Did you know the term privatization was introduced in the 1930s by The Economist while covering Nazi Germany’s economic policy? In fact, Adolf Hitler introduced policies outsourcing government services (privatization) aimed at improving the German economy in the 1930s. Don’t believe me, read Against the mainstream: Nazi privatization in 1930s Germany.
So, what’s my point here? I am not comparing a privatized company to Hitler; yet, I do intend to argue why child welfare should not be operated through a prism of profit. Privatization in competitive markets tends to increase output and efficiency, which I fully support. Nevertheless, companies who operate as contractors for the foster care system have a financial interest in the continued accumulation (and holding) of foster children. Essentially, they are structured to choose profit over humanity.
What is privatization?
Privatization takes place when a government outsources services or functions to private firms. These private firms exist for one reason only: to make a profit. For the same reason, private companies make a profit through enticing the consumer to purchase their product over the product offered by a competitor. In the case of foster care, the product is a child.
Moreover, privatization in foster care is a reform strategy where many public child welfare agencies contract out child welfare services. Privatized foster care is starting to grow throughout the United States for which seven states have privatized foster care: Kansas, Nebraska, Texas, Georgia, Florida, Pennsylvania, and Michigan (with more on the way).
Foster Child = Product
Let’s first examine the structure of a contract for a privatized foster care system. Using the contract for the Kansas foster care system, we find that Department for Children and Families (DCF) has legal custody of children; yet, two companies serve as contractors: Saint Francis Community Services (St. Francis) and KVC Behavioral Healthcare (KVC).
Kansas has witnessed a significant rise in the number of children in foster care, which is also a problem they are trying to solve. By examining the contract in Figure 1, you can clearly see that the increased number of foster children can be linked directly to the verbiage in the contract. For example, take a look at the verbiage in paragraphs 5 and 6.
Paragraph 5: The monthly perspective base rate shall be ($897,345.00) per month. The monthly prospective case rate shall be ($1,710.00) per out of home placement per month.
Paragraph 6 (pay close attention): Payments will cease (NO payment will be made) for the service month in which one of the following events occur:
a. The child is reintegrated with their family.
b. The child achieves Finalization of adoptive placement.
c. The child is placed in permanent custodianship.
There is NO incentive for a permanent solution. St. Francis and KVC are paid only when a child enters and remains in foster care. So, what is the incentive for the child to be adopted, return home, or attain a permanent solution? Essentially, there is none.
Next, let’s take a quick look at some alarming trends due to the verbiage in the Kansas contract. Figure 2 identifies the total number of children in foster care, children exiting foster care, and the difference between entry and exit into foster care. As you can see, the total number of foster children in care has increased 33% from FY10 to FY17. Additionally, the budget for the foster care contract has also increased 18% from FY10 to FY17 (an increase of $25 million).
The more we spend, the more we exacerbate the problem. Don’t believe me, take a quick look at the correlation between the amount of money we budget (or spend) and the increase in the number of foster children in the regression analysis in Figure 3.
After examining the data provided in the Kansas contract, I am left with the following conclusion.
Premise #1: Contractors are paid only when a child is in foster care, thus incentivizing the problem (children in foster care).
Premise #2: These incentives are creating an increase in the number of children remaining in foster care.
Conclusion: Therefore, Kansas DCF is incentivizing an increase in the number of foster children (the same problem they are trying to solve).
Ending privatization would remove the need to yield a profit
Another system experiencing similar pains is the prison system. Privatizing the prison system leads to cost-cutting measures in order to maximize the bottom line. The Washington Post argues in The Problems with Private Prisons:
a. Privatized prison leads to less interested security measures and less interested personnel development.
b. Lower pay for employees and cuts to staff.
c. Higher inmate to staff ratios and a higher turnover rate for correctional officers.
Additionally, the Office of the Inspector General found that privately operated prisons have higher rates of assaults (both prisoner on prisoner and prisoner on staff) than do federally run facilities.
Joseph Margulies writes in This Is the Real Reason Private Prisons Should Be Outlawed that the problem with privatized prison is the companies that build and run private prisons have a financial interest in the continued growth of mass incarceration. Furthermore, as long as you have private prisons, their corporate leadership will support policies to fill every bed. If they don’t…they will go bankrupt. They profit by having more people in prison just as companies profit by having more children in foster care. Thus, if we expect these private companies to solve the crisis found in prison and foster care, they will simply buy more beds.
Moreover, the similarities between privatized foster care and privatized prison are vast. Nearly every issue discussed in privatized prison could be discussed in privatized foster care. We have to realize that there are certain goods and services that should remain primarily in the hands of the government. When we outsource or privatize, the public loses control and oversight. We lose accountability, which is clearly evident in privatized foster care.
Fostering Profits is an example of the loss in accountability and oversight in privatized foster care. In this case, Bill Torrey the Milam County district attorney was outraged when prosecuting a horrible murder of a foster child by her foster parents. The foster parents were fostering for a giant corporation called National Mentor Holdings which had turned the field of foster care into a cash cow. Torrey remarked on the following regarding privatized foster care:
“Money for kids—it’s like a crop, that’s what it is. It should not be a business.”
Lastly, when we outsource public services for the care and well-being of children, this sets off a downward spiral. We have to remember that a company exists for one reason and one reason only—to maximize profits. Knowing this, we must ask ourselves if we can seriously continue to profit off of foster children. My answer is no.