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). 3/27/2024 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 rates are set based off the 80th percentile per the MRS that was available at the time. Plus, an additional $2/$1 per day based on full/part-time enrollment respectively. Rates reported were daily rates. Calculation: Daily rates multiplied by 5. Citation: https://www.chfs.ky.gov/agencies/dcbs/dcc/Documents/dcc300kymaxpaymentchart.pdf 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) 47.00 Per Day 50.00 235.00 78.00 37.00 40.00 47.00 Family Child Care for Infants (6 months) 36.00 Per Day 8.00 180.00 78.00 30.00 35.00 36.00 Center Care for Toddlers (18 months) 47.00 Per Day 51.00 235.00 81.00 36.00 40.00 45.00 Family Child Care for Toddlers (18 months) 36.00 Per Day 8.00 180.00 81.00 30.00 34.00 36.00 Center Care for Preschool ers (4 years) 41.00 Per Day 56.00 205.00 79.00 32.00 35.00 41.00 Family Child Care for Preschool ers (4 years) 34.00 Per Day 9.00 170.00 68.00 30.00 32.00 35.00 Center Care for School- Age (6 years) 37.00 Per Day 46.00 185.00 85.00 29.00 30.00 36.00 Family Child Care for School- Age (6 years) 28.00 Per Day 9.00 140.00 65.00 25.00 28.00 30.00 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) 27.00 Per Day 50.00 135.00 11.00 37.00 40.00 47.00 Family Child Care for Infants (6 months) 24.00 Per Day 8.00 120.00 17.00 30.00 35.00 36.00 Center Care for Toddlers (18 months) 27.00 Per Day 51.00 135.00 15.00 36.00 40.00 45.00 Family Child Care for Toddlers (18 months) 24.00 Per Day 8.00 120.00 20.00 30.00 34.00 36.00 Center Care for Preschool ers (4 years) 25.00 Per Day 56.00 125.00 18.00 32.00 35.00 41.00 Family Child Care for Preschool ers (4 years) 22.00 Per Day 9.00 110.00 18.00 30.00 32.00 35.00 Center Care for School- Age (6 years) 27.00 Per Day 46.00 135.00 45.00 29.00 30.00 36.00 Family Child Care for School- Age (6 years) 20.00 Per Day 9.00 100.00 15.00 25.00 28.00 30.00 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: $5/day Special Needs add-on rate for special needs child under 13 or child 13-19 with special needs, $5/day add-on rate for accredited programs, and $10/day add-on for Non-traditional hour care provided between the hours of 7pm and 5am on weekdays or from 7pm Friday through 5am Monday. Enrollments serving Special Needs children, Non-traditional hours for care, and centers with accreditation receive these add-on rates. The add-on rates are added to the daily CCAP reimbursement rate based on the age of the child, care level, and rates charged by the provider. [ ] 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: $10/day add-on for Non- traditional hour care provided between the hours of 7pm and 5am on weekdays or from 7pm Friday through 5am Monday. Citation: Section 10, 2 (b) MS 5040. ii. [x] Differential rate for children with special needs, as defined by the Lead Agency. Describe: $5/day Special Needs add-on rate for special needs child under 13 or child 13-19 with special needs. Citation: Section 10, 3 (a) (b) MS 5040. 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: $5/day add-on rate for accredited programs. Differential rates for Kentucky ALL STARS for the annual subsidy enrollment award are based on the center-type, achieved STARS level and the age of the child. Citation: Section 10, 2 (a) MS 5040. Citation: KY-ALL STARS Regulation: https://apps.legislature.ky.gov/law/kar/titles/922/002/270/ vi. [x] Other differential rates or tiered rates. For example, differential rates for geographic area or for type of provider. Describe: Set different reimbursement rates for different areas of the State, densely populated areas have a higher reimbursement rate. Citation: DCC 300: https://www.chfs.ky.gov/agencies/dcbs/dcc/Documents/dcc300kymaxpaymentch art.pdf 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 the provider’s commercial rates are less than the established State Max Rate, CCAP reimburses at the reported lower rate. [ ] 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? These market rates are provided from a Kentucky Child Care Market Rate Survey (MRS) to inform the Lead Agency as they look at setting subsidy rates. In addition, these rates can be utilized to inform business decisions of providers as they set their own rates based on the market in their area. The research team also uses this market rate information as a baseline to examine the providers’ costs of child care in part two of this project. After the MRS is concluded it is used by DCC and the Division of Administration and Financial Management (DAFM) along with the current budget and costs to update the DCC-300, Kentucky Child Care Maximum Payment Rate Chart of current daily payment rates. The Lead Agency considers provider fees based on results of Market Rate survey and take into consideration regional differences; type of care provided; and rates of programs that do and do not accept CCDF funding. There is a range of child care provider types supporting parental choice such as-Licensed Type I, Licensed Type II, Certified and Family Friend and Neighbor. There are various payment options such as on-line billing and paper billing. Providers can submit CCAP billing the first day of the month. 90 % of providers who submit payment through the online billing portal are issued payment within the 1st two weeks of the month. Payments are issued monthly and daily. Providers also have access to receive their CCDF payments via direct deposit, whereas payments are issued within the first 4 days of the month. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? This report details the data collection process and participation rates among all providers. In addition, geographic variations are detailed in full so that comparison of full-time and part-time rates can be made by geographic variation including region of the state, Child Care Aware (CCA) region, and urban/rural differences. These county divisions are detailed in Tables A-C. We also examine differences between providers who accept CCAP child care subsidies, and those who rely solely on private pay. Additionally, our study looks at differences based on quality level (High Quality vs. Regulatory Compliance). Considering that the recommendation is to pay at the 75th percentile and the Division of Child Care raised rates to 80th percentile based on the 2020 MRS and also added the additional $2/$1 across the board from state general funds, we feel it is sufficient for providers at this time. Based on the results of the 2024 Market Rate Survey, Kentucky is currently reimbursing providers at the 75th percentile. Citation: 2024 MRS: https://www.childcareawareky.org/research/ 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 methodological comparison of the actual cost of child care from the MRS and the cost of private child care across geographical regions is used to inform rate setting, retention and stabilization of child care providers. This creates a more equitable pay rate and baseline to inform DCC and early childhood stakeholders with accurate price data across the state. In the 2024 Kentucky Cost Model for Licensed Centers, the cost of care based on current Kentucky data is broken down by age of child in Tables 6 and 7 for small and large centers respectively. This information can be used by DCC to examine potential changes to rates. The differentials between market rate and cost, between CCAP and market rate, and between CCAP and cost indicate that overall centers are operating at a loss. Citation: https://www.childcareawareky.org/wp-content/uploads/2024/07/Cost-of-Care- in-Kentucky-Part-2-Cost-Model-2024.pdf d. How did the Lead Agency account for the cost of higher quality while setting payment rates? Cost comparisons are completed with the MRS to look at the differences of High Quality vs. Regulatory requirements in child care programs across all geographical regions of the state. Kentucky All STARS is a 5 Star Quality Program. Programs who score higher receive higher All STARS Incentives. These monetary payments incentivize programs to score higher for the extra funding at the higher levels. Citation: Please see All STARS Payment breakdown per level via the following link: https://www.chfs.ky.gov/agencies/dcbs/dcc/Documents/KYAllSTARSRegulatedIncentives. pdf 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. Setting additional payments for those serving populations with special needs, non- traditional hours, and accreditation (e.g. additional payment rate $5/ per day for accreditation; Non-traditional $10/day; Special Needs $5/day) are measures which help to ensure equal access across different geographical regions of the state.