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). 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)? Monthly rates were divided by 4.3 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) 326.74 Per Week 2.50 326.74 35.00 353.72 362.80 393.95 Family Child Care for Infants (6 months) 198.14 Per Week 1.90 198.14 20.00 231.86 251.86 251.86 Center Care for Toddlers (18 months) 326.74 Per Week 14.00 326.74 35.00 353.72 362.79 393.95 Family Child Care for Toddlers (18 months) 217.91 Per Week 27.00 217.91 20.00 259.53 266.98 282.09 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 Preschool ers (4 years) 296.74 Per Week 9.20 296.74 40.00 309.30 327.44 351.62 Family Child Care for Preschool ers (4 years) 215.81 Per Week 23.00 215.81 45.00 224.18 251.86 251.86 Center Care for School- Age (6 years) 190.70 Per Week 9.60 190.70 50.00 191.39 209.30 240.93 Family Child Care for School- Age (6 years) 184.88 Per Week 24.70 184.88 30.00 201.63 207.67 282.09 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) 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 Toddlers (18 months) Center Care for Preschool ers (4 years) 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? [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: Rates for certified developmental day centers are established by a cost study rather than through the market rate survey. The cost study establishes a net cost determined after the program documents available revenues such as Medicaid, Early Intervention Funds ,NC DPI payments or other. This net cost is used as the subsidy payment rate for children with special needs and typically developing children. When a child identified as having a special need is served in an inclusive child care setting (non-CDDC settings) and the provider incurs additional costs for the care of the child, a supplemental payment above the provider's approved rate may be requested and paid by the LPA. Funding for supplemental payments for these children should initially come from the special needs set-aside. Additionally, County market rates for centers and family child care home providers increase as the star level increases (1-5) and this is based on the MRS. The MRS determines county market rates for each star level and age group. [ ] 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: Rates for certified developmental day centers are established by a cost study rather than through the market rate survey. The cost study establishes a net cost determined after the program documents available revenues such as Medicaid, Early Intervention Funds, NC DPI payments or other. This net cost is used as the subsidy payment rate for children with special needs and typically developing children. When a child identified as having a special need is served in an inclusive child care setting (non-CDDC) and the provider incurs additional costs for the care of the child, a supplemental payment above the provider's approved rate may be requested and paid by the LPA. Funding for supplemental payments for these children should initially come from the special needs set-aside. 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: County market rates for centers and family child care home providers increase as the star level increases (1-5) and this is based on the MRS. The MRS determines county market rates for each star level and age group. 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? [ ] 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? Data gathered about providers cost was gathered and used to set market rates. Market rates are established using the 75th percentile by child, which means that if surveys find that there were 100 children whose parents paid for child care in a certain county, the market rate would use the 75th percentile rate, counting from lowest to highest paid for an individual child in that county. Market rates are set using the 75th percentile so that eligible children can have access to a majority of child care options. Further adjustments to the 75th percentile were made in order to ensure ascending market rates for higher star ratings. If there are not at least fifty children in an age category/type of facility/rated license-level combination for a county, an imputed rate is used in the development of the market rates for that county. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? The Lead Agency modeled rates for centers with a three-star, four-star, and five-star rated license in rural, suburban, and urban areas. The modeled rate for each category was then compared to the average subsidy rate in the same category and the results for each are described below. The average three-star rural center had monthly cost per child (CPC) amounts up to $223 not covered by current subsidies. All ages at these centers had negative gaps between the cost of care and the current subsidy. The modeled costs for child care at the average suburban three-star center range from $632-$919 monthly. The current subsidy ranges from $718￿$785 monthly resulting in a positive gap for those two years and older. For two- and three-year-olds, the current monthly subsidy is $38 more