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: [x] Sets the same payment rates for the entire State or Territory. [ ] 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). 8/1/2024 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)? 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) 1572.0 0 Per Month 100.00 363.00 50.00 1549.0 0 1625.0 0 1750.0 0 Family Child Care for Infants (6 months) 1206.0 0 Per Month 100.00 278.00 55.00 1120.0 0 1200.0 0 1250.0 0 Center Care for Toddlers (18 months) 1400.0 0 Per Month 100.00 323.00 50.00 1400.0 0 1500.0 0 1625.0 0 Family Child Care for Toddlers (18 months) 1206.0 0 Per Month 100.00 278.00 65.00 1080.0 0 1100.0 0 1200.0 0 Center Care for Preschool ers (4 years) 1250.0 0 Per Month 100.00 289.00 50.00 1250.0 0 1325.0 0 1462.0 0 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) 1057.0 0 Per Month 100.00 244.00 65.00 1000.0 0 1000.0 0 1140.0 0 Center Care for School- Age (6 years) 1185.0 0 Per Month 100.00 274.00 68.00 900.00 1000.0 0 1213.0 0 Family Child Care for School- Age (6 years) 1056.0 0 Per Month 100.00 244.00 70.00 900.00 1000.0 0 1080.0 0 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) Family Child 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? 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? [ ] 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. [ ] Differential rate for children with special needs, as defined by the Lead Agency. Describe: 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: Providers (licensed centers and FCC) that have achieved a rating in New Jersey’s Quality Improvement System, Grow NJ Kids (GNJK), are paid higher rates than providers that do not participate in GNJK. GNJK payment rates are tiered based on the provider’s star rating (3, 4 or 5-stars) with 5-star rated providers receiving the highest payment rate. GNJK serves infant, toddler, and preschool programs. These rates were based on the MRS. 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? DHS/DFD sets payment rates in accordance with the results of the most recent market rate survey, which is the methodology DHS/DFD used to capture and analyze provider rates. Along with the MRS, the narrow cost analysis (NCA) and additional provider rate data are taken into consideration when developing and setting payment rates. The MRS provides a percentile placement table to display rates from 50th to 95th percentile to help DHS/DFD measure our progress in moving rates towards the 75th percentile benchmark. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? A key objective of the MRS and NCA studies is to assess the adequacy of DHS/DFD rates for providers to meet health, safety, quality, and staffing requirements under CCDF. Specifically, the estimated narrow cost analysis examined how much it costs for child care providers to offer services to families. It is important to acknowledge that the number of providers that responded to the NCA survey and provided information about major revenue items was too small to generate reliable statistics. The NCA suggests that licensed center providers’ revenue sources are mainly from tuition fees (40%), state assistance (37%), grants (18%), and other sources (5%) which are directed at covering operational expenses. Family child care providers’ revenue sources included tuition fees (44%), state assistance (37%), grants (8%) and other sources (11%). It was reported that more than 83% of the center providers who raised their tuition identified inflated supply costs as one of the reasons for the increase. It was reported that more than 83% of the center providers who raised their tuition identified inflated supply costs as one of the reasons for the increase. Additionally, in a 2022 analysis, center providers reported that enrollment size and staff size were major factors impacting their budgets. To help offset providers increased expenses, DHS/DFD raised rates annually, waived co-payments, offered hiring and retention grants, covered the cost of criminal background checks, and offered health and safety trainings at no cost to providers, to cover the expenses related to health, safety, quality and staffing requirements under CCDF. Additionally, in March 2024, rates were increased across the board and again in August 2024 only for toddlers and preschoolers in licensed center care to meet the 50th percentile required benchmark, based on most current MRS report, which indicated rates were below 50th percentile. 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? As part of the MRS study, a narrow cost analysis was conducted, which examined how much it costs for child care providers to offer services to families so that the cost-based estimates can be considered in setting state assistance rates. The NCA rates were also compared to the 75th percentile market rates as well as the state assistance rates. The narrow cost analysis findings yielded similar percentile ranking results as the market rate survey and state assistance rates falling below the 75th percentile benchmark. The NCA suggested center providers that served infants, had larger enrollment and were rated higher by GNJK incurred higher program and building costs, compared to their counterparts. From 2018-2024, DHS/DFD annually increased rates, resulting in a 94% to 117% rate increase across all age groups. Infant care received the largest percentage rate increase of 117%, followed by pre-school at 112%, school-age 104% and toddlers 94% over the past six years. Additionally, providers rated in Grow NJ Kids and special needs care rates also steadily increased. DHS/DFD plans to use this valuable information from the narrow cost analysis to help evaluate and structure base, and higher rates equitably, which promotes the stabilization of child care providers. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? DHS/DFD accounts for the cost of providing higher quality care by setting tiered payment rates for providers who participate in NJ’s quality improvement rating system, Grow NJ Kids (GNJK), and who have achieved a GNJK rating of 3, 4 or 5 stars. 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