U.S. Department of Health and Human Services Office of Inspector General States’ Payment Rates Under the Child Care and Development Fund Program Could Limit Access to Child Care Providers OEI-03-15-00170 Suzanne Murrin August 2019 Deputy Inspector General for Evaluation and Inspections oig.hhs.gov Report in Brief U.S. Department of Health and Human Services August 2019 OEI-03-15-00170 Office of Inspector General Why OIG Did This Review States’ Payment Rates Under the Child Care and The Child Care and Development Development Fund Program Could Limit Access Fund (CCDF) program, for which fiscal year (FY) 2018 Federal funding to Child Care Providers totaled $8.2 billion, provides child What OIG Found care subsidies for 1.4 million eligible The majority of child care providers charge more for full-time infant care than States’ children. CCDF program payments, CCDF payment rates. As a result, CCDF families’ access to care may be limited unless which are administered by States, they can pay the difference between provider prices and State payment rates . allow eligible low-income parents to work or pursue training or education Operating with finite resources, States while their children attend child care. must balance competing priorities and Key Takeaways If States set CCDF payment rates too perform tradeoffs between raising  The majority of child care providers low, families may not have access to payment rates, serving eligible families, charge more for infant care than child care providers. The and ensuring compliance with program States’ payment rates, which could Administration for Children and requirements. ACF does not evaluate limit access to care for CCDF Families (ACF) is responsible for States’ CCDF payment rates, nor does it families overseeing States’ CCDF payment determine whether States have ensured  Operating with finite resources, rates and ensuring that eligible equal access to child care services for States must balance competing families have equal access to child eligible families. We found that only priorities when setting payment care services. The only proxy for seven States have set their CCDF rates ensuring equal access that ACF has payment rates at the level that ACF recommends for ensuring equal access.  ACF does not evaluate States’ recommended to States is setting compliance with the Federal CCDF payment rates at a level that The majority of States have implemented equal-access provision covers 75 percent of child care provider-friendly payment practices,  Only seven States set payment rates provider prices—referred to as the such as paying providers timely, to at the level that ACF recommends 75th percentile. incentivize providers to participate in the for ensuring equal access CCDF program and ensure access for How OIG Did This Review eligible families. However, some We surveyed a nationwide sample of providers still report concerns about payment amounts, payment frequencies, and licensed child care providers, other administrative burdens associated with CCDF program participation. including centers and family child What OIG Recommends care homes, to obtain child care As only seven States set payment rates at the level ACF recommends, ACF should pricing for an infant with no special evaluate whether States are ensuring equal access for CCDF families, as required. needs. We compared providers’ ACF should consider developing additional proxies for equal access—apart from prices to States’ CCDF payment rates setting rates at the 75th percentile of provider prices—that would allow it to evaluate and estimated the difference States’ progress toward meeting the requirement. Additionally, ACF should ensure between these amounts. We that States comply with the new requirement to use the results of the most recent surveyed States to examine how market-rate survey, or alternative methodology, to set CCDF payment rates. they determine that their CCDF To encourage States to learn about and potentially adopt successful practices, ACF payment rates are sufficient to should establish a forum for States where, at regular intervals, they can share ensure equal access to child care strategies regarding how they set payment rates to ensure equal access for eligible services for eligible families. Lastly, families while balancing competing program priorities. Lastly, ACF should encourage we interviewed ACF staff responsible States to minimize administrative burdens for CCDF providers, with a goal of for CCDF plan oversight to review encouraging provider participation and expanding access for eligible families. ACF how ACF ensures that States’ CCDF concurred with all of our recommendations. provider payment rates are sufficient to ensure equal access for eligible Full report can be found at http://oig.hhs.gov/oei/reports/oei-03-15-00170.asp families. TABLE OF CONTENTS BACKGROUND 1 Methodology 6 FINDINGS The majority of child care providers charge more for infant care than States’ payment rates, 9 which could limit access to care for CCDF families When setting CCDF payment rates, States face budgetary constraints and competing priorities 10 ACF does not evaluate States’ payment rates to ensure compliance with the CCDF equal-access provision 12 Some providers report concerns about CCDF payment practices, despite States’ efforts to 14 incentivize providers to accept CCDF families CONCLUSION AND RECOMMENDATIONS Conclusion 17 ACF should evaluate whether States are ensuring equal access for CCDF families, as required 17 ACF should ensure that States comply with the new requirement to use the results of the most 17 recent market-rate survey, or alternative methodology, to set CCDF payment rates ACF should establish a forum for States to share strategies regarding how they set payment 18 rates to ensure equal access for eligible families while balancing competing program priorities ACF should encourage States to minimize administrative burdens for CCDF providers, with 18 a goal of expanding access for eligible families AGENCY COMMENTS AND OIG RESPONSE 19 APPENDICES A: Detailed Methodology 20 B: Child Care Provider Survey—Statistical Estimates and Confidence Intervals 24 C: CCDF Infant-Care Payment Rate Percentiles by State, Fiscal Years 2016-2018 27 D: Agency Comments 29 ACKNOWLEDGMENTS 32 BACKGROUND Objectives Objectives 1. To compare Child Care and Development Fund (CCDF) provider payment rates to the prices charged by child care centers and family child care homes. 2. To review efforts States determine that their CCDF provider examine how by States and the Administration for Children and Families to ensure equal access to child access to child care payment rates are sufficient to ensure equal care services for eligible for eligible families. servicesfamilies. 3. To review how the Administration forproviders & Families (ACF) identify challenges that child care Children face in ensures that States’ CCDF program. payment rates are sufficient to participating in the CCDF provider ensure equal access to child care services for eligible families. Child Care and Development Fund Program The CCDF program is a partnership between the Department of Health and Human Services’ (HHS) Administration for Children and Families (ACF) and CCDF Program Snapshot States to provide child care subsidies to eligible low-income families. It is the third-largest block grant program that the Federal government administers,  CCDF is the with fiscal year (FY) 2018 Federal funds totaling $8.2 billion.1 CCDF funding is third-largest Federal made up of Federal funds and State matching funds. The Child Care and block grant program. Development Block Grant Act of 2014 (the Act), signed into law on  CCDF funds help pay for November 19, 2014, reauthorized the CCDF program through FY 2020. 1.4 million children to Under the block grant, States have flexibility in the design and administration participate in child care of their CCDF programs and policies, which essentially leads to a different every month. program in each State. States establish their own payment rates for  305,524 child care providers that serve CCDF families, and these rates are highly variable both providers care for within and across States. If States set rates too low, they may be insufficient CCDF-eligible children. to ensure equal access to child care for low-income families.2  Nearly half of the families CCDF Eligibility receiving CCDF subsidies States’ CCDF programs serve low-income families. For purposes of CCDF, reported income below the the definition of “low income” is capped at 85 percent of State median Federal poverty level. income, adjusted for household size. However, States generally set the income-eligibility ceilings lower for their CCDF programs. Children under age 13 in low-income families qualify for the CCDF program if their parents are working or pursuing education or training.3 1ACF, Final FY 2018 CCDF Allocations (Including Redistributed Funds), December 2018. Accessed at https://www.acf.hhs.gov/occ/resource/final-fy-2018-ccdf-allocations-including- redistributed-funds on March 7, 2019. 2 81 Fed. Reg. 67438, 67561 (Sept. 30, 2016). 3 To qualify for the program, children also must be U.S. citizens or qualified aliens. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 1 OEI-03-15-00170 CCDF-eligible children are cared for in a variety of provider settings. Seventy-five percent of children are cared for in child care centers, 21 percent are cared for in family child care homes4, and 3 percent are cared for in their own home.5 State CCDF Plans Every 3 years, States are required to submit a comprehensive CCDF plan to ACF for review and approval. The plan serves as a State’s application for CCDF funds and an outline of how the program and funds will be administered. Each State must ensure that its CCDF program complies with its approved CCDF plan and all Federal requirements.6 In the section of the CCDF plan regarding States’ payments to child care providers, States must report provider payment rates and the percentage of providers that charge prices at or below the States’ payment rate.7 States report these percentiles for certain categories of child care in the geographic area of the State that serves the highest number of children.8 States provide information including increased payment rates for children with special needs and higher quality providers, and policies regarding additional fees that providers are permitted to charge to CCDF families. In addition, States are required to describe in their CCDF plans their policies to ensure the timeliness of payments to providers. As reported in their FY 2016–2018 CCDF plans, 42 States have implemented a CCDF payment rate add-on, also called a tiered rate, for child care providers that meet higher quality standards, as defined by the State.9 Equal Access to Child Care Services Federal statutes include an equal-access provision that requires States to 4 As defined in the CCDF regulations, a child care center is a provider licensed or otherwise authorized to provide child care services for fewer than 24 hours per day per child in a non-residential setting. A family child care provider is one or more individual(s) who provide child care services for fewer than 24 hours per day per child, in a private residence other than the child's residence. 45 CFR § 98.2. 5 ACF, FY 2017 Preliminary Data Table 3 - Average Monthly Percentages of Children Served by Types of Care, February 2019. Accessed at https://www.acf.hhs.gov/occ/resource/fy-2017- preliminary-data-table-3 on April 23, 2019. For the remaining 1 percent of children, information on the type of care was invalid or missing. 6 Section 658E of the Child Care and Development Block Grant Act of 2014; 45 CFR § 98.16. 7 45 CFR § 98.16(r). 8For example, Nevada establishes CCDF provider payment rates for each of four market areas across the State. However, in its CCDF plan for FYs 2016–2018, Nevada reported to ACF the payment rates and corresponding percentiles only for Clark County—the area serving the highest number of children. 9Tiered or differential provider payment rates could include higher payment rates for child care programs that (for example) meet certain quality standards, have nontraditional hours, and/or serve children with special needs. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 2 OEI-03-15-00170 certify to ACF in their CCDF plans that their CCDF provider payment rates are sufficient to ensure that eligible children have equal access to child care services that are comparable to services provided to children whose parents are not eligible to receive child care assistance.10 The Federal equal-access provision specifically refers to the role of States’ payment rates in ensuring equal access for CCDF-eligible families. States are required to describe in their CCDF plans how their provider payment rates are adequate to ensure equal access.11 In addition, Federal law establishes requirements regarding access to child care in States’ CCDF programs, including minimum 12-month eligibility periods,12 affordable family copayments,13 and timely payments to child care providers.14, 15 ACF’s Recommended Level of Payment To Ensure Equal Access. Historically, ACF has designated setting CCDF provider payment rates at the 75th percentile of the child care provider prices found in a State’s market-rate survey as a proxy for equal access.16 Setting payment rates at this level would mean that CCDF families may access three out of four child care providers without paying additional money out of pocket, apart from any family copayment. ACF has encouraged—but has not required—States to set their payment rates at this level. In the introduction to a regulation issued in 2016, ACF noted that CCDF payment rates below this recommended level are “of great concern to ACF both because inadequate rates may violate the statutory requirement for equal access and because CCDF is serving a large number of vulnerable children who would benefit from access to high-quality care and for whom payment rates even higher than the 75th percentile may be necessary to afford access to such care.”17 Setting CCDF Payment Rates States establish their own CCDF payment rates for child care services, and these rates are highly variable across, and sometimes within, States. Within a State, provider payment rates may vary based on geographical area; the type and quality of child care provider; and the age and needs of the child. 10 Section 658E(c)(4)(A) of the Child Care and Development Block Grant Act of 2014. 11 Section 658E(c)(4) of the Child Care and Development Block Grant Act of 2014. 12 Section 658E(c)(2)(N)(i)(I) of the Child Care and Development Block Grant Act of 2014. 13 45 CFR § 98.16(k). 14 Section 658E(c)(4)(B)(iv) of the Child Care and Development Block Grant Act of 2014. 15ACF has incorporated requirements related to affordable family copayments and timely payments to child care providers in the equal-access section of the CCDF regulations. 45 CFR §§ 98.45(k) and 98.45(l)(1). 1681 Fed. Reg. 67440, 67512 (Sept. 30, 2016); ACF, Program Instruction CCDF-ACF-PI-2018-01, February 2018. 17 81 Fed. Reg. 67512 (Sept. 30, 2016). States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 3 OEI-03-15-00170 CCDF payment rates include the family contribution toward the cost of child care. This family contribution is also referred to as a copayment. Each State determines its own formula for purposes of calculating the family copayment, and may choose to waive the copayment in special circumstances.18 In cases where States’ CCDF payment rates (including the family copayment) do not cover a provider’s price of child care, families may elect to pay this difference out of pocket if they wish to enroll with the provider. Effective October 1, 2018, States are required to set their CCDF provider payment rates in accordance with the results of their most recent child care market-rate survey or an alternative methodology.19, 20 Previously, States had to conduct a market-rate survey (or alternative methodology), but they were not required to base their payment rates on the most recent results. A child care market-rate survey is a study that collects and analyzes information on child care providers’ prices within the State, across geographic areas, different provider types, and for children of varying ages. An example of an alternative methodology for setting CCDF payment rates is a cost-estimation model that takes into account child care providers’ operating costs. States must conduct a market-rate survey, or an alternative methodology, every 3 years, but no earlier than 2 years before submitting a CCDF plan.21 ACF Oversight of States’ CCDF Plans Reviewing and approving States’ CCDF plans is the primary mechanism by which ACF works with States to ensure that CCDF program implementation meets Federal requirements.22 According to ACF, it uses States’ CCDF plans “to track and assess progress, determine [the] need for technical assistance and [CCDF] plan amendments, and ultimately determine compliance with specific requirements and deadlines.”23 In an April 2015 program instruction, ACF indicated that it will determine States’ compliance with requirements in 18States must establish a sliding fee scale—based on income and family size—to be used in determining the family copayment. ACF suggests that copayments that are no more than 7 percent of a family’s income would generally be considered affordable. 81 Fed. Reg. 67440 (Sept. 30, 2016). 81 Fed. Reg. 67438 (Sept. 30, 2016). Section 658E(c)(4)(B)(iii) of the Child Care and 19 Development Block Grant Act of 2014. The statute does not define “alternative methodology.” 20In States’ FY 2016–2018 CCDF plans, only the District of Columbia reported to ACF that it used an alternative methodology in lieu of a market-rate survey. 21 45 CFR § 98.45(c). 22ACF, CCDF Reauthorization Frequently Asked Questions, March 2015. Accessed at https://www.acf.hhs.gov/occ/resource/ccdf-reauthorization-faq-archived on May 29, 2018. 23ACF, Draft CCDF Preprint for Public Comment, CCDF Plan for FY 2016-2018. Accessed at https://www.acf.hhs.gov/sites/default/files/occ/final_fy2016_2018_ccdf_plan_preprint_for_public _comment_12_17_15.pdf on October 11, 2018. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 4 OEI-03-15-00170 the Act, in part, through submission and approval of States’ CCDF plans for FYs 2016–2018.24 States submit their CCDF plans electronically through the Form ACF-118 online submission portal. Electronic submission allows for review and approval of the plans, both by ACF regional offices and ACF central office staff.25 ACF’s 10 regional offices serve as liaisons between States’ CCDF programs and ACF’s central office, and the regional offices participate in reviewing and approving States’ CCDF plans and plan amendments. The regional offices also provide technical assistance to States and serve as points of contact for States’ requests for such assistance. Related OIG Work A July 2016 OIG report evaluated States’ CCDF program integrity efforts and their subsequent results.26 OIG found that States differed in the scope of their respective CCDF program integrity activities and varied substantially in the degree to which they conducted specific program integrity activities. Not all States performed important antifraud activities, and few States notified ACF and other States about suspected fraud. ACF concurred with all four of OIG’s recommendations and has implemented the recommendations for it to establish routine communication with States to share program integrity and fraud fighting best practices; determine the feasibility of requiring all States to report information about the results of their program integrity and fraud fighting activities; and request that States examine the effectiveness of their program integrity and fraud fighting activities. ACF concurred with—but has not yet implemented—OIG’s recommendation to examine with States the benefits of expanding program integrity and fraud-fighting activities. In a 2013 report, OIG found that all States complied with the Federal requirement to have health and safety requirements for licensed child care providers that receive CCDF payments.27 However, States’ monitoring requirements were not always in line with ACF’s recommendations for criminal background screenings. ACF has implemented all five of OIG’s recommendations regarding the development of health and safety standards and States’ compliance with health and safety requirements. OIG has also 24ACF also will use other appropriate means—including site visits to States—to determine compliance with CCDF requirements. ACF, CCDF Reauthorization Frequently Asked Questions, March 2015. Accessed at https://www.acf.hhs.gov/occ/resource/ccdf-reauthorization-faq- archived on May 29, 2018. Also see 45 CFR § 98.90 authorizing ACF to monitor States’ compliance with CCDF statute, regulations, and States’ plans. 