than the cost per child and for four-year-olds the current monthly subsidy is $86 more than the cost per child. Alternatively, for one-year-olds and infants, the cost per child is $54￿$134 more than the current monthly subsidy. The calculated monthly cost for infants was just above $1,000 while the corresponding subsidy was $981 for three-star centers in urban counties. As the current monthly subsidy ranges from $686 to $981, all ages older than infants had a positive gap between the current subsidy and the cost. This monthly gap ranges from $63 for one-year-olds to $201 for four-year-olds. For rural four-star centers, the calculated monthly costs per child ranged from $674￿$993 and the current monthly subsidy ranged from $679￿$750. These amounts resulted in negative gaps for all ages younger than four-year-olds. The largest monthly gap was $242 for infants followed by a gap of $154 for one-year-olds, $57 for two-year-olds, and $48 for three-year-olds. For the average suburban four-star center, monthly costs per child ranged from $669 for four-year olds to $974 for infants. The corresponding current monthly subsidies ranged from $762 to $873. The resulting negative gap was largest for infants at $101 monthly followed by a $16 monthly gap for one-year-olds. For the remaining ages, the calculated cost and current subsidies resulted in positive monthly gaps ranging from $42￿$93 for those aged two to four years old. The modeled amounts for urban four-star centers resulted in positive gaps for all ages. The monthly cost per child ranged from $705 for four-year-olds to $1,031 for infants. Current monthly subsidies ranged from $930 to $1,043. The gap between CPC and current subsidy was largest for four-year-olds and smallest for infants at $12 monthly. The calculated monthly cost for infants at a five-star rural center is $1,032, and the calculated monthly cost for four-year-olds is $699. As with previous models, these monthly costs decrease for each age from infants to four-year-olds. Corresponding current monthly subsidies ranged from $780 to $882. Infants and one-year-olds both had costs greater than the current subsidy, but two- to four-year-olds had subsidies $25￿$81 more than their respective costs. For five-star centers in suburban counties, the monthly cost per child ranges from $718 for fouryear-olds to $1,068 for infants. The current monthly subsidy for infants and one-yearolds in these centers is $1,010 resulting in a negative gap of $58 for infants and a positive gap of $40 for one-year-olds. The gap between current subsidy and cost increased for each age older than one-year-olds, with four-year-olds receiving $117 more than the monthly cost. For five-star centers in urban counties, the current subsidies were greater than the cost for each age. The monthly cost per child ranged from $737￿$1,093 and current subsidies ranged from $997￿ $1,144. Based on these amounts, the gap between CPC and current subsidy ranged from $40 for infants to $252 for four-year-olds. The average current subsidy for homes with a three-star rating or higher for all counties is $617 monthly based on current subsidized child care market rates. This average current subsidy is lower than all modeled CPC values. Homes providing the baseline of care have a modeled CPC $666 more than the average monthly current subsidy. This gap between CPC and current subsidy increases as the quality-of-care increases. 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 higher cost of higher- quality care is acknowledged in the fact that payment rates are tiered based upon the five-star QRIS quality scale and programs with higher star ratings receive a higher reimbursement rate than programs with lower star ratings. The narrow cost analysis indicates that there are negative gaps in many rate categories between the cost of care and the current subsidy rates. Subsidy rates are set by the NC General Assembly and the Lead Agency is seeking approval and funding to implement higher subsidy rates in order to better promote the stabilization of child care providers. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? The higher cost of higher-quality care is acknowledged in the fact that payment rates are tiered based upon the five star QRIS quality scale and programs with higher star ratings receive a higher reimbursement rate than programs with lower star ratings. All child care providers are included in a regular survey of rates and those are appropriate to the age groups served, geographic location, and number of hours the child is in care. Greater than75% of child care programs voluntarily participate in the subsidized child care program. This participation rate is strong indication that the tiered rates cover the cost of quality and give families a wide variety of options of care. In addition to the standard fee based market rate survey in 2021, NC DCDEE also surveyed providers on their cost to provide high quality care and compared the costs to the fees charged by providers. Incorporation of both data sets in the payment rates is an ongoing process for North Carolina. 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. NA