When Policy Moves Faster Than Capacity: What the GAO Report Reveals About Title IV-E Funding and Foster Care Gaps

The U.S. Government Accountability Office (GAO) just released a report on the Family First Prevention Services Act (FFPSA), Child Welfare: HHS Should Clarify Guidance on State Spending for Congregate Care.

The report examines limits on Title IV‑E funding for congregate care, state experiences, and HHS oversight, ultimately calling on HHS to clarify spending guidance for “at-risk” youth while highlighting gaps in care caused by rapid deinstitutionalization.

However, its findings also reveal a key challenge in child welfare that policy goals are outpacing the system’s ability to support them.

Here are a few of the findings.

Intentional Funding Limits, Unmet Placement Needs

Family First sought to reduce reliance on congregate care and expand access to family-based settings, a goal widely supported in child welfare. The law intentionally limited federal Title IV‑E payments for most congregate care placements to 14 days, with exceptions only for Qualified Residential Treatment Programs (QRTPs) or specialized programs for trafficking victims.

GAO found that:

• 29 states reported a decline in Title IV‑E funds for congregate care.

• 21 states attributed most or all of that decline to Family First’s congregate care limits.

• In one state, the federal share for congregate care fell from 17.9% in 2018 to 1.6% in 2024.

  
  

At the same time, the need for congregate care hasn’t disappeared:

• States and Counties continue to rely on congregate care for youth in foster care despite Family First’s limitations on the use of Title IV-E funds for these placements. 

• 33 states reported increasing state, county, or local funding to cover youth in congregate care.

• 20 states said Family First “a lot” or “completely” contributed to that increase.

IV-E Eligibility Erosion Compounds the Problem

States also reported that Title IV‑E income eligibility IS STILL tied to 1996 AFDC standards, which have never been updated for inflation.

• Fewer children qualify for IV‑E each year.

• Some placements that used to qualify for federal funding no longer do.

  
  

This means shorter federal reimbursement windows for congregate care and a shrinking pool of eligible youth, further compounding placement and funding challenges.

As I explored in an earlier blog on how Medicaid policy collides with foster youth treatment, conflicting federal rules like the Medicaid IMD exclusion and FFPSA’s Title IV‑E limits can leave youth with complex needs without reliable financing for essential therapeutic care.

Capacity and Treatment Gaps Are Growing

Nearly every state reported difficulty securing appropriate placements, particularly for youth with significant behavioral challenges, autism, or intellectual disabilities. Shortages in therapeutic foster homes, QRTP beds, and step-down options are forcing some youth into hotels, offices, emergency shelters, or extended stays in high-restriction settings.

Key findings include:

• Congregate care hasn’t meaningfully declined in many states; over half reported use has stayed the same or increased.

• Behavioral health infrastructure is stretched, limiting safe step-down options for youth leaving higher-level care.

• 32 states reported a lack of psychiatric residential treatment facility (PRTF) beds in the state; 18 states cited a lack of available non-PRTF behavioral health services or placements

  
  

States Are Absorbing Costs, Straining Budgets

As Title IV‑E reimbursement declines, states are increasingly covering the gap with state, county, and local funds, a trend GAO calls “backfilling.”

This creates several challenges:

• Money that could support early intervention, family preservation, and community-based services is redirected to pay for congregate care.
  

• Counties and municipalities frequently bear a disproportionate share, exacerbating regional disparities in access to quality care.

  
  

In short, reducing federal funding does not reduce the need for care. It shifts costs to states and counties, creating trade-offs that can undercut the reforms FFPSA was designed to support.

The Policy Question Ahead

The debate isn’t whether family-based care should be prioritized; everyone agrees it should. The pressing question is whether the system is investing enough in the full continuum of care needed to make that shift work, particularly for youth who still require structured, therapeutic environments to stabilize and heal.