25ACF, The Fundamentals of CCDF Administration Resource Guide, August 2018, pp. 93-95. Accessed at https://ccdf-fundamentals.icfcloud.com/fundamentals_tools on January 25, 2019. 26OIG, More Effort Is Needed To Protect the Integrity of the Child Care and Development Fund Block Grant Program, OEI-03-16-00150, July 2016. OIG, Child Care and Development Fund: Monitoring of Licensed Child Care Providers, 27 OEI-07-10-00230, November 2013. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 5 OEI-03-15-00170 conducted indepth audits of child care providers in 10 States, including center-based and family home providers, to determine their compliance with State licensing requirements related to the health and safety of children. OIG found that of the child care providers inspected in unannounced site visits, 96 percent had one or more instances of potentially hazardous conditions and noncompliance with State health and safety requirements, including requirements for criminal-records checks and for licensing. The reports contained a number of recommendations to States, including that States:  ensure through effective monitoring that providers comply with all health and safety requirements;28  ensure adequate oversight by reducing licensing inspectors' caseloads;29 and  develop a mandatory training program to improve provider compliance with health and safety regulations.30 Methodology There are many factors that may impact access to child care, but this report focuses on States’ payment rates because of the explicit link that the Federal equal-access provision makes between payment rates and equal access for CCDF-eligible families. Data Collection and Analysis States’ FY 2016–2018 CCDF Plans. We obtained all States’ provider payment rates from the information that each State provided for Section 4.3.1 of its FY 2016–2018 CCDF plan. If States had amended their FY 2016–2018 plans with updated provider payment rates, we used the latest rates in our comparison to surveyed providers’ prices. To examine how States have demonstrated to ACF that payment rates are sufficient to ensure equal access to child care services for eligible families, we reviewed information in Section 4.4.1 of States’ FY 2016–2018 CCDF plans. In this section, States are asked to select—from a list of options—the “data and facts” that they relied on to certify to ACF that their provider payment rates ensure equal access. ACF does not require States to submit any documentation with their plans to support their selected data and facts. Survey of Child Care Providers. To obtain information regarding child care providers’ prices, OIG surveyed a national, stratified random sample of 2,000 licensed child care centers and family child care homes by mail. In the 28Seven States have implemented this recommendation for centers, and six States have implemented this recommendation for family child care homes. 29Three States have implemented this recommendation for centers, and four States have implemented this recommendation for family child care homes. 30 Three States have implemented this recommendation for family child care homes. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 6 OEI-03-15-00170 1,257 survey responses, 81 providers reported that they were not currently providing child care, and we therefore did not include those 81 providers in our review. We received surveys from 1,176 respondents, achieving a weighted response rate of 61 percent.31 Because the price of child care may vary depending on the age of the child, we needed to create a specific child profile for the survey. We selected an infant, age 0 to 11 months, with no special needs. The survey included questions about the price charged for full-time infant care and the providers’ experiences, if any, participating in the CCDF program. We compared providers’ prices to States’ corresponding CCDF provider payment rates, as displayed in Exhibit 1. Appendix A contains a detailed description of our sampling methodology and analysis of child care prices. Appendix B contains statistical estimates and 95-percent confidence intervals for the child care provider survey. 31Our results pertaining to child care providers apply to the population represented by the survey respondents. The survey respondents included providers that served CCDF families and providers that did not. It is possible that the providers that did not respond to our survey have different payment rates and/or practices than the providers that did respond to our survey. We did not adjust our results on the basis of any inferences about the nonrespondents. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 7 OEI-03-15-00170 Survey of States’ CCDF Programs. To examine how States determine that their CCDF payment rates are sufficient to ensure equal access to child care services for eligible families, we sent an online survey to all 50 States and the District of Columbia (hereafter referred to as States). Forty-five of the 51 States (88 percent) responded to our survey.32 We reviewed and aggregated States’ responses to the survey questions. We did not receive completed surveys from Montana, New Mexico, Ohio, Oregon, Pennsylvania, or Rhode Island.33 ACF Office of Child Care. To review how ACF ensures that States’ CCDF provider payment rates are sufficient to ensure equal access to child care services for eligible families, we sent information requests to the Office of Child Care in ACF’s Central Office. We reviewed ACF’s responses to the information request, and we followed up with ACF staff by telephone to clarify their responses. Limitations We based our findings regarding child care providers and States on the information reported by child care providers and States. We did not independently verify these responses. In addition, we achieved an overall weighted response rate of 61 percent for the survey of child care providers. Our results pertaining to child care providers apply only to the population represented by these respondents—child care centers and family child care homes that responded to the survey—and cannot be generalized to all child care providers. Finally, we surveyed child care providers regarding the prices they charge for infant care; we did not request any information from providers regarding their operating costs. Standards We conducted this study in accordance with the Quality Standards for Inspection and Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 32Using a combination of email and telephone outreach, OIG made at least three followup attempts to obtain responses from States that did not complete the survey. 33 These six States served approximately 13 percent of CCDF children in 2016. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 8 OEI-03-15-00170 FINDINGS The majority of States’ CCDF payment rates are an important component of ensuring that low-income families may access child care. We found that States’ CCDF child care providers payment rates for infant care covered 41 percent of child care providers’ prices. charge more for Specifically, 36 percent of providers’ prices for full-time infant care were lower infant care than than States’ payment rates, and 5 percent of providers’ prices were equal to States’ payment States’ payment rates. In contrast, the remaining 59 percent of providers’ prices exceeded States’ payment rates. In these instances, the State payment rates, which could amount, including the family copayment, might not cover the cost of child limit access to care care, potentially limiting CCDF families’ access to these providers. for CCDF families Exhibit 2: States’ CCDF payment rates for infant care do not cover the prices charged by 59 percent of child care providers 5% Provider Price Higher than State Payment Rate 36% Provider Price Lower 59% than State Payment Rate Provider Price Equal to State Payment Rate Source: OIG comparison of surveyed providers’ prices to States’ CCDF payment rates in 2017. When providers’ prices exceeded States’ CCDF payment rates, nearly half did so by a substantial margin For 18 percent of providers whose prices exceeded CCDF payment rates, the We would like to prices charged by the providers were at least 50 percent higher than accept infants but the corresponding State payment rates. An additional 29 percent were between [CCDF] rate is just too 25 and 50 percent higher than State payment rates. low to pay for staff in A family seeking to enroll a child with a provider whose price exceeded the [infant] room. State’s CCDF payment rate would have to cover the cost of the difference Child Care Provider itself if required to do so by the provider, in addition to any required copayment. This could pose a significant financial hardship on low-income families or potentially prevent them from accessing child care, even with CCDF assistance. For example, in one State, the difference between a provider’s price and the corresponding State CCDF payment rate was $376 per month. In