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). 1/6/2025 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)? N/A 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) 512.40 Per Week 21.00 512.40 87.76 475.00 498.00 512.40 0.00 Per Week 0.00 Family Child Care for Infants (6 months) 250.00 Per Week 11.00 250.00 75.78 225.00 235.00 250.00 0.00 Per Week 0.00 Center Care for Toddlers (18 months) 462.00 Per Week 23.00 462.00 84.59 424.00 447.00 462.00 0.00 Per Week 0.00 Family Child Care for Toddlers (18 months) 250.00 Per Week 8.00 250.00 81.60 213.00 225.00 250.00 0.00 Per Week 0.00 Center Care for Preschool ers (4 years) 398.40 Per Week 21.00 398.40 82.43 372.00 390.00 398.40 0.00 Per Week 0.00 Family Child Care for Preschool ers (4 years) 230.00 Per Week 9.00 230.00 76.37 200.00 210.00 230.00 0.00 Per Week 0.00 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) 375.00 Per Week 22.00 375.00 77.89 355.00 372.00 375.00 0.00 Per Week 0.00 Family Child Care for School- Age (6 years) 205.00 Per Week 8.00 205.00 75.06 180.00 195.00 205.00 0.00 Per Week 0.00 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) 274.00 Per Week 6.00 274.00 75.53 255.00 260.00 274.00 0.00 Per Week 0.00 Family Child Care for Infants (6 months) 205.00 Per Week 13.00 205.00 75.20 190.00 200.00 205.00 0.00 Per Week 0.00 Center Care for Toddlers (18 months) 364.00 Per Week 6.00 364.00 77.42 318.00 324.00 364.00 0.00 Per Week 0.00 Family Child Care for Toddlers (18 months) 170.00 Per Week 8.00 170.00 77.93 150.00 155.00 170.00 0.00 Per Week 0.00 Center Care for Preschool ers (4 years) 240.00 Per Week 7.00 240.00 75.45 220.00 225.00 240.00 0.00 Per Week 0.00 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? Family Child Care for Preschool ers (4 years) 140.00 Per Week 34.00 140.00 75.17 130.00 135.00 140.00 0.00 Per Week 0.00 Center Care for School- Age (6 years) 200.00 Per Week 3.00 200.00 69.09 182.00 199.00 200.00 0.00 Per Week 0.00 Family Child Care for School- Age (6 years) 205.00 Per Week 11.00 205.00 75.06 180.00 195.00 205.00 0.00 Per Week 0.00 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? [ ] 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. [ ] Differential rate for non-traditional hours. Describe: ii. [x] Differential rate for children with special needs, as defined by the Lead Agency. Describe: Special Needs Rates are established on an as-needed basis for individual children, separately from the standard hour base rates. Special Needs Rates are approved by the department and are based on the child's needs, the provider's description of services and the provider's related costs. A rating scale is used to determine the maximum Special Needs Rate that may be paid, based on one of three levels of need in relationship to the standard county maximum rate for that provider type and age of the child. Level one is 1.75 times the standard county maximum rate. Level two is 2.5 times the standard county maximum rate. Level three is 3.0 times the standard county maximum rate. In addition, CCAP policies allows counties to establish higher at- risk rates to certain providers caring for children defined as special needs due to inclusion in at-risk populations. Counties identify the special needs rates that are paid in their biennial Child Care Fund Plan. 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: There is an accreditation and credential differential for a family child care provider or child care center which allows the provider to be paid a 15 percent differential above the standard hour maximum rate, up to the actual provider charge, if the provider or center holds a current early childhood development credential or is accredited. Highly-rated providers participating in Minnesota's QRIS, Parent Aware, are paid a 20 percent differential above the maximum rate, up to the actual provider charge. Providers with a Three-Star Parent Aware Rating can be paid a 15 percent differential. Those with a Four-Star Rating can be paid a 20 percent differential. Payments are made at the weekly rate for some children attending high quality child care. High-quality is defined as those providers that qualify for tiered reimbursement. Providers may be paid the maximum weekly rate, not to exceed the provider's charge, when a child is age birth to five years old, but not yet in kindergarten, and when the applicant's authorized hours are 30 or more. vi. [ ] Other differential rates or tiered rates. For example, differential rates for geographic area or for type of provider. Describe: 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: A child care provider cannot charge families receiving child care assistance more than their private, full-paying client rate. A child care provider may offer a discount to a family. Common discounts include pre-pay discounts, multiple child discounts or employee discounts. If a family using child care assistance meets the discount criteria, the provider can choose whether to apply the discount to the amount the family owes the provider. Providers can choose whether to apply discounts to the amount they bill the Child Care Assistance Program. [ ] 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? Results of the Minnesota Provider Business Update, which includes the market rate survey, are used to inform the Legislature’s rate setting process. The 2023 