4.3 Adequate Payment Rates

The Lead Agency must set CCDF subsidy payment rates in accordance with the results of the current MRS or ACF pre-approved alternative methodology and at a level to ensure equal access for eligible families to child care services comparable with those provided to families not receiving CCDF assistance. Lead Agencies are also required to provide a summary of data and facts to demonstrate how payment rates ensure equal access, which means the Lead Agency must also consider the costs of base level care and higher quality care as part of its rate setting. Finally, the Lead Agency must re-evaluate its payment rates at least every 3 years. The ages and types of care listed in the base payment rate tables are meant to provide a snapshot of the categories of rates and are not intended to be comprehensive of all categories that might exist or to reflect the terms used by the Lead Agency for particular ages. If rates are not statewide, please provide all variations of payment rates when reporting base payment rates below. Base rates are the lowest, foundational rates before any differentials are added (e.g., for higher quality or other purposes) and must be sufficient to ensure that minimum health, safety, quality, and staffing requirements are covered. These are the rates that will be used to determine compliance with equal access requirements. 4.3.1 Payment rates a. Are the payment rates that the Lead Agency is reporting in 4.3.2 set statewide by the Lead Agency? [x] Yes. i. If yes, check if the Lead Agency: [x] Sets the same payment rates for the entire State or Territory. [ ] Sets different payment rates for different regions in the State or Territory. [ ] No. ii. If no, identify how many jurisdictions set their own payment rates: b. Provide the date the current payment rates became effective (i.e., date of last payment rate update based on most recent MRS or ACF pre-approved alternative methodology as reported in 4.2.1). 10/1/2023 c. If the Lead Agency does not publish weekly rates, then how were the rates reported in 4.3.2 or 4.3.3 calculated (e.g., were daily rates multiplied by 5 or monthly rates divided by 4.3)? OSSE publishes daily subsidy rates. Rates were multiplied by five to get the full-time weekly rate. 4.3.2 Base payment rates a. Provide the base payment rates in the tables below. If the Lead Agency completed a market rate survey (MRS), provide the percentiles based on the most recent MRS for the identified categories. If the Lead Agency sets different payment rates for different regions in the State or Territory (and checked 4.3.1aii), provide the rates for the most populous region as well as the region with payment rates set at the lowest percentile. Percentiles are not required if the Lead Agency also conducted an ACF pre-approved alternative methodology but must be reported if the Lead Agency conducted an MRS only. The preamble to the 2016 final rule states that a benchmark for adequate payment rates is the 75th percentile of the most recent MRS. The 75th percentile benchmark applies to the base rates. The 75th percentile is the number separating the lowest 75 percent of rates from the highest 25 percent. Setting rates at the 75th percentile, while not a requirement, would ensure that eligible families can afford three out of four child care providers. In addition to reporting the 75th percentile in the tables below, the Lead Agency must also report the 50th percentile and 60th percentile for each identified category. If the Lead Agency conducted an ACF pre-approved alternative methodology, provide the estimated cost of care for the identified categories, as well as the percentage of the cost of care covered by the established payment rate. If the Lead Agency indicated it sets different payment rates for different regions in the State or Territory in 4.3.1.a, provide the estimated cost of care and the percentage of the cost of care covered by the established payment rate for the most populous region as well as the region with rates established at the lowest percent of the cost of care. For each identified category below, provide the percentage of providers who are receiving the base rate without any add-ons or differential payments. Provide the full-time weekly base payment rates in the table below. If weekly payment rates are not published, then the Lead Agency will need to calculate its equivalent. i. Table 1: Complete if rates are set statewide. If rates are not set statewide, provide rates for most populous region. Percentiles are not required if the Lead Agency also conducted an ACF pre-approved alternative methodology but must be reported if the Lead Agency conducted an MRS only. Care Type Base payment rate (specify unit, e.g., per day, per week, per month) % of providers receiving Base rate Full-Time Weekly Base Payment Rate What is the percentile of the rate? (MRS) What is the 50th percentile of the rate? (MRS) What is the 60th percentile of the rate? (MRS) What is the 75th percentile of the rate? (MRS) What is the estimated cost of care? (Alternative Methodology) What percent of the estimated cost of care is the rate? Center Care for Infants (6 months) 98.65 Per Day 67.00 493.25 612.04 Per Week 81.00 Family Child Care for Infants (6 months) 84.28 Per Day 12.00 421.40 383.79 Per Week 110.00 Center Care for Toddlers (18 months) 98.65 Per Day 80.00 493.25 464.60 Per Week 106.00 Family Child Care for Toddlers (18 months) 84.28 Per Day 11.00 