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: [ ] Sets the same payment rates for the entire State or Territory. [x] 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). 9/29/2024 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)? The Lead Agency publishes weekly rates. 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) 260.00 Per Week 35.00 260.00 60.00 240.00 260.00 315.00 324.00 Per Week 80.20 Family Child Care for Infants (6 months) 199.00 Per Week 35.00 199.00 60.00 180.00 199.00 224.00 190.00 Per Week 104.70 Center Care for Toddlers (18 months) 248.00 Per Week 35.00 248.00 60.00 225.00 248.00 299.00 233.00 Per Week 106.40 Family Child Care for Toddlers (18 months) 188.00 Per Week 35.00 188.00 60.00 175.00 188.00 206.00 192.00 Per Week 97.90 Center Care for Preschool ers (4 years) 221.00 Per Week 35.00 221.00 60.00 200.00 221.00 275.00 180.00 Per Week 122.80 Family Child Care for Preschool ers (4 years) 180.00 Per Week 35.00 180.00 60.00 170.00 180.00 200.00 197.00 Per Week 91.40 Center Care for School- Age (6 years) 185.00 Per Week 35.00 185.00 60.00 170.00 185.00 225.00 154.00 Per Week 120.10 Family Child Care for School- Age (6 years) 156.00 Per Week 35.00 156.00 60.00 150.00 156.00 185.00 191.00 Per Week 81.70 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) 130.00 Per Week 23.00 130.00 60.00 125.00 130.00 145.00 250.00 Per Week 52.00 Family Child Care for Infants (6 months) 120.00 Per Week 28.00 120.00 60.00 105.00 120.00 125.00 139.00 Per Week 86.00 Center Care for Toddlers (18 months) 125.00 Per Week 23.00 125.00 60.00 115.00 125.00 143.00 184.00 Per Week 67.90 Family Child Care for Toddlers (18 months) 110.00 Per Week 28.00 110.00 60.00 100.00 110.00 125.00 141.00 Per Week 78.00 Center Care for Preschool ers (4 years) 120.00 Per Week 23.00 120.00 60.00 110.00 120.00 135.00 146.00 Per Week 82.20 Family Child Care for Preschool ers (4 years) 105.00 Per Week 28.00 105.00 60.00 100.00 105.00 124.00 147.00 Per Week 71.40 Center Care for School- Age (6 years) 115.00 Per Week 23.00 115.00 60.00 110.00 115.00 130.00 129.00 Per Week 89.10 Family Child Care for School- Age (6 years) 94.00 Per Week 28.00 94.00 60.00 85.00 94.00 100.00 140.00 Per Week 67.10 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? [x] 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: Effective September 29, 2024, the Lead Agency will begin implementing a new process that will result in payment rate add-ons for high- quality child care providers, Quality Rated 2-star or 3-star, providing care in the child care subsidy program. Rate add-ons will be based on a percentage of net base payment, base payment less the family fee, made to a provider. Quality Rated 2-star providers will receive a 5 percent add-on bonus, and Quality Rated 3-star providers will receive a 10 percent add-on bonus. [ ] 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. [ ] Differential rate for non-traditional hours. Describe: ii. [x] Differential rate for children with special needs, as defined by the Lead Agency. Describe: The Lead Agency will pay a child care provider's full public price for care provided to children with special needs. In addition, upon review and approval, the Lead Agency may pay an amount greater than a provider’s full public rate determined by the specific needs of the care situation. Historically, 6 percent of all children receiving care in the subsidy program are impacted by this payment rate policy. 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. [ ] Differential rate for higher quality, as defined by the Lead Agency. Describe: 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 quality requirements under CCDF. However, quality-based payment add-ons have been used to offset the potential costs of higher quality. In addition, whether payment rates are adequate to support the requirements of CCDF heavily depends on the scale of each provider’s participation. For providers that only care for a small number of children with subsidy relative to the total number cared for, payment rates will have no true impact on whether that provider can meet CCDF requirements. On the other hand, for programs where most of the children cared for are in the subsidy program, payment rates will have a greater impact on the program’s ability to meet CCDF requirements because their financial viability is intrinsically linked to their total subsidy funding. When determining if payment rates are adequate to meet CCDF requirements, the Lead Agency is increasing base rates to the 60th percentile of the current MRS, a level that meets or exceeds the base level quality for many rates. This determination was supported by evaluating the cost of the base level of quality in a total cost study in comparison to the proposed rates. The Lead Agency must focus on how these rates will impact the providers who participate to a higher degree of scale. Careful analysis shows that providers who care for many children with subsidy, across a variety of ages, will see increased total payments compared to historical rates, and for most, total payments will exceed their total cost of care for those children. Also, history and experience demonstrate that payment rates have not compromised CCDF requirements in the past, and thus higher payment rates relative to the past, as proposed, would not logically change this precedent. 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? The Lead Agency used the cost of care at the base level of quality to inform rate setting. Doing so provided valuable perspective for interpreting the impact of rates. The lead agency compared the current market-based rates at the 60th percentile to the cost of quality in the state's QRIS, which is a 1-star provider. The Lead Agency is setting rates at the 60th percentile of each market rate zone and a QRIS rating is required by all child care subsidy providers and therefore the base level of quality is a 1-star provider. The Lead Agency has two primary types of care in the child care subsidy program and those are full-day care and before and after school care. For full time care, there are twenty-four rates, and each rate has been set at the 60th percentile. For five of the twenty-four rates, the rate amount is greater than the estimated cost. An additional five rates are at least 90 percent of cost. While six additional rates are least 80% of cost. Establishing rates at the 60th percentile means that the Lead Agency has made a great deal of progress towards meet the cost of care. The Lead Agency intends to continue to regularly collect data regarding the cost of care in order to educate and engage with providers and stakeholders on the value that understanding the cost of care. The Lead Agency believes that understanding the cost of care and working to invest, when possible, to align subsidy rates more closely with the cost of care will help strengthen and stabilize child care by providers by ensuring that rates adequate enough to support provider cost. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? When setting base rates, the Lead Agency considered only the base level of quality but not high quality since the Office of Child Care makes compliance determinations only at the lowest rate available. High quality, which makes up most subsidy providers, was considered when determining add-on payments for Quality Rated 2- and 3-star programs. 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