States’ Payment Rates Under the Child Care & Development Fund Program Could Limit Access to Child Care Providers

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Author(s): U.S. Dept. of Health and Human ServicesOffice of Inspector General

  • Suzanne Murrin – Deputy Inspector General for Evaluation and Inspections

Published: August 2019

Report Intro/Brief:
“The Child Care and Development Fund (CCDF) program, for which fiscal year (FY) 2018 Federal funding totaled $8.2 billion, provides child care subsidies for 1.4 million eligible children. CCDF program payments, which are administered by States, allow eligible low-income parents to work or pursue training or education while their children attend child care. If States set CCDF payment rates too low, families may not have access to child care providers. The Administration for Children and Families (ACF) is responsible for overseeing States’ CCDF payment rates and ensuring that eligible families have equal access to child care services. The only proxy for ensuring equal access that ACF has recommended to States is setting CCDF payment rates at a level that covers 75 percent of child care provider prices—referred to as the 75th percentile.

We surveyed a nationwide sample of licensed child care providers, including centers and family child care homes, to obtain child care pricing for an infant with no special needs. We compared providers’ prices to States’ CCDF payment rates and estimated the difference between these amounts. We surveyed States to examine how they determine that their CCDF payment rates are sufficient to ensure equal access to child care services for eligible families. Lastly, we interviewed ACF staff responsible for CCDF plan oversight to review how ACF ensures that States’ CCDF provider payment rates are sufficient to ensure equal access for eligible families.

The majority of child care providers charge more for full-time infant care than States’ CCDF payment rates. As a result, CCDF families’ access to care may be limited unless they can pay the difference between provider prices and State payment rates. Operating with finite resources, States must balance competing priorities and perform tradeoffs between raising payment rates, serving eligible families, and ensuring compliance with program requirements. ACF does not evaluate States’ CCDF payment rates, nor does it determine whether States have ensured equal access to child care services for eligible families. We found that only seven States have set their CCDF payment rates at the level that ACF recommends for ensuring equal access. The majority of States have implemented provider-friendly payment practices, such as paying providers timely, to incentivize providers to participate in the CCDF program and ensure access for eligible families. However, some providers still report concerns about payment amounts, payment frequencies, and other administrative burdens associated with CCDF program participation.

As only seven States set payment rates at the level ACF recommends, ACF should evaluate whether States are ensuring equal access for CCDF families, as required. ACF should consider developing additional proxies for equal access—apart from setting rates at the 75th percentile of provider prices—that would allow it to evaluate States’ progress toward meeting the requirement. Additionally, ACF should ensure that States comply with the new requirement to use the results of the most recent market-rate survey, or alternative methodology, to set CCDF payment rates. To encourage States to learn about and potentially adopt successful practices, ACF should establish a forum for States where, at regular intervals, they can share strategies regarding how they set payment rates to ensure equal access for eligible families while balancing competing program priorities. Lastly, ACF should encourage States to minimize administrative burdens for CCDF providers, with a goal of encouraging provider participation and expanding access for eligible families. ACF concurred with all of our recommendations.”

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