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70 | P a g e FFY 2025–2027 CCDF State Plan

vi. [x] Other differential rates or tiered rates. For example, differential rates for geographic area or for type of provider. Describe: The Lead Agency will pay a child care provider's full public price for care provided to children in foster care. Historically, 11 percent of all children receiving care in the subsidy program are impacted by this payment rate policy. 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? [x] Yes. If yes, describe: If a provider’s public price is below their subsidy payment, the Lead Agency will authorize a payment rate equal to the provider’s public price. [ ] 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 process for setting rates involved balancing multiple factors to achieve the highest possible rate structure while recognizing the applicable limitations. The factors considered include: the long-standing intent to provide care to at least 50,000 children each week, new market rates collected in 2023, cost per child amounts developed through the total cost study, an estimate of funding available, knowledge that add-ons for quality are not creditable toward the evaluation of rate levels, cost impact to families, and minimum rate levels required by OCC interpretation of applicable law. The primary limitation when setting rates was the estimated amount of funding available to apply to child care rates while not sacrificing the integrity of other requirements of CCDF. The first step in the process of setting rates involved compiling child care subsidy data to create a model population of children and providers. With the model data, the Lead Agency developed a rate-setting tool that allowed agency leaders to evaluate the impact and total estimated cost of various scenarios for base rate levels and quality add-ons. For each scenario, the tool would also analyze how each scenario would impact providers. While the Lead Agency did evaluate scenarios that incorporated cost- based rates for all rates as well as a cost/price hybrid approach, the Lead Agency did not adopt this approach due to the need for additional stakeholder engagement since it would represent a significant departure from prior rate setting using the MRS. Ultimately, the Lead Agency decided to set rates based on the MRS at the highest sustainable level. Doing so would provide the greatest impact to families by minimizing their potential cost burden to the greatest extent possible. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? When considering the degree to which base subsidy rates are adequate to meet health, safety, quality, and staffing requirements under CCDF, historical precedence and the scale of each provider’s participation must be considered. Historically, despite low base rates, there is no evidence to suggest that receiving low subsidy payments undermined a provider’s ability to meet CCDF requirements for health, safety, and staffing. At an individual provider level, there are no