanency and well-being measures for kids in its care.

In 2003, a task force created by then-Gov. Mike Johanns released a report that addressed caseworker workload and retention issues. The next year, Johanns signed legislation that included $5.5 million to help pay for 120 additional social services workers.

But Nebraska continued to have one of the highest rates of U.S. children in out-of-home care. And in 2006, Johanns’ successor, current Gov. Dave Heineman, announced a series of Health and Human Services (HHS) System directives targeting the state’s management of foster children and other state-ward cases.

Meanwhile, New York-based Children’s Rights and the Nebraska Appleseed Center for Law in the Public Interest sued the state, claiming that the governor’s recommendations lacked specificity and commitment to secure money needed to fix the system.

The lawsuit, which said HHS endangered the 6,000 children in the foster-care system and was “mismanaged, overburdened and under-funded,” was later dismissed by a judge, who cited precedent saying the federal courts should not interfere with the action of state courts. Children in foster care are involved in ongoing state court cases, he said.

“This decision consigns Nebraska’s most vulnerable children to an empty promise that the courts will protect them,” Appleseed lawyer Jennifer Carter said at the time.

Before it was dismissed, the lawsuit prompted Gov. Heineman to issue directives to improve the child welfare system — focusing on decreasing the length of time children spend in the system by achieving permanent placements faster — particularly for young children — and freeing up resources to allow workers more time to focus on high-priority cases.

Several months after issuing the directives, Gov. Heineman said there had been “dramatic progress” in the child welfare system, adding that the number of state wards had gone from a record 7,803 in April to 7,603 in July.

“I do not expect this to be an overnight success, and there may well be bumps along the way,” he said. “I am, however, pleased to see progress beginning to take shape.”

But in December 2006, a report by the HHS Office of Protection and Safety said that the caseloads for child welfare workers were still too high — despite the addition of 120 social services workers in 2004. The report said that average caseloads fell from about 129 percent above state standards in 2004 to about 114 percent in 2005.

And while state’s Foster Care Review Board said in early 2007 that Nebraska had made “huge progress” in reducing the number of children in foster care, the board’s executive director said the state could not achieve true reform of the foster care system without spending more money.

Change at the Top

A few months later, Gov. Heineman restructured HHS, a process which included the creation of a Division of Children and Family Services. He appointed Todd Landry, CEO of the Child Saving Institute in Omaha, to head the division.

“We are going to have to make some significant changes,” Landry said.

In December 2007, a Children’s Behavioral Health Task Force, comprised of legislators, HHS officials and child advocates, released a report that set goals to improve the system, including going from 7,000 state wards with 70 percent in out-of-home care to 5,000 state wards with 70 percent in in-home care by 2011. It also supported a reduction of out-of-home and out-of-state placements of children, and called for developing a uniform system to collect and analyze data regarding youth served, the quality of services, and outcomes.

But advocates said this new plan lacked specificity on how to actually fix things.

Kathy Bigsby Moore, co-founder of the advocacy group Voices for Children of Nebraska, said at the time: “My big concern is that much of this continues to be focused on guiding principles and values, rather than getting down to the street level and saying, ‘This is how this is going to roll out.’”

HHS spokeswoman Kathie Osterman said Nebraska didn’t suddenly decide to privatize child welfare. She said that HHS has always contracted with the private sector for direct services for state wards and their families rather than providing the services directly.

However, in 2008 and 2009, Landry moved HHS from individual service contracts with more than 100 providers to a “lead agency model” with five contractors responsible for the delivery and coordination of services instead of the state. The lead agencies then subcontracted with the other private providers to provide a continuum of services.

Trouble out of the Chute

The contracts began in November 2009. And before six months were out, one contractor was bankrupt and another ended its contract. Both blamed inadequate reimbursement from the state. Shortly after that, a third company lost its contract because of financial and management problems, which forced HHS to make unplanned infusions of money to keep things going.

An analysis by the Legislative Fiscal Office later showed that the state overspent the amount budgeted for child welfare services by $50 million during the two-year budget period – with all the money going into the private contracts.

Things got worse.

A few months before the 2012 legislative session, State Auditor Mike Foley issued a scathing 152-page report on the privatization effort, saying the state spent millions more than expected and failed to provide accountability for the costs of the new system.

Foley said that from the outset, HHS had touted its “Families Matter” reform effort as a way to increase the efficiency and accountability of the child welfare system—without increasing spending. But Foley said child welfare costs skyrocketed under Family Matters, jumping 27 percent—from $108 million in 2009 to $137 million in 2011.

HHS said the money being spent was necessary and reasonable, but Foley said the agency lacked accountability, mainly by not having adequate documentation. No documentation was provided by HHS, for example, to support the spending of $7 million in start-up costs, given to lead agencies involved in privatization.

Lawmakers Step In

State lawmakers began the 2012 session in January, promising that it would be the “year of the children.” And the HHS Committee soon held public hearings on child welfare reform.