addition, a family of four in this State would incur a monthly copayment ranging from $35 to $442, depending on family States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 9 OEI-03-15-00170 income.34 Should a family seek child care services from this provider, it may need to pay approximately $400 to $800 per month out of pocket to cover the gap between the provider’s price and the CCDF payment amount and copayment. When setting CCDF Most States reported that finite resources at the State and Federal levels were challenges in setting payment rates that ensure equal access to child payment rates, care services. CCDF funding is made up of Federal funds—allocated to States face States in formula block grants—and State matching funds. Formula block budgetary grants give States the flexibility to decide how to allocate the fixed amount of constraints and Federal funding. Thirty-seven States identified State budget and funding limitations as a challenge that they have encountered. Similarly, 36 States competing priorities indicated that Federal funding limitations were a challenge in setting provider payment rates that ensure equal access for eligible families. In light of budgetary constraints, States must consider a number of competing factors and make tradeoffs when setting their CCDF provider payment rates, as shown in Exhibit 3. One State explained that increasing payment rates may mean serving fewer families: “The cost of […] subsidies is driven by three things: (1) the number of children served, (2) the amount each child is served, and (3) the amount paid for each unit of care…In the absence of additional funding this presents counties with two primary options: (A) find other sources of funding or (B) serve fewer children. Thus, a focus on increasing rates to a sufficient level comes with a cost borne out either in more dollars or fewer children served/served for less time.” Exhibit 3: States balance multiple competing priorities when setting their CCDF payment rates Number of States 1 For example, paying for days when a child is absent. Source: OIG analysis of 45 States’ survey responses, 2017 This copayment information was reported in the State’s FY 2016–2018 CCDF plan for the 34 most populous area of the State. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 10 OEI-03-15-00170 There are factors—such as the desire to increase the number of families [Setting rates at the served—that may drive States to lower CCDF payments for individual families 75th percentile] would in an effort to stretch the overall CCDF budget to provide child care assistance to more families. Seventeen States reported that concerns over substantially reduce the having waiting lists of families requesting CCDF assistance affected their number of children and approach to setting CCDF payment rates. As one State put it, “In setting families who could be rates, we seek to support as many families while balancing demand and served. resources in a way that allows us to maximize participation and avoid State CCDF Program Administrator returning to a waiting list.” Similarly, seven States indicated that avoiding enrollment freezes factored into their decision-making about payment rates. Other factors may drive States to increase CCDF payment rates or establish tiered rates, even if this may result in serving fewer families. One of these factors is that when States set CCDF payment rates, they are required to take into consideration the cost of providing higher quality child care.35, 36 Offering increased, tiered rates to providers that meet higher quality standards is a financial consideration that a State may weigh when setting its CCDF payment rates. Thirty-eight States indicated that they took the cost of higher quality child care services into account when setting provider payment rates for the FY 2016–2018 plan period. Twenty-nine of these States noted that they have increased payment rates for higher quality providers. Other factors raise the overall costs of the CCDF program, which may reduce the amount available for direct child care assistance and thereby affect rate-setting. One of these factors is the program requirement to maintain a minimum 12-month eligibility period for CCDF families37—i.e., provide for a family’s continuous eligibility throughout a 12-month period, regardless of changes in income, as long as the family does not exceed the Federal income threshold or experience a nontemporary change in work, education, or training that affects eligibility. Seventeen States indicated that complying with this policy affects how they set payment rates. One State estimated that implementing the 12-month eligibility policy would double its costs. Ten States reported that ensuring family copayments are affordable affects their payment rates, and nine States reported that implementing generally accepted payment practices affects their payment rates. Finally, 12 States reported that setting reasonable income-eligibility thresholds had an impact on rate-setting. When setting CCDF payment 35 Section 658E(c)(4)(B)(iii)(II) of the Child Care and Development Block Grant Act of 2014. 36Many States have implemented Quality Rating and Improvement System (QRIS) programs to assess the quality of child care providers and to communicate provider quality levels to the public. Typically, a QRIS program assigns ratings (such as star ratings) to providers that meet a set of defined quality standards. In certain States, providers that have achieved a QRIS rating may be entitled to a higher CCDF payment rate, also called a tiered rate or rate add-on. 37Section 658E(c)(2)(N)(i) of the Child Care and Development Block Grant Act of 2014; ACF, CCDF Reauthorization Frequently Asked Questions, March 2015. Accessed at https://www.acf.hhs.gov/occ/resource/ccdf-reauthorization-faq-archived on May 29, 2018. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 11 OEI-03-15-00170 rates, States consider whether to have lower income thresholds that may reduce the number of eligible families but allow for higher provider payment rates, or to have higher income thresholds that may increase the number of eligible families but potentially reduce the subsidy amount available to each family. ACF does not ACF has not evaluated whether States are ensuring equal access; evaluate States’ instead, it relies on States to self-certify their compliance with the equal-access provision payment rates to Although States must provide in their CCDF plans information regarding ensure compliance payment rates and equal access, ACF does not evaluate this information. with the CCDF ACF reported that staff review this information for completeness, equal-access responsiveness, and clarity, but that they do not make evaluative judgements to determine whether States with payment rates that are below the provision recommended level have ensured equal access. Regardless of the level at which States’ rates are set, ACF defers to States to self-certify that they have met the equal-access provision. ACF reported that 40 States self-certified in their CCDF plans that payment rates were sufficient to ensure equal access for the FY 2016–2018 plan period. Eleven States self-certified that they had not fully implemented the equal-access provision. These States described implementation plans to meet the requirement and requested waivers for this provision. ACF approved all of these waiver requests. ACF allows States to indicate, in their CCDF plans, how they met the equal-access provision. States select—from a list of options—the “data and facts” they relied on to demonstrate to ACF that their provider payment rates ensure equal access to child care services. In FY 2016–2018 CCDF plans, many States selected (1) the use of “tiered” or differential payment rates38 for targeted child care needs; (2) data on the percentage of families served by high-quality providers; and (3) data showing that families have access to the full range of providers. States provided narrative descriptions, but they were not required to submit any documentation with their plans to support their selected data and facts. The flexibility in program administration afforded to States under the CCDF block grant and the lack of an operating definition for equal access make it difficult for ACF to evaluate whether States with rates below the recommended level have ensured equal access. ACF also stated that it cannot review payment rates in isolation, considering that States have limited resources and competing factors that they must balance when setting 38Tiered or differential provider payment rates could include higher payment rates for child care programs that (for example) meet certain quality standards, have nontraditional hours, and/or serve children with special needs. