Last week, the Biden-Harris Administration announced a new rule to reduce the co-pays for many families who receive child care subsidies (Press Release). Families who receive a subsidy would have their co-pays capped at 7% of their household income, a figure that the U.S. Department of Health & Human Services (HHS,) has cited, since 2016, as “affordable” to most families.
Eligible families receive child care subsidies through a federal program called the Child Care & Development Block Grant (CCDBG) program. Although this is a federal program, like many federal programs, it is administered by the states. States follow certain guidelines but many of the details about how the program is administered are left up to the states. As encouraging as the 7% cap sounds, it doesn’t really translate to lower costs for families because in most states, the family co-pay does not represent the true cost to the family.
States set reimbursement rates (the amounts paid directly to the providers) based on market rates across their state. Unfortunately, the total of the reimbursement from the state to the provider, and the 7% co-payment from the family rarely cover the full cost of tuition. Definitely for Maryland and Virginia – two states that Child Care Counts operates in – providers can and do charge the family for the gap. For example, if tuition, at a center is $600/week for an infant (don’t laugh, that is a pretty average rate for an infant in the close-in DC area) and the subsidy reimburses the center at a rate of $481/week, it doesn’t matter if the state voucher specifies a 7% co-pay – the family is still responsible for the $119 difference each week if they want to send their child to this center. They could move to a different center, but rates are similar everywhere else. They could also find a home-based provider that would be less expensive, but many home-based providers are at capacity and not accepting new enrollments – or they may not have the expertise to handle a particular child’s needs.
Although many readers of this blog would be thrilled to pay $119/week for child care at a center, sadly, these are not the families who actually qualify for the program. For those who qualify (low-income, often single parents,) $500/month ($119 x 52)/12 is a huge expense on top of rent, groceries, car expenses, clothing, utilities, and other necessities. The average gross annual income for families in our program is just over $40,000.
Some might be tempted to blame providers – who have an option to waive the remaining tuition for these families. Many people don’t realize the tight margins that providers operate on, due to necessary, mandatory child/teacher ratios and other factors. Additionally, participating in the state subsidy program adds to a provider’s costs since they must maintain a certain level “quality rating” to participate and there are additional administrative costs involved with being paid accurately and timely by the state. If they didn’t charge the difference, they would wind up losing money on each family enrolled in the subsidy program – not a great business model. Providers do not have to accept child care subsidy families. Faced with the prospects of losing money, many, if not most, would opt out of the program.
So, what is the answer? Experts, considerably wiser than I, have not been able to come up with a workable solution so I’m certainly not going to offer one here. Anyway, the purpose of this piece is not to offer a solution but to point out that misinformation hurts our efforts at finding real solutions. I would bet that the average American voter doesn’t understand how child care subsidies work. I know I didn’t before starting Child Care Counts. It will be hard to get valuable constituent support for increased spending on child care if voters don’t have the complete picture.
While I applaud the Biden-Harris Administrations efforts to get this through – if for no other reason than to show their symbolic support for families – it will not help the families we work with. Child care subsidy co-pays have been and continue to be fairy tale numbers in many states. They are a “recommendation” basically – and no provider will, anytime soon, be in a position to accept them as full payment.
The harm in making a big fuss over accomplishments like this, is that it perpetuates the idea that child care subsidies work for those who need them most…and they frequently don’t. If we pat ourselves on the back for “helping families,” we stop searching for real solutions to the child care affordability issue – especially for those who earn the lowest salaries and who face little prospects for upward mobility, without stable, safe child care.
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