During a hearing on the bill (LB961) that would eventually return control of foster care case management from private contractors to the state, Sen. Campbell said that children, especially those who are victims of abuse and neglect, “should have stability, continuity, and the absolute best system the state can construct to ensure safety and provide permanency for them.

“The current lead agency model of contracting for private case managers for children is always 90 or 60 days away from massive change. The circumstances the state is currently in is the result of a process entered into by the department with the lead agency model with no strategic plan, experiencing subsequently one major change or crisis after another,” Campbell said.

Campbell cited statistics that showed how permanency substantially drops with each case manager that a child has. In one study, children with one case manager achieve permanency in 74.5 percent of the cases. However, for children with two or more case managers, it drops to 17.5 percent, and for children who have six or more caseworkers, the rate of permanency is 0.1 percent.

The Nebraska Foster Care Review Board said that in the first six months of 2011, 21 percent of the children in the state’s care had four or more case managers. In a survey of biological parents, 60 percent reported they had had between two and four caseworkers, and 9 percent said they had between five and 10 caseworkers.

Compelling Testimony

At the January HHS hearing, Brandi Conner, a former state ward who worked for KVC, testified that while she herself was in Nebraska’s foster-care system from 1992 to 2002 — long before privatization began — she moved 10 times, lived in three foster homes and “had more workers than I could count.”

Conner also said case workers did not check up on how she was doing in foster care. She said one home in which she was placed was filthy with dog feces and that she often was made to take care of four younger children in the home.

Foster mother Lorrie Palmer told lawmakers that while the child welfare system had always had problems, “I’ve seen even more implosion of the system since privatization.”

“Privatization of foster care was an attempt to take the burden off our state workers,” Palmer said. “Instead, untrained, unskilled, poorly paid workers have been left to manage our state wards. Privatization has left our state wards victimized by the very people [who] were supposed to protect them.”

Betty Nisly, who has been a foster parent on and off since 1980, told lawmakers that KVC “appears overwhelmed with case overload and poor management.

“Contact with KVC case managers is close to nil. Except for court hearings, there is no contact,” she said. “They do not answer their phones. Their messages are overflowed, so they can’t accept a message on their phone, and foster care parents are left dangling in midair.”

Palmer shared a Facebook post from one of her former foster children, a 15-year-old girl: “Just moved into a new foster home, and I’m scared. Don’t know what to do. Give me some advice.”

Another post said: “I’m lost. I don’t know who to turn to … I was just getting comfortable in my foster home when they took me out of it. It seems like nothing is going to be able to go right, and I’m just going to move from place to place until I turn 18.”

After some four months of hearings and debate, lawmakers passed a sweeping overhaul of the system. The package of child welfare reform bills that passed created:

  • Children’s Commission and Inspector General for child welfare (LB821)
  • Requirement for more transparency and reporting on child welfare spending, financial benchmarks, a strategic plan and a separate child welfare budget (LB949)
  • Plan for a web-based, statewide automated child welfare information system (LB1160)
  • Increases in foster parent payments, licensing changes and a requirement that the state HHS apply for a federal foster care demonstration project (LB820)
  • Requirement to bring case management in most of the state under HHS and put caseload standards in place (LB961).

Gov. Heineman also signed a related bill (LB998) that eliminated the 11-member state Foster Care Review Board and created a five-member committee to work in tandem with the foster care review office.

Said Campbell: “The package of bills is a foundation, but we should know more as monitoring continues and the components of the package are fully implemented.”

Lessons Learned

Voices for Children’s Rooker said many lessons were learned in the failed privatization effort.

“It’s important that the whole diverse group of child welfare system stakeholders have consensus around what improvements need to be made and how to do that,” she said, adding that real reform takes time, systemic change and new ways of thinking and acting.

She said such reform requires stakeholders to “really challenge the status quo.”

Looking back, HHS’ Osterman said the agency probably tried to do “too much too quickly” with privatization. She said that implementing  privatization statewide rather than in stages or pilots also was a mistake and that lead contractors may have underestimated challenges and costs.

“We’ve learned it’s important to realize business may need to be done differently in rural and urban areas,” she said.

Said Sen. Campbell: ‘’Through the … process ... it was made clear that child welfare reform is bigger than privatization. Privatization is a tool. It is not a child welfare reform.”

At Home in Lincoln

Almost a year has passed since that midnight emergency call in September 2011 when Jenae VanEvery and her husband were asked to pick up the two sisters who were living in such a wretched condition. 

The state has abandoned its grand experiment in privatizing child welfare and tried to set itself on a path of improvement, and the VanEvery’s have grown their family.

On a recent spring day in Lincoln, Jenae VanEvery was busy playing with her sons, Noah and Zane, on the swing set in their backyard. Joining the boys was their new little brother.

Until recently, Josiah was a foster child, a ward of the state of Nebraska. Today, he is the legally adopted son of the VanEverys.

Kevin O’Hanlon covers the Nebraska Legislature and state government for the Lincoln Journal Star. This story was produced in collaboration with YOUTHtoday and the Juvenile Justice Information Exchange.