Child care reimbursement rates: A quick explainer
by Jamie O’Leary, associate director of policy and external affairs
As part of the second annual “Day Without Child Care,” advocates in Ohio visited the Statehouse in May to call for better pay for early childhood educators as well as expanded eligibility for families to access publicly funded care. In terms of early educator pay, however, it’s important to understand what’s standing in the way of early learning providers being able to pay teachers more.
Small programs like mine have gone for far too long without sustainable reimbursement or support from legislation… Policy blocks community programs from accessing other streams of income, and yet they continue pay these community programs at 25% market rate when federal guidelines suggest 75%.
– Tarrezz Thompson, home-based provider
What does this mean in layperson’s terms – and why is it so important to understand?
Stick with us for a moment as we know reimbursement rates and percentiles can become confusing quickly. The federal government recommends that states set reimbursement rates for child care providers at the 75th percentile. Some of Ohio’s programs are set at the level (with quality-based incentives), but the base rate is currently set at the 25th percentile.
A reimbursement rate reflects how much providers receive from the state for each child based on age of the child, county location, and quality level of the center. For instance, a center-based provider not yet participating in Ohio’s quality-rating system receives $146.25 per week per infant, which comes out to an hourly rate of $6.56. Infant reimbursement rates are the highest; in this same example, the rate for a preschooler in the same place would be $4.18 hourly. For home providers (licensed, Type B) the rates are quite a bit lower – $4.47 for infants hourly and $3.71 for preschoolers.
The percentile for the reimbursement rate reflects whether there is equal access for publicly funded families. So, for a family receiving public assistance for child care where rates are set at the 75th percentile, this means that when they go out into the “market” and evaluate their options for child care, 75% of options should be affordable to them with that subsidy. (It reflects “the price at or below which 75 percent of child care providers reported charging for services.”) The idea is that for families living under or near the poverty level, the funds received from the state program should be sufficient enough to allow them to find reliable child care that would enable them to keep their job. Where the base rate is set to the 25th percentile, that means about only one in four child care options are financially accessible for the family.
For child care programs serving a high number of publicly funded children, their budget is limited almost entirely to the funds they get from the state through these reimbursements. Think about the math for a moment. How exactly can a program increase educator pay when it is already operating on a bare-bones budget – paying for materials, food, teacher wages, building expenses, administration, etc. – when the reimbursement rates (e.g., $6.56 per infant hourly) don’t reflect the actual cost of providing that care? This is why states are moving toward an approach called cost modeling, which is an arguably better way to estimate the costs of providing quality care and ensure that the child care industry is sustainable.