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). 10/1/2024 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)? 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) 235.00 Per Week 43.00 235.00 345.00 Per Week 68.00 Family Child Care for Infants (6 months) 215.00 Per Week 12.00 215.00 308.00 Per Week 70.00 Center Care for Toddlers (18 months) 205.00 Per Week 43.00 205.00 263.00 Per Week 78.00 Family Child Care for Toddlers (18 months) 215.00 Per Week 12.00 215.00 308.00 Per Week 70.00 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 Preschool ers (4 years) 191.00 Per Week 43.00 191.00 193.00 Per Week 99.00 Family Child Care for Preschool ers (4 years) 169.00 Per Month 12.00 169.00 308.00 Per Week 55.00 Center Care for School- Age (6 years) 89.00 Per Week 43.00 89.00 89.00 Per Week 100.00 Family Child Care for School- Age (6 years) 108.00 Per Week 12.00 108.00 154.00 Per Week 70.00 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) 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: The Lead Agency provides a higher reimbursement rate of $20 per week for children determined eligible for a special needs child care scholarship. Additionally, children in foster care may receive an add on of $30 per week for children who qualify for a foster care child care scholarship. The add-ons are in addition to the established based rates determined by the Lead Agency rate setting practices (MRS, alternative methodology, etc.). [ ] 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 uses a payment rate add-on that is $20 more per week than rates for other children in a specific type of care when requested by providers to support their efforts to accommodate and care for children with special needs. The base rates have been determined by the Lead Agency rate setting practices (MRS, alternative methodology, etc.). 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: The Lead Agency differentiates payment rates based on the quality level the provider has achieved in ABC Quality. South Carolina's payment rates are established to progressively compensate providers based on their performance in meeting increasing quality criteria that exceed regulatory requirements. A tiered reimbursement payment system was implemented decades ago to incentivize the opportunity for more children with child care scholarships to have access to higher quality care. Since 1992, the Lead Agency has used voluntary standards higher than state regulatory requirements in conjunction with financial incentives to recognize and promote quality, ranging from Level C (foundational level meeting basic health and safety regulations) to A+ (the highest level of quality criteria). These rates are determined based on the Lead Agency’s rate setting practices using an alternative methodology based on cost of care. Payment rates for base Level C are set at a percentage of the estimated cost of care (rate modifiers that are based on prioritizations for rate increases) at Level C by type of care, age of child, and by urban or rural setting. The higher quality levels above base Level C (ranging from Level B to the highest Level A+) have higher costs associated with the additional quality components. For Level B, rate modifiers for the higher costs of care including quality components are applied to 95% of the quality care costs to determine the Level B payment rate. 5% is added to the Level B rate to determine the Level B+ rate. 5% percent is added to the Level B+ rate to determine the Level A rate. 5% is added to the Level A rate to determine the Level A+ rate. This approach incrementally increases the payment rates by quality level. vi. [x] Other differential rates or tiered rates. For example, differential rates for geographic area or for type of provider. Describe: Other differential payments: add on for children in foster care that is $30 more per week than child care scholarship payments for other children in a specific type of care will be added to new subsidy payments that are based on the Lead Agency rate setting practices (MRS, alternative methodology, etc.). 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? The Lead Agency used a rate setting model and a cost estimation model which were developed by its contractor, Prenatal to Five Fiscal Strategies (P5FS) to inform the Lead Agency’s alternative methodology rate setting process. Results from the cost estimation model were compared to current Child Care Scholarship rates and gaps were identified between costs of care and current payment rates. Based on this analysis, prioritization was given to raising payment rates where gaps were largest: for family child care, programs in rural areas, and infants. The Lead Agency used the rate setting model developed by P5FS to set payment rates at a percentage of the cost of care that reflects available resources under CCDF and the priority areas identified based on the gap analysis. o Payment rates o incrementally increase from base Level C meeting licensing requirements, through the quality levels, from Level B tot Level A+. The payment rates are set at a percentage of the estimated cost of care with variations by type of care, age of child, and by geographic area (urban and rural). Based on the prioritizations for rate increases, rate modifiers average 70% of the cost of care across all ages, settings, and regions ranging from 54% to 100% of the costs of care in urban and rural settings by type of care, age of child and quality level. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? The cost estimation model incorporates factors from state licensing regulations that address health and safety requirements to determine the costs of care at the base level of quality (Level C), as well as SC’s quality measures established for its ABC Quality Program (SC’s quality rating and improvement system) to determine the higher costs of care at higher levels of quality. In this way, the cost estimation model provides the Lead Agency with an accurate understanding of the true costs of meeting health, safety, quality, and staffing requirements under CCDF. Using the cost estimation model and accompanying rate setting model described in 4.3.4.a above, the Lead Agency is proposing higher payment rates to cover these costs, averaging 70% of the cost of care across all ages, settings, and regions, with ranges from 54% to 100% of the cost of care. The rate for 3- and 4-year-olds and school age children in child care centers in the urban region, which includes 84% of the total scholarship population with 25% being children age 3,4, and school age, are set at an average of 96% of the cost of care. 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 a cost of care model developed through it’s alternative methodology to inform rate setting using a related rate setting model, as described in 4.3.4.a above. The cost estimation model provides the Lead Agency with key data to inform rate setting. The Lead Agency used this data and resulting data on the gaps between current rates and the cost of care with the variations in these gaps by age, program type, and geography, to inform decisions about rate setting priorities. By increasing payment rates that significantly narrow the gap between current payment rates and the actual cost of care, the Lead Agency is promoting the stabilization of child care providers especially those in rural areas, serving infants, and family child care providers by addressing their actual costs which increases their ability to stay in business. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? The Lead Agency used a rate setting model that incorporates a rate modifier to incrementally increase proposed rates based on percentages of costs at each higher level of quality ranging from base Level C to the highest Level A+ by type of care and age of child. The estimated cost of meeting ABC Quality standards in the cost estimation model was used as the baseline for setting differentiated payment rates based on quality, with rates at Level B set at 95% of the estimated cost of quality care under ABC Quality. Rates at Levels B, B+, A and A+ were increased by a 5% step at each level to incentivize providers to meet higher quality standards. 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