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The Effective Use of Adoption Subsidies —
Executive Summary


It is a national tragedy when some of our youngest citizens grow up in the child welfare system. However, in this day and age, it is our reality. More and more of our children are coming into care at earlier ages and staying for longer periods of time. The rate at which they are leaving the system is not keeping up with the increasing numbers of kids entering care. Current estimates indicate that the foster care population of more than 500,000 children, is reaching all-time highs (CWLA, 1997). When in the system, these youngsters often deal with an ominous past filled with memories of family violence, drug and alcohol abuse, and instability in the home. They face an uncertain future.

The truth is that the system as we know it is broken. However, there is hope. At the point at which the system can legally free a child for adoption, child welfare advocates have a powerful tool available to them when placing special needs children in permanent homes. For certain children, government-funded subsidies are available if they have special needs or characteristics and meet certain eligibility requirements.

Traditionally, children who qualify for adoption subsidies are the hardest to place by public and private agencies. Special needs children by definition are typically older children, some are medically fragile or have emotional or physical disabilities, and many need to be placed with siblings. In addition, some children qualify because they have a racial or ethnic background that makes it difficult to place them for adoption. These characteristics have proven to be obstacles to adoption.

Historically, agencies referred to these children as "unadoptable." Children with this label often found themselves adrift in the system with a case plan of long-term foster care. Today, the North American Council on Adoptable Children and other national child advocacy organizations believe that no child is unadoptable. Time and time again, families of all types and backgrounds have come forward to parent very needy children—shattering the theory that institutionalization or long-term foster care are the only options for certain children. However, these national organizations recognize that providing appropriate supports to parents, as well as financial safeguards, is paramount to finding permanency for a special needs child.

The passage of the Adoption Assistance and Child Welfare Act of 1980 created a federal structure that provides incentives to families who adopt children with special needs. Each state must operate its own adoption subsidy program as a prerequisite to receiving federal foster care funds. With federal participation, subsidies are an effective way to secure permanence for children who may have spent years in the foster care system. Unfortunately, state and county agencies throughout the country are faced with several disincentives that limit the use of subsidies. This document provides a historical perspective of state and federal subsidy programs, highlights discrepancies between foster care and adoptive subsidy rates, and outlines the barriers inherent in the system.

In light of President Clinton's 1997 Executive Memorandum challenging child welfare systems to increase the number of foster children who find permanent homes, as well as the national welfare reform efforts of 1996 (SSI, AFDC and TANF) and the Adoption and Safe Families Act of 1997, workers and administrators throughout the country are concerned. More children are coming into the system under these reform efforts. Change is imminent. Subsidies can achieve permanence for waiting special needs children.

Section 1

In this section, we discuss the underlying purposes of adoption subsidy programs—why they were created and what they were intended to accomplish. The section also reviews the historical underpinnings of adoption subsidies, compares 1996 foster care and subsidy rates, targets barriers to permanence, and suggests useful policy, management, and practice solutions.

The History Behind Adoption Subsidies

  • Before state and federal adoption subsidy programs were created, special needs children—those who were older, had medical or emotional disabilities, had siblings, or were children of color—were often labeled "unadoptable" and languished in the foster care system.

  • In the past, parents who chose to adopt without the safety net of adoption subsidies often faced tremendous financial difficulties. In many cases, special needs children require costly medication, frequent occupational or behavioral therapy, specialized schooling, etc. Without support, these families have a difficult time raising their children. Some parents choose not to adopt because of the barriers.

  • In 1980, Congress passed the Adoption Assistance and Child Welfare Act, also known as P.L. 96-272. The Act is to promote the permanent placement of special needs foster children (rather than maintain them in foster care) and guarantee that the needs of children with special needs or medical conditions are met. Although individualized, adoption assistance agreements can include financial and medical assistance, social services, and reimbursement for the up-front costs of adoption.

  • The1996 Green Book indicates the average per child subsidy payment in 1995 was $309.72, compared to $448.75 for the average foster care rate.

  • Avery (1994) found that subsidies are on average five percent less than the rate paid to foster parents and 27 percent lower than the basic costs of raising a child as determined by the U.S. Department of Agriculture.

  • A 1993 Westat, Inc. study found that the administrative costs of adoption are substantially lower than those associated with a state’s foster care program. The researchers also found that the average monthly subsidy rate (between 1983 and 1987) was $63, whereas the foster care rate was $206 per month—a costs savings of $146 per child (or $1.6 billion in savings to federal and state governments).

Recent Federal Legislation

  • On Nov. 19, 1997, President Clinton signed the Adoption and Safe Families Act.. As a result of the Act, children with state-funded subsidies are now guaranteed health coverage. States must provide medical coverage to any eligible child with a signed adoption assistance agreement. States are able to receive federal reimbursement for this coverage, and children with subsidies can maintain this coverage if their families moves across state lines.