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 12 OEI-03-15-00170 payment rates. Going forward, a new requirement under the Act mandates States to set payment rates on the basis of the results of the most current market-rate survey or alternative methodology.39 However, ACF has not developed a specific review process or tool that it will use to determine compliance with this requirement. Most States do not set payment rates at the level ACF recommends Only seven States reported to ACF in their CCDF plans for FYs 2016–2018 that they set their CCDF payment rates for full-time infant care at or above the 75th percentile of child care provider prices for their respective geographic areas serving the highest number of children. The 75th percentile is the level that ACF recommends to ensure equal access. The payment rates for these seven States ranged from the 75th percentile to the 98th percentile of child care provider prices for the reported geographic areas. Across the remaining States that have payment rates for full-time infant care that are below the 75th percentile, rates varied widely. To illustrate, CCDF payment rates for full-time licensed center care for infants ranged from the 1st percentile of child care provider prices in Vermont to the 74th percentile in New Mexico. Appendix C provides the CCDF infant-care payment rate percentiles for each State. Only 15 States indicated that they plan to set any of their CCDF payment rates at ACF’s recommended level for the FY 2019–2021 plan period.40, 41 ACF oversight has focused on technical assistance and has been expanded to include onsite monitoring Provision of technical assistance. States have access to technical assistance and guidance materials from the ACF central office, ACF regional offices, the National Center on Early Childhood Quality Assurance, and the National Center on Subsidy Innovation and Accountability. States may access program instructions and technical assistance materials on ACF’s website, and ACF operates an “Announcements” listserv that emails guidance, briefs, and materials directly to States. States may also request targeted guidance, potential strategies, and assistance as needed. In response to these requests, ACF has provided direct assistance to individual States on topics including the development of a 39Previously, States routinely had to conduct a market-rate survey or an alternative methodology, but they did not have to base their payment rates on the results of the most recent version. 40 These 15 States are out of the 45 States that responded to the OIG survey. 41Only 4 of the 7 States that set their rates at or above the 75th percentile in the FY 2016–2018 plan period are among the 15 States that indicated that they plan to do so for the FY 2019–2021 plan period. One of the 7 States indicated that it does not plan to set rates at or above the 75th percentile and the remaining 2 of 7 States did not complete the OIG survey. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 13 OEI-03-15-00170 market-rate survey and alternative methodology options. For example, ACF reviewed a questionnaire that a State was drafting for its market-rate survey process, and ACF provided a presentation comparing provider cost modeling to child care market-price surveys during a State and Territory CCDF Administrators’ Meeting. Onsite monitoring. Beginning October 2018, ACF began implementing an onsite monitoring system. As part of the process, each year, ACF will conduct an onsite monitoring visit with one-third of States’ CCDF agencies. It expects to complete visits to all States in FY 2022. Currently, a review of equal access is not part of these monitoring visits. Rather, the focus is on compliance with health and safety requirements for child care providers. Some providers The majority of States have implemented provider-friendly report concerns payment practices to incentivize providers to accept CCDF families about CCDF To aid in ensuring access for CCDF families, many States reported that they payment practices, have implemented numerous provider-friendly payment practices for child despite States’ care providers, as shown in Exhibit 4. efforts to incentivize Exhibit 4: Most States implemented provider-friendly payment practices providers to accept Provider-Friendly Payment Practice Number of States1 CCDF families Pay providers within 21 calendar days of receiving invoice 44 Use electronic payment systems (e.g., direct deposits) 43 Promptly notify providers of changes to a family’s eligibility 42 status that may impact payment Pay providers for days a child is absent 41 Ensure timely appeal and resolution for payment disputes 35 Use electronic billing systems (e.g., automated billing) 32 Pay providers for enrollment/registration fees 19 Pay providers for extra child care activities (e.g., class trips) 7 Pay providers prospectively (e.g., at beginning of month) 6 1 This column contains the number of States that implemented the provider-friendly payment practice for child care centers and family child care homes. Source: OIG analysis of 45 States’ survey responses, 2017. Under the Act, States are required to have in place generally accepted payment practices that reflect payment practices of non-CCDF providers. The goal of this requirement is to provide stability of funding and encourage States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 14 OEI-03-15-00170 more child care providers to participate in the CCDF subsidy program.42 In the CCDF final rule, ACF stated that policies governing provider payments, including generally accepted payment practices, are “an important aspect of ensuring equal access and supporting the ability of providers to provide high-quality care.”43 Nineteen States reported that they pay providers for child care enrollment fees and/or registration fees—such fees can reach several hundred dollars.44 In the remaining States, the lack of payment for enrollment fees and/or registration fees may pose a financial hardship to families, as only 13 percent of CCDF providers waive registration fees for CCDF children. Seven States reported that they pay providers for extra child care activities, such as class trips. In addition, only six States reported that they pay child care centers and family child care homes prospectively (before services are rendered— e.g., at the beginning of the month), making it the least-implemented payment practice. It is possible that States have not implemented prospective payments because disconnecting payment from attendance could leave their programs vulnerable to fraud and abuse. Providers that serve CCDF families cite unreliable payments and additional administrative work as challenges Providers that served CCDF families identified low payment rates from States I have received subsidy and the lack of reliable or timely payments as challenges in participating in payments in the past, the CCDF program.45 Although 44 States reported that they pay within 21 calendar days of receiving an invoice, some providers remain unsatisfied but they are more with the timeliness of payment. paperwork and don’t pay what I charge for When describing the administrative burdens associated with participating in the CCDF program, 51 percent of providers mentioned paperwork private pay, so to me, requirements and overall program administration requirements. it’s not worth the extra Thirty-four percent of providers cited the reporting of attendance and billing, work for less pay. Child Care Provider 42Per ACF guidance, “provider-friendly payment practices” are practices that align with the private-paying child care market in order to encourage providers to accept children who receive CCDF assistance and enable families to retain child care services. ACF, What is meant by “generally accepted payment practices?” Accessed at https://www.acf.hhs.gov/occ/faq/what-is-meant-by-generally-accepted-payment-practices on June 25, 2018. 43 81 Fed. Reg. 67516 (Sept. 30, 2016). 44ACF considers State payment to providers for child care enrollment fees or registration fees as a “provider-friendly” payment practice because private-pay families typically pay for these fees and extracurricular activities. According to OIG’s survey of child care providers, center registration fees (when not waived), ranged from $10 to $350, and family care registration fees ranged from $10 to $375. Some providers charged registration fees annually, while others charged the fees only at the time of initial enrollment. 45In response to OIG’s survey, 58 percent of child care providers indicated that they care for children enrolled in their States’ CCDF programs. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 15 OEI-03-15-00170 including the added responsibility of ensuring attendance is properly recorded. For example, States may use electronic cards that CCDF families “swipe” at the child care provider to record attendance. Because payment is linked to attendance, providers must become vigilant in overseeing that parents swipe their cards consistently. One respondent explained this by stating, “The major burden I face is parents not swiping the card… With over 90 percent of my [enrollees using the attendance card], it hurts when they don’t swipe.” Concerns over payment and administrative burdens discourage providers from participating in the CCDF program Non-CCDF providers stated that low payment rates, infrequent payment, and perceived administrative burdens discouraged them from participating in the CCDF program. Of the 42 percent of providers that did not provide care to CCDF families at the time of our review, 34 percent would not be willing to provide care to CCDF families in the future.46 While the reasons for not participating varied, they commonly included the provider’s belief that States’ payments are too low or not frequent enough, and concerns about the administrative burdens and program requirements associated with being a CCDF provider. For example, one former CCDF provider said, “I started in this field because I love working with kids. The amount of calls and paperwork took time from my own children during nights and weekends.” Another reason providers offered for not participating included the lack of prospective payment in State CCDF programs. One CCDF provider stated, “We cannot bill until the end of the month, but have to cover payroll and overhead costs all month. Accepting these subsidy payments is financially difficult for the day care providers having to wait so long to get their tuitions paid. I can understand why more centers don't accept [CCDF families].” 46Thirty-nine percent of providers would be willing to provide care to CCDF families and the remaining 27 percent expressed lack of familiarity with the CCDF program. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 16 OEI-03-15-00170 CONCLUSION AND RECOMMENDATIONS Federal law recognizes that CCDF provider payment rates are an important aspect of ensuring that eligible children have access to child care services. We found that CCDF payment rates for infant care provide access to only 41 percent of child care providers. When setting their CCDF payment rates, States have to factor in numerous competing priorities, including the desire to help as many families as possible. States reported wrestling with the question of whether it is better to set CCDF payment rates lower and serve more children, or to set payment rates higher and potentially serve fewer children. States also implement provider-friendly payment practices to encourage providers to accept CCDF program payments and help ensure access for eligible children. However, providers report that more could be done to ease the burden of accepting CCDF payments for eligible children. With respect to oversight, ACF relies on States to self-certify that their payment rates for CCDF providers are sufficient to ensure that eligible children have equal access to child care services comparable to services provided to children whose families are not eligible to receive child care assistance. To promote States’ compliance with the Federal equal-access provision, we recommend that ACF take a number of practical steps, as outlined below. 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 market prices—that would allow it to evaluate States’ progress towards ensuring equal access to child care services for eligible families. Additional proxy measures would allow ACF to evaluate whether, and how, States have ensured equal access when payment rates are lower than the 75th percentile of market prices, and when States are employing an alternative methodology, in lieu of a market-rate survey. This will become increasingly important as States move toward alternative rate-setting methodologies that collect and assess child care costs rather than market prices. 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 Prior to the FY 2019–2021 plan period, States were permitted to use outdated market-rate survey results in setting CCDF payment rates, even though more recent results were available. Effective October 1, 2018, the Act requires States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 17 OEI-03-15-00170 States to set their CCDF provider payment rates in accordance with the results of their most recent child care market-rate survey or alternative methodology. This does not mean that States must set their CCDF payment rates at the 75th percentile, but rather that the new percentiles that States report to ACF will represent up-to-date child care provider prices. ACF currently is implementing an onsite monitoring system with States that focuses on States’ compliance with health and safety requirements for child care providers. ACF could incorporate into this onsite monitoring of States’ CCDF programs an evaluation of States’ compliance with the requirement to use the results of the most recent survey (or alternative methodology). Another option would be to conduct desk reviews of States’ payment-rate information compared to the results of their market-rate surveys. This information is readily available to ACF, as States provide links to CCDF payment rates and market-rate survey reports in their CCDF plans. ACF should establish a forum for States to share strategies regarding how they set payment rates to ensure equal access for eligible families while balancing competing program priorities States reported encountering challenges in setting payment rates that ensure equal access for eligible families. ACF should work with States to identify and share strategies across States for setting payment rates to ensure equal access while taking into account other competing program priorities and funding limitations. To encourage States to learn about and potentially adopt strategies that have worked for their peers, ACF should establish a forum—such as an interactive webinar—that is held at least once per year. ACF should encourage States to minimize administrative burdens for CCDF providers, with a goal of expanding access for eligible families Under ACF guidance, States must implement generally accepted payment practices that reflect payment practices of non-CCDF providers, to encourage more child care providers to participate in the CCDF program. Although numerous States are currently implementing many of the payment practices that OIG evaluated, some providers remain unsatisfied with CCDF payments and administrative burdens. Therefore, ACF should encourage States to continue implementing practices that streamline administrative processes and reduce CCDF providers’ administrative burdens, while also keeping in mind the need for appropriate program oversight and accountability. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 18 OEI-03-15-00170 AGENCY COMMENTS AND OIG RESPONSE ACF concurred with all four of our recommendations. In response to our first recommendation to evaluate whether States are ensuring equal access for CCDF families, ACF described steps it has taken to ensure compliance with the equal-access requirement. These include prioritizing the review of the equal-access requirement as part of the FY 2019–2021 CCDF plan review and placing 33 States on corrective action plans for not demonstrating compliance with this requirement. ACF stated that if these States are unable to come into compliance by September 30, 2019, they will be subject to a penalty pursuant to the CCDF regulations. ACF reported that it is providing intensive technical assistance to these States. ACF also issued a number of guidance documents to highlight the importance of the equal-access requirement. In response to our second recommendation to 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, ACF reported that it placed 18 States on corrective action plans for data collection issues, including not completing market-rate surveys within the required timeframe and not using the market-rate surveys to set payment rates. In response to our third recommendation to establish a forum for States to share strategies regarding how they set payment rates to ensure equal access for eligible families while balancing competing program priorities, ACF stated that it is planning a set of activities to implement this recommendation. These activities include analyzing States’ market-rate survey methodologies, convening a roundtable with key stakeholders, and using the results of those efforts to develop and execute a technical assistance strategy to support States in setting adequate payment rates while balancing other factors. Lastly, in response to our fourth recommendation to encourage States to minimize administrative burdens for CCDF providers, with a goal of expanding access for eligible families, ACF stated that it believes the stakeholders’ roundtable it is planning will provide input from providers on the administrative burdens they face in serving CCDF families. In addition, ACF stated that it will analyze and summarize States’ strategies to minimize administrative burden and include this in its technical assistance strategy. For the full text of ACF’s comments, see Appendix D. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 19 OEI-03-15-00170 APPENDIX A: Detailed Methodology Child Care Provider Sample We contacted the CCDF agencies in all States to request lists of all licensed child care centers and family child care homes, including the provider’s address; contact information; and QRIS rating and accreditation status, if applicable. On receipt of this information, we combined the lists of providers into a single sampling frame. Because States and providers may have different payment and price levels depending on the age of the child, we needed to create a specific child profile for our review. We selected an infant, age 0 to 11 months, with no special needs. Because infants need a higher level of care, not all child care providers offer infant care. Some States’ lists of providers distinguished between those that served infants and those that did not. Therefore, when it was possible to do so, we removed providers that—according to State-submitted data—did not serve infants to create a sampling frame of providers who potentially served infants. We grouped providers into four strata by type of care and State payment rate percentile for infant care, as displayed in Exhibit A-1. We stratified providers in this manner to ensure that the sample included centers and family child care homes located in States with both lower and higher payment rate percentiles. We used the payment rate percentiles—the percentage of providers that charge prices at or below a State’s payment rate—that States reported in their FY 2016–2018 CCDF plans to identify States with infant-care payment rates above or at/below the 33rd percentile.47 We selected a stratified random sample of 2,000 providers from the sampling frame—500 providers from each stratum. To obtain additional information regarding accreditation status for child care centers and family child care homes, we contacted five national child care accreditation organizations that were cited in States’ CCDF plans.48 We compared our lists of child care providers against the lists obtained from the accreditation organizations to ensure that we applied payment rate add-on amounts for accredited providers, if applicable, when comparing surveyed providers’ prices to the corresponding State CCDF payment rates. 47States’ FY 2016–2018 CCDF plans, Section 4.3.1. The State-by-State data for payment rate percentiles are presented in Appendix C. 48The five accrediting organizations were the Council on Accreditation; the National Accreditation Commission for Early Care and Education Programs; the National Association for the Education of Young Children; the National Association for Family Child Care; and the National Early Childhood Program Accreditation. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 20 OEI-03-15-00170 Exhibit A-1: National, random sample of child care providers that potentially served infants Number of Number of Number Providers Providers in of Currently Number Study Sampled Providing of Survey Response Strata Descriptions Population Providers Care Responses Rate Stratum 1: Licensed child care centers in States with payment rate percentiles (for 22,377 500 492 331 67% full-time infant care) at or below the 33rd percentile Stratum 2: Licensed child care centers in States with payment rate percentiles (for 39,911 500 484 296 61% full-time infant care) above the 33rd percentile Stratum 3: Licensed family child care homes in States with payment rate 24,284 500 475 260 55% percentiles (for full-time infant care) at or below the 33rd percentile Stratum 4: Licensed family child care homes in States with payment rate 99,760 500 468 289 62% percentiles (for full-time infant care) above the 33rd percentile Total 186,332 2,000 1,9191 1,176 61% Source: OIG analysis of providers’ survey responses. 1 Of the sample of 2,000 licensed providers, 81 providers reported not providing child care at the time of the survey. To examine the extent of potential nonresponse bias, we compared whether survey respondents and nonrespondents differed with regard to provider type. We did not find a significant difference at the 95-percent confidence level. We found that, for center-based providers, the weighted response rate was 63 percent. For family child care home providers, the weighted response rate was 60 percent. We found no evidence that these response rates were statistically different (p=0.22). We also explored the potential effects that nonresponse may have had on the results of our comparison of providers’ prices for full-time infant care to the corresponding State payment rates. If all nonresponding child care providers had reported prices that were lower than State payment rates, we would have found that 70 percent of providers’ prices were lower than or equal to corresponding State payment rates. On the other hand, if all nonrespondent providers had reported prices that were higher than corresponding State payment rates, we would have found that 21 percent of providers’ prices were lower than or equal to the payment rates. Child Care Provider Survey In September 2017, OIG sent its survey to sampled providers through UPS and included a prepaid business reply envelope to facilitate survey response. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 21 OEI-03-15-00170 We sent two follow-up requests to providers that had not responded to the initial mailing, for a total of three outreach attempts for each provider. Providers had the choice to respond online or by returning the survey by mail. We received responses from 1,176 child care providers for an overall weighted response rate of 61 percent. The response rates by stratum ranged from 55 percent in Stratum 3 to 67 percent in Stratum 1. The provider survey estimates are weighted to reflect the stratified sample design and the population of responding providers. Child Care Provider Prices OIG asked surveyed providers to report the total amount charged to a private-pay, nonsubsidized family for full-time weekday care of an infant with no special needs and the accompanying unit of time (i.e., hourly, daily, weekly, monthly).49 Using the CCDF payment rates that States submitted to ACF with their FY 2016–2018 CCDF plans, we identified the payment rate for full-time infant care corresponding to the type and location of each sampled provider. We included any additional payments that States implemented for child care providers that met higher quality standards. The payment rate add-on amount was applied for providers that met specified quality rating levels or achieved child care accreditation status.50 To ensure that our comparisons of provider prices to State payment rates were based on the same unit of time, we performed calculations to convert provider prices when necessary. We used the following conversion formulas: 9 hours equals 1 day; 5 days equals 1 week; and 4.33 weeks equals 1 month. We computed the difference between providers’ prices for full-time infant care for private-pay families and the corresponding State payment rates. We estimated the direction and extent of the difference and examined the differences by type of child care provider. Price Comparison for Providers Serving CCDF Families. We examined the full-time infant care prices reported by 601 providers that served CCDF families. We compared these providers’ prices to corresponding State payment rates. The results of the price-to-rate comparison did not differ substantially from the overall results described in the Findings section of this report. Specifically, 55 percent of CCDF providers’ prices exceeded States’ payment rates; 38 percent were lower than States’ payment rates; and 7 percent were equal to the corresponding payment rates. Providers that served CCDF families were given an opportunity to indicate whether they charged these families a different price for full-time infant care 49 Because the price of child care may vary depending on the age of the child, we needed to create a specific child profile for the provider survey. 50 Each State may designate its own add-on amount for specific criteria that a provider meets. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 22 OEI-03-15-00170 than their private-pay price. For almost all of these providers, the price charged for full-time infant care was the same across both CCDF and private-pay families. Only 5 percent of providers charged a lower price to CCDF families, while another 3 percent of providers charged a higher price to CCDF families. Price Comparison by Provider Type. We observed only small percentage differences in the results of our comparison of providers’ prices to corresponding State payment rates when analyzing by provider type. For child care centers, 65 percent of prices for full-time infant care exceeded States’ payment rates; 31 percent of prices were lower than payment rates; and 4 percent of prices equaled the corresponding payment rates. For family child care homes, 56 percent of prices for full-time infant care exceeded payment rates; 39 percent of prices were lower than payment rates; and 5 percent of prices were equal to States’ corresponding payment rates. Survey of States’ CCDF Programs OIG sent an online survey to all States and the District of Columbia (hereafter referred to as States). Forty-five States responded to the survey, a response rate of 88 percent. The survey included questions about whether and how States ensure that their payment rates are sufficient to ensure equal access; how States incorporate considerations of program policies (e.g., family copayments) and provider quality into their processes for setting payment rates; and whether States have implemented provider payment practices similar to those in the private-pay market that may incentivize providers to accept CCDF families. In addition, we asked States to identify the challenges that they face when setting their CCDF payment rates. We also requested the policies, procedures, and/or calculations that States use to determine their CCDF payment rates and to set payment rates that are sufficient to ensure equal access for eligible families. ACF Survey For this review, OIG sent information requests to the Office of Child Care in ACF’s central office. We requested copies of any policies, procedures, and guidelines that ACF uses to monitor whether States’ CCDF payment rates are sufficient to ensure equal access for eligible families. We inquired about how, and the degree to which, ACF assesses whether States’ payment rates are sufficient to ensure equal access. We asked about the nature and extent of documentation that States submit to ACF regarding their payment rates and the types of specific guidance and/or technical assistance that ACF provides to States regarding payment rates and equal access. In addition, we inquired about steps that ACF has taken to hold States accountable for establishing payment rates that are sufficient to ensure equal access. Lastly, we asked about the challenges that ACF faces in monitoring and overseeing States’ payment rates. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 23 OEI-03-15-00170 APPENDIX B: Child Care Provider Survey— Statistical Estimates and Confidence Intervals Exhibit B-1: Child Care Provider Survey—Statistical estimates and confidence intervals 95-Percent Sample Point Confidence Estimate Description Size Estimate Interval Percentage of providers whose prices for full-time infant care 950 59.0% 55.1%–62.8% exceeded corresponding CCDF payment rates Percentage of providers whose prices for full-time infant care 950 36.4% 32.7%–40.2% were lower than corresponding CCDF payment rates Percentage of providers whose prices for full-time infant care 950 4.6% 3.2%–6.7% were equal to corresponding CCDF payment rates Of providers whose full-time infant care prices exceeded corresponding CCDF payment rates, percentage of providers 626 53.4% 48.6%–58.2% whose prices were up to, but not including, 25 percent higher than CCDF payment rates Of providers whose full-time infant care prices exceeded corresponding CCDF payment rates, percentage of providers 626 28.8% 24.6%–33.3% whose prices were from 25 percent to up to, but not including, 50 percent higher than CCDF payment rates Of providers whose full-time infant care prices exceeded corresponding CCDF payment rates, percentage of providers 626 17.8% 14.5%–21.6% whose prices were at least 50 percent higher than CCDF payment rates Percentage of providers that serve CCDF families 1,163 57.6% 54.2%–61.0% Of providers that serve CCDF families, percentage of 713 13.1% 10.3%–16.5% providers that waive registration fees for CCDF children Of CCDF providers that described challenges/issues faced in participating in their State’s CCDF program, percentage that 394 17.4% 13.2%–22.5% identified the lack of reliable or timely payments as a challenge Of CCDF providers that described challenges/issues faced in participating in their State’s CCDF program, percentage that 394 19.5% 15.3%–24.7% identified