Legislature passed changes to statute resulting in an increase to maximum rates increasing to the 75th percentile of the 2024 market rate survey effective January 6, 2025. The data collected in the survey were assessed according to Minnesota’s methodology and the 75th percentiles for Centers and Licensed Family Child Care were determined. The 75th percentiles were determined for hourly, daily and weekly units for each age group. About 85 percent of maximum rates increased tied to that change in state law. Minnesota assesses the gap between payment rates and the cost of care. This information is used to monitor the size of the gap. In Minnesota, the Legislature sets the maximum rate percentiles used to determine the maximum payment rates. The gap information is used to support legislative proposals (to the Minnesota Legislature) to increase CCAP payment rates. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? The rates are set based on the 75th percentile of the most recent market rate survey, meeting the federal benchmark for rates that are adequate for ensuring equal access and meeting health, safety, quality and staffing requirements under CCDF. The department uses the price data gathered in each market rate survey to measure one type of access of the current maximum rates, the percent of provider prices that are fully covered by the applicable current maximum rate. The percent of provider prices fully covered is calculated by dividing the number of prices that are at or below the applicable standard maximum rate by the total number of all provider prices reported. The percent of prices fully covered is generated on a statewide, regional and county basis, separately for family child care and centers. At the 75th percentile, 84 percent of center rates statewide are fully covered by standard CCAP reimbursement rates; 79 percent of family child care prices are fully covered. 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? Minnesota assesses the gap between payment rates and the cost of care. The Minnesota Legislature sets the maximum rate percentiles used to determine the maximum payment rates. The gap information is used to support legislative proposals (to the Minnesota Legislature) to increase CCAP payment rates. The department uses cost to support legislative proposals for rate increases. The department has not targeted rate increases where larger gaps exist but is currently exploring how rates may be set using cost instead of (or in conjunction with) price; the Lead Agency will provide a report to Minnesota legislature outlining these options by January 30, 2025. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? Minnesota’s Cost Modeling Report informed the Lead Agency on the cost of providing care at each Parent Aware (QRIS) rating level and shows that while health and safety standards do not have a significant cost implication for providers, increases in staffing costs for high-quality providers can be a significant cost driver. High quality providers holding certain accreditations, credentials or a Three- or Four-Star rating from Parent Aware are eligible for 15 percent and 20 percent differential reimbursement rates, respectively. The differential payments do not fully cover the cost of high-quality care, but are intended to assist providers in reaching and maintaining quality standards. The percent of 2024 provider prices eligible for the 15 percent quality differential and fully covered by that differential, on a statewide basis, are 90 percent for licensed family child care and 98 percent for licensed child care centers. The percent of 2024 provider prices eligible for the 20 percent quality differential and fully covered by that differential, on a statewide basis, are 86 percent for licensed family child care and 96 percent for licensed child care centers. The 15 percent and 20 percent quality differentials allow more of a provider's price to be fully covered by the quality differential maximums, increasing access to this portion of the provider market. The quality differential payment rates allow high quality child care programs to cover more of the cost to provide high quality care. High-quality providers are participating in the State's subsidy system and families are able to access high-quality care. In Federal Fiscal Year 2024, 2,299 programs had high-quality ratings, including 543 child care centers and 461 family child care homes. In November 2024, 69 percent of children ages 0 to 5 served in the subsidy program were cared for by providers meeting high quality standards through Parent Aware, accreditation or holding certain educational credentials (this option is for licensed family child care only. 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. The department assesses the difference between maximum rates and child care prices as reported in the most recent survey that are higher than the applicable maximum rates. The higher prices are about two percent higher than the maximum. Method of determining uncovered amounts for price comparison: All prices reported on the 2024 market rate survey that were at or below the January 6, 2025, Child Care Assistance Program maximum rates were excluded from the analysis. The difference between all remaining reported child care prices and the applicable maximum rates were calculated and aggregated statewide.