  • Section 307 of the Act provides that adoption subsidies now follow the child when an adoptive parent(s) dies or the adoption dissolves. Prior to federal changes, children lost their adoption subsidies if their adoptive parent(s) died or if the child went back into foster care because the adoption dissolved. Children now have continued eligibility for Title IV-E Adoption Assistance if they are placed with a second adoptive family.

Foster Care Versus Adoption Subsidy Rates

  • Our research compared data from the APWA's 1996 Survey of Foster Care Maintenance Payment Rates with NACAC's 1996 Survey of Adoption Subsidy Maximum Basic Rates. Data are located in four tables, and detail how states rank in providing payments for 2, 9, and 16 year olds. Information is available on which states have formula driven subsidy payments, as well as which provide difficulty-of-care rates. APWA’s codes are added to the foster care data to determine what types of services or items are included in each state’s maintenance payments (i.e., supervision, clothing allowances, etc.).

  • There is considerable difference among state’s rates. By law, the subsidy rate can be no more than the rate the child received (or would have received) while in family foster care. In 24 states, the subsidy rates are equal to foster care rates, while 16 states reported lower subsidy rates. In six states, children lose $100 or more per month when they move from the foster care system into an adoptive home with subsidy.

  • Data displayed in this publication reflect average foster care rates and maximum subsidy rates. Therefore, the true difference between average foster care and average subsidy rates is not truly illustrated here. However, the U.S. House of Representatives' Committee on Ways and Means' 1996 Green Book found substantial differences between these rates. In 1995, average monthly foster care rates were roughly $450 per child compared to $310 for subsidy rates. This reflects a significant disincentive to adoption for most parents.

Barriers to Permanence

NACAC has identified eight barriers to permanence related to adoption subsidies. Below, we present these barriers along with proposed solutions we think will help children find and stay in adoptive families.

  • On average, subsidy rates are considerably lower than the rates children receive in foster care—Subsidy rates should be equal to the rates children receive while in the foster care system.

  • Some state or county systems pressure agencies to negotiate a lower adoption subsidy rate for a child who had a higher specialized or difficulty-of-care rate while in foster care—Children with exceptional special needs should be given rates that reflect their needs. Agencies should "target" subsidies carefully for children with extraordinary conditions.

  • P.L. 96-272 states that adoption subsidies may not exceed the rate a child receives in family foster care—In some cases, states should allow flexibility to increase adoption subsidy rates above the foster care rates as necessary.

  • Some children need specialized services after the finalization of an adoption, but these services are not offered within their state—States need to create and fund additional post-adoption services for families.

  • Prospective adoptive parents are not adequately informed about the existence of government-funded subsidies—Agency workers should inform both prospective foster and adoptive parents of adoption subsidies at various times during the adoption process.

  • Many state and county social workers are unfamiliar with the federal and state subsidy programs—States should provide on-going training to foster care and adoption specialists.

  • State legislators are often unaware of who is served by subsidies and why they were created—States agencies, foster and adoptive parents, and child advocates must educate lawmakers about the importance of adoption subsidies.

  • In states that have county-administered systems, counties that control eligibility determinations, payment, and rate setting may have budgetary pressure to limit access to and levels of services—States should not allow counties to have responsibility for all three functions: eligibility determinations, payment, and rate setting.

Summary of recommendations

The recommendations contained within this research brief are three-fold—public policy, management, and practice.


  • Financial incentives should support moving more foster children into adoptive homes.

  • States needs to make necessary changes in legislation or administrative rules based on the Adoption and Safe Families Act of 1997.

  • States should not allow counties to have responsibility for all three functions—eligibility determination, payment, and rate setting.


  • States need to make Title IV-E training available to both front-line foster care and adoption workers.

  • States need to build subsidy training into pre-adoptive sessions for foster and adoptive parents.

  • State systems must ensure that all eligible children receives the benefits they deserve, regardless of whether they are adopted through a public or private agency.

  • States must create or expand access to post-adoptive services for families.

  • States need to collect descriptive data on adoption subsidies.


  • Child welfare systems need to encourage the use of subsidies in the placement of special needs children.

  • Front-line workers need to offer both prospective foster and adoptive parents more information and encouragement about subsidies.


Adoption 2002 challenges child welfare systems to double the number of foster children who find permanent homes. State and federally funded subsidies are a cost-effective way to meet this goal. Research shows that subsidies mitigate the risk of adoption disruption (Barth & Berry, 1998), and that the provision of certain post-adoption services as part of the assistance agreement is key to placement success (Rosenthal & Groze, 1994). When properly used, subsidies serve as a safety net for families who adopt children with special needs children.

Section 2

This section offers an assessment tool for state workers and advocates to use to determine the adequacy and effectiveness of their adoption subsidy programs. The tool provides exercises to help stakeholders rethink state policies, determine if practice meets policy, and develop solutions to move children more rapidly to permanence.



North American Council on Adoptable Children (NACAC)
970 Raymond Avenue, Suite 106
St. Paul, MN 55114
phone: 651-644-3036
fax: 651-644-9848