low payment rates (and not being paid for absent days) as a challenge States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 24 OEI-03-15-00170 Exhibit B-1: Child Care Provider Survey—Statistical estimates and confidence intervals (continued) 95-Percent Sample Point Confidence Estimate Description Size Estimate Interval Percentage of CCDF providers that indicated they were not 678 21.2% 17.8%–25.2% satisfied with the timeliness of CCDF payments Of CCDF providers that described administrative burdens associated with participating in their respective State’s CCDF 444 51.2% 45.6%–56.8% programs, percentage that identified paperwork requirements and overall program administration requirements as burdens Of CCDF providers that described administrative burdens associated with participating in their respective State’s CCDF 444 33.6% 28.7%–38.9% programs, percentage that identified the reporting of attendance and billing as burdens Of CCDF providers that offered full-time infant care to CCDF families, percentage of providers whose prices exceeded 601 55.4% 50.5%–60.2% corresponding CCDF payment rates Of CCDF providers that offered full-time infant care to CCDF families, percentage of providers whose prices were lower 601 37.8% 33.2%–42.7% than corresponding CCDF payment rates Of CCDF providers that offered full-time infant care to CCDF families, percentage of providers whose prices were equal to 601 6.7% 4.6%–9.7% corresponding CCDF payment rates Percentage of providers that do not serve CCDF families 1,163 42.4% 39.0%–45.8% Of providers that do not serve CCDF families, percentage of providers that would not be willing to provide care for CCDF 431 33.8% 28.8%–39.3% children Of providers that do not serve CCDF families, percentage of providers that would be willing to provide care for CCDF 431 39.0% 33.6%–44.7% children Of providers that do not serve CCDF families, percentage of providers that expressed lack of familiarity with the CCDF 431 27.1% 22.6%–32.2% program Of CCDF providers that offered full-time infant care to CCDF families, percentage of providers that charged CCDF families 601 4.9% 3.2%–7.4% a lower price than their private-pay price Of CCDF providers that offered full-time infant care to CCDF families, percentage of providers that charged CCDF families 601 3.4% 1.9%–6.0% a higher price than their private-pay price States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 25 OEI-03-15-00170 Exhibit B-1: Child Care Provider Survey—Statistical estimates and confidence intervals (continued) 95-Percent Sample Point Confidence Estimate Description Size Estimate Interval For child care centers, percentage of providers whose prices for full-time infant care exceeded corresponding CCDF 475 65.1% 60.5%–69.5% payment rates For child care centers, percentage of providers whose prices for full-time infant care were lower than corresponding CCDF 475 31.3% 27.1%–35.8% payment rates For child care centers, percentage of providers whose prices for full-time infant care were equal to corresponding CCDF 475 3.6% 2.2%–5.8% payment rates For family child care homes, percentage of providers whose 475 56.2% 51.0%–61.3% prices exceeded corresponding CCDF payment rates For family child care homes, percentage of providers whose prices for full-time infant care were lower than corresponding 475 38.7% 33.7%–43.9% CCDF payment rates For family child care homes, percentage of providers whose prices for full-time infant care were equal to corresponding 475 5.1% 3.2%–8.0% CCDF payment rates Source: OIG analysis of providers’ survey responses and comparison of providers’ prices to States’ CCDF payment rates, 2017. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 26 OEI-03-15-00170 APPENDIX C: CCDF Infant-Care Payment Rate Percentiles by State, Fiscal Years 2016–2018 Exhibit C-1 contains payment rate percentiles data that States reported in their FY 2016-2018 CCDF plans. The percentiles reflect States’ measurements of the percentage of child care providers that charge prices for infant care at or below the State’s CCDF payment rates, based on each State’s market-rate survey. Payment rate percentiles below are for full-time infant care in the geographic area of the State that serves the highest number of children. Exhibit C-1: States’ CCDF infant-care payment rate percentiles reported in FY 2016–2018 CCDF plans CCDF Infant-Care Payment Rate Percentile1 State Full-Time Licensed Center Care Full-Time Licensed Family Child Care Alabama 46 22 Alaska 11 45 Arizona 8 70 Arkansas 80 98 California 55-60 50-55 Colorado 10-25 <10 2 Connecticut 4 72 Delaware 65 65 3 District of Columbia n/a n/a Florida 25 13 Georgia 50 50 Hawaii 56 42 Idaho 40 40 Illinois 31 72 Indiana 32 47 Iowa 40 60 Kansas 15 50 Kentucky 33 39 Louisiana4 50 25 Maine 50 50 Maryland 8 15 Massachusetts 58 33 Michigan 71 83 Minnesota 26 39 Mississippi 54 52 States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 27 OEI-03-15-00170 Exhibit C-1: States’ CCDF infant-care payment rate percentiles reported in FY 2016–2018 CCDF plans (continued) CCDF Infant-Care Payment Rate Percentile1 State Full-Time Licensed Center Care Full-Time Licensed Family Child Care Missouri 46 49 Montana 75 75 Nebraska 60 60 Nevada 8 18 New Hampshire 50 50 New Jersey 19 58 New Mexico 74 47 New York 69 69 North Carolina 56 58 North Dakota 33 24 Ohio 16 16 Oklahoma 36 52 Oregon 75 75 Pennsylvania 22 17 Rhode Island 12 55 5 South Carolina 75 75 South Dakota 80 75 6 Tennessee 21 7-33 Texas 57 49 Utah 69 71 Vermont 1 3 Virginia 18 35 Washington 8 39 West Virginia 75 75 Wisconsin 53 53 Wyoming 15 11 Source: OIG review of States’ FY 2016–2018 CCDF plans, Section 4.3.1. 1 OIG rounded States’ reported percentiles to the nearest whole number. 2 Connecticut indicated in its CCDF plan that the reported percentiles are for the north central region. 3 The District of Columbia is the only State that used an alternative methodology in lieu of a market-rate survey for its FY 2016–2018 CCDF plan. As such, it did not provide percentiles in Section 4.3.1 of its plan. 4 The center care percentile in the table is based on this information reported by Louisiana in its CCDF plan: “Near the 50 th percentile rate of $125.” In addition, Louisiana reported that family child care is not licensed. 5 South Carolina indicated in its CCDF plan that the reported percentiles are for Level B of the State’s five-tier provider-quality rating system. 6 Tennessee’s percentile range for family child care encompasses both of the State’s percentile ranges for its two categories of family child care: group and family homes. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 28 OEI-03-15-00170 APPENDIX D: Agency Comments States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 29 OEI-03-15-00170 States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 30 OEI-03-15-00170 States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 31 OEI-03-15-00170 ACKNOWLEDGMENTS Amy Sernyak served as the team leader for this study. Others in the Office of Evaluation and Inspections who conducted this study include Karolina Hill, Tara Bernabe, San Le, and Maura Lavelle. Office of Evaluation and Inspections staff who provided support include: Althea Hosein, Seta Hovagimian, and Christine Moritz. This report was prepared under the direction of Linda Ragone, Regional Inspector General for Evaluation and Inspections in the Philadelphia regional office, and Joanna Bisgaier, Deputy Regional Inspector General. To obtain additional information concerning this report or to obtain copies, contact the Office of Public Affairs at Public.Affairs@oig.hhs.gov. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 32 OEI-03-15-00170 ABOUT THE OFFICE OF INSPECTOR GENERAL The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by the following operating components: Office of Audit The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting audits with its own audit resources or by overseeing audit Services work done by others. Audits examine the performance of HHS programs and/or its grantees and contractors in carrying out their respective responsibilities and are intended to provide independent assessments of HHS programs and operations. These assessments help reduce waste, abuse, and mismanagement and promote economy and efficiency throughout HHS. Office of Evaluation The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS, Congress, and the public with timely, useful, and reliable and Inspections information on significant issues. These evaluations focus on preventing fraud, waste, or abuse and promoting economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI reports also present practical recommendations for improving program operations. Office of The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of fraud and misconduct related to HHS programs, operations, Investigations and beneficiaries. With investigators working in all 50 States and the District of Columbia, OI utilizes its resources by actively coordinating with the Department of Justice and other Federal, State, and local law enforcement authorities. The investigative efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties. Office of Counsel to The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering advice and opinions on HHS programs and the Inspector operations and providing all legal support for OIG’s internal operations. General OCIG represents OIG in all civil and administrative fraud and abuse cases involving HHS programs, including False Claims Act, program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG also negotiates and monitors corporate integrity agreements. OCIG renders advisory opinions, issues compliance program guidance, publishes fraud alerts, and provides other guidance to the health care industry concerning the anti-kickback statute and other OIG enforcement authorities. States’ Payment Rates Under the CCDF Program Could Limit Access to Child Care Providers 33 OEI-03-15-00170