As of fiscal year 2022, 49 states were using a methodology that sets future maximum payment rates based on past market rates charged, making them unresponsive to market or economic changes. By the final year the payment rates are used, the underlying data could represent the child care market of up to five years prior. There is, however, an alternative to market rate surveys: cost estimation modeling. Cost models use regulatory requirements and program characteristics to quantify the typical expenses child care providers face and develop an estimate of what it truly costs to provide care. Moving to cost modeling is a change that states could make already with the approval of the Administration for Children and Families (ACF); in fact, District of Columbia and New Mexico have already done so, and Virginia will soon join them. (author abstract)
States can improve child care assistance programs through cost modeling
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