AFC Policy Platform - Illinois Action for Children

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Increasing Base Reimbursement Ratesfor ProvidersLow-income families are unable toadequately and fairly access high qualitychild care services due to insufficientreimbursement rates paid toproviders through the Child CareAssistance Program.BackgroundThe reimbursement rate is the amountpaid to providers who care for childrenthrough the Illinois Department of HumanServices’ (IDHS) Child Care AssistanceProgram (CCAP). Illinois’ rate structure isdivided into three regional categories,and is then further stratified by type ofcare provided and the age of child. Illinoishas not raised the infant-toddlerreimbursement rate since the currentIDHS Child Care Assistance Programwas created in 1997. In 1999, thepreschool rate received a small increase,but remains far below the federallyrecommended standard.Federal guidelines recommend thatproviders who accept families with statechild care assistance be reimbursed at the75th percentile of the rate determined bya mandatory state market rate survey(MRS). Most of Illinois falls far short ofthis goal. For example:• In the Chicago metropolitan area, thereimbursement rate for a preschooler infull-day care at a center is at the 18thpercentile of the market rate.• In DeKalb County, the reimbursementrate for a preschooler in full-day careat a licensed child care home is at the37th percentile.The federal Child Care and DevelopmentBlock Grant (CCDBG) requires that statesconduct a MRS every other year to guidethem in setting their provider reimbursementrates. This rule, however, does notprovide guidelines on how states mustconduct the MRS. Furthermore, there isno mandate for states to actually basetheir reimbursement rates on the findingsof the MRS. There is widespread concernin Illinois and other states as to whetherMRS data accurately summarizes ratescharged by child care providers, and moreimportantly, what quality care costs.Low reimbursement rates adverselyimpact the accessibility and affordabilityof care for low-income workingfamilies. Many high-quality child careprograms cannot accept children onthe CCAP because reimbursement ratesare too low to cover basic costs. As aresult, availability is limited.Chronically low reimbursement rates paidto Illinois providers also result in lowwages for child care staff. In turn, qualitysuffers as a consequence of high turnover,and less educated staff, in addition toa lack of program resources and supplies.Providers who accept families on theCCAP often charge parents fees inaddition to the standard co-paymentparents pay to the state.
Thus, low-income working parents mustdevote a higher percentage of their incometo child care, with fewer dollars left fornecessities such as housing and food. Infact, low-income families pay up to 14% oftheir gross family income in child care copaysto the state—twice as much as theaverage American family pays for childcare. (See: Lowering Child Care Co-paymentsfor Parents). Providers are left to choosebetween charging parents more or compromisingthe quality of their program.To understand the problem, we mustunderstand the difference between marketrate and market cost. Market cost is thefull cost associated with child care, includingwages, supplies, rent, utilities and more.Market rate refers to what providersactually charge for their child care services— often significantly lower than the truecost of providing quality care. Relyingsolely on market rate surveys to determinean adequate reimbursement rate will notachieve high quality care for all families.Regional differences further complicatethe ‘rates puzzle.’ In rural areas, rates arerestricted not only by the MRS, but bywhat families can actually pay for childcare. The vast difference in the economiesof southern Illinois and the Chicagolandarea suggests that basing rates exclusivelyon the MRS may not be an effectivemethod for Illinois.For example, in southern Illinois, thecurrent reimbursement rate for a 2-1/2year old child in a licensed child carehome is $16.59 per day. The MRSindicates that this rate is at the 75thpercentile of the market rate paid to childcare providers. However, the cost ofproviding that care far exceeds bothreimbursement and market rates. As aresult, programs are struggling and manyare closing their doors altogether.ActionImproving the reimbursement rate forproviders in Illinois is good public policy.An adequate and accurate child carereimbursement rate will help alleviate theeconomic dilemma that plagues the childcare profession, support child careproviders in delivering services to lowincome children, and benefit workingfamilies needing access to high quality care.In order to improve the reimbursementrate, however, Illinois must first examinethe methodology used in determining thatrate. Given Illinois’ economic diversity, arate increase based solely on the MRSmay not be the best approach. Illinoisshould investigate and evaluate additionalmethods of determining an adequate basereimbursement rate that more accuratelyreflects the cost of delivering high qualitychild care to all families.Simultaneously, Illinois should examine atiered reimbursement rate system thatwould provide both financial incentives andresources to reach and maintain quality(see: Implementing a Tiered ReimbursementSystem for Providers for more information).
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AFC Policy Platform - Illinois Action for Children

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