421.40 383.79 Per Week 110.00 Center Care for Preschool ers (4 years) 63.00 Per Day 58.00 315.00 338.04 Per Week 93.00 Family Child Care for Preschool ers (4 years) 53.04 Per Day 6.00 265.20 383.79 Per Week 69.00 Care Type Base payment rate (specify unit, e.g., per day, per week, per month) % of providers receiving Base rate Full-Time Weekly Base Payment Rate What is the percentile of the rate? (MRS) What is the 50th percentile of the rate? (MRS) What is the 60th percentile of the rate? (MRS) What is the 75th percentile of the rate? (MRS) What is the estimated cost of care? (Alternative Methodology) What percent of the estimated cost of care is the rate? Center Care for School- Age (6 years) 36.74 Per Day 1.00 183.70 201.08 Per Week 91.00 Family Child Care for School- Age (6 years) 32.20 Per Day 0.00 161.00 213.21 Per Week 76.00 ii. Table 2: Do not complete if rates are set statewide. If rates are not set statewide, provide rates for region with payment rates set at the lowest percentile. Percentiles are not required if the Lead Agency also conducted an ACF pre-approved alternative methodology but must be reported if the Lead Agency conducted an MRS only. Care Type Base payment rate (specify unit, e.g., per day, per week, per month) % of providers receiving Base rate Full-Time Weekly Base Payment Rate What is the percentile of the rate? (MRS) What is the 50th percentile of the rate? (MRS) What is the 60th percentile of the rate? (MRS) What is the 75th percentile of the rate? (MRS) What is the estimated cost of care? (Alternative Methodology) What percent of the estimated cost of care is the rate? Center Care for Infants (6 months) Family Child Care for Infants (6 months) Center Care for Toddlers (18 months) Family Child Care for Toddlers (18 months) Center Care for Preschool ers (4 years) Care Type Base payment rate (specify unit, e.g., per day, per week, per month) % of providers receiving Base rate Full-Time Weekly Base Payment Rate What is the percentile of the rate? (MRS) What is the 50th percentile of the rate? (MRS) What is the 60th percentile of the rate? (MRS) What is the 75th percentile of the rate? (MRS) What is the estimated cost of care? (Alternative Methodology) What percent of the estimated cost of care is the rate? Family Child Care for Preschool ers (4 years) Center Care for School- Age (6 years) Family Child Care for School- Age (6 years) b. Does the Lead Agency certify that the percentiles reported in the table above are calculated based on their most recent MRS or ACF pre-approved Alternative Methodology? [x] Yes. [ ] No. If no, what is the year of the MRS or ACF pre-approved alternative methodology that the Lead Agency used? What was the reason for not using the most recent MRS or ACF pre-approved alternative methodology? Describe: 4.3.3 Tiered rates, differential rates, and add-ons Lead Agencies may establish tiered rates, differential rates, or add-ons on top of their base rates as a way to increase payment rates for targeted needs (e.g., a higher rate for serving children with special needs). a. Does the Lead Agency provide any rate add-ons above the base rate? [ ] Yes. If yes, describe the add-ons, including what they are, who is eligible to receive the add-ons, and how often are they paid: [x] No. b. Has the Lead Agency chosen to implement tiered reimbursement or differential rates? [x] Yes. [ ] No. Tiered or differential rates are not implemented. If yes, identify below any tiered or differential rates, and, at a minimum, indicate the process and basis used for determining the tiered rates, including if the rates were based on the MRS or an ACF pre-approved alternative methodology. Check and describe all that apply: i. [x] Differential rate for non-traditional hours. Describe: Child development facilities receive increased payment rates if a child receives services during non- traditional hours. ii. [x] Differential rate for children with special needs, as defined by the Lead Agency. Describe: Child development facilities receive increased payment rates if a child with special needs receives services. iii. [ ] Differential rate for infants and toddlers. Note: Do not check if the Lead Agency has a different base rate for infants/toddlers with no separate bonus or add-on. Describe: iv. [ ] Differential rate for school-age programs. Note: Do not check if the Lead Agency has a different base rate for school-age children with no separate bonus or add-on. Describe: v. [x] Differential rate for higher quality, as defined by the Lead Agency. Describe: Child development facilities receive payment rates based on their Capital Quality designation, with higher rates for higher quality designations. vi. [x] Other differential rates or tiered rates. For example, differential rates for geographic area or for type of provider. Describe: Child development facilities that participate in the QIN receive enhanced payment rates. vii. If applicable, describe any additional add-on rates that you have besides those identified above. Does the Lead Agency reduce provider payments if the price the provider charges to private-pay families not participating in CCDF is below the Lead Agency’s established payment rate? [ ] Yes. If yes, describe: [x] No. 4.3.4 Establishing payment rates Describe how the Lead Agency established payment rates: a. What was the Lead Agency’s methodology or process for setting the rates or how did the Lead Agency use their data to set rates? The current rates were