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Understanding alternative methodology: An alternative to the market rate approach for child care subsidy rate setting


An alternative methodology for rate setting may be a cost study or a cost estimation model. A cost study involves collecting data from providers about their current costs of operating a program that meets licensing standards as well as other quality standards, reflecting point in time data about provider costs. A cost estimation model involves building a tool that is informed by provider data and that can run multiple scenarios to estimate the impact of several variables on cost, such as program characteristics (e.g., size and age mix), child populations served, program quality, and location in the state. (author abstract)

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