established based on the District’s 2023 Child Care Cost Model Analysis, which calculated the cost of delivering care in different settings, to children of different ages, and estimated the average cost of care at varying levels of quality in both centers and homes. OSSE reviewed the 2023 cost model analysis to assess gaps between cost, price, and subsidy payment rates. In response to that analysis, in FY24, OSSE increased child care subsidy payment rates. The analysis found that the largest gap between cost and rates was for infant care in centers and, therefore, OSSE raised infant subsidy rates by 15 to 29 percent for homes and centers, depending on a provider’s Capital Quality designation. Facilities with the lowest quality designations received the largest rate increases. In 2024, OSSE compared the findings of the 2024 cost model analysis to the new FY24 subsidy rates and found that, while costs had increased since the 2023 analysis, the FY24 rate increase still reduced the gap between subsidy rates and costs to deliver care, and in some cases eliminated the gap. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? The District’s Child Care Cost Modeling Tool assesses the cost of meeting health, safety, quality, and staffing requirements as outlined in the District’s child care licensing regulations. To ensure that base payment rates were adequate, OSSE revised the tiered reimbursement structure by moving from four tiers of payment rates to three tiers and moving the bottom tier (previously two tiers), Developing/Progressing rates, closer to the Quality rate, while raising rates for providers at all designations. The bottom tier (Developing/Progressing) is now 98 percent of the Quality rate, compared to 88 percent (Developing) and 90 percent (Progressing) previously. By providing a disproportionate rate increase to the lowest-paid providers, OSSE ensured that all facilities would have the means to meet health, safety, quality, and staffing requirements. Rates at the Quality designation were set just short of the cost of care, based on the District’s Child Care Cost Modeling Tool, which exceeds the cost of meeting basic health, safety, quality, and staffing requirements. c. How did the Lead Agency use the cost of care, either from the narrow cost analysis or the ACF pre-approved alternative methodology to inform rate setting, including how using the cost of care promotes the stabilization of child care providers? OSSE uses a cost estimation model to set subsidy payment rates. To understand how both subsidy payment rates and costs to deliver care compared to tuition paid by families, OSSE also conducted a child care provider survey, sent to all licensed child development facilities in the fall of 2022, which included questions about tuition rates. OSSE used the information on market rates received through that survey to compare child care costs, prices, and the District’s subsidy payment rates. OSSE sets rates for child development facilities at the Quality designation close to the estimated cost of care and rates for Developing/Progressing designations and High-quality designations below and above the Quality rate, respectively. Because the District’s Child Care Cost Modeling Tool incorporates, across all scenarios, assumptions that exceed the basic requirements to meet health, safety, and licensing standards, the estimated cost of care produced by the model exceeds the costs to deliver base-level care, resulting in payment rates that support child care providers at all quality designations to sustainably operate. Rates for child development homes were set to promote stabilization of home- based child care providers by providing home providers rate increases comparable to those provided to centers and by setting infant-toddler rates at or above the cost of care. Setting payment rates near or above the cost of care increased the revenue received by child care providers participating in the subsidy system, thereby promoting their fiscal stability. Although OSSE’s review of cost model assumptions found little direct connection between the tools OSSE uses to measure quality and factors that drive facilities’ costs to deliver care, OSSE maintained differential rates for providers at higher quality levels, to promote stabilization for these providers while increasing rates proportionally for providers at lower quality designations, which stabilizes providers at lower designations by supporting their true costs to deliver care. OSSE uses the results of the cost modeling analysis reports to provide transparent information to child care operators and other stakeholders about child care operating costs, which can help child care program operators understand how their costs and tuition compare to other programs in the District and identify possible ways to lower costs or increase revenues to stabilize the child care market. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? OSSE used the District’s Child Care Cost Modeling Tool to calculate the cost of care for a variety of scenarios including scenarios that reflect each of the District's Capital Quality designations (Developing, Progressing, Quality, and High-quality), as well as participation in various quality improvement programs (i.e., the QIN, PKEEP). e. Identify and describe any additional facts (not covered in responses to 4.3.1 – 4.3.3) that the Lead Agency considered in determining its payment rates to ensure equal access. N/A