Policy Impacts of Reimbursement Rate Reform: Evidence from the Child Care and Development Fund

The Child Care and Development Fund (CCDF) subsidizes child care costs to help low- income families afford care. Reimbursements for cost-subsidized care are paid to child care providers; however, per-child reimbursements are extremely low compared with market rates and actual cost of care. We examine how the 2014 CCDF reauthorization, which recommended states increase subsidy reimbursement rates to the 75th percentile of market rates, affected the supply and quality of child care. Using a triple difference design, we investigate the population- level characteristics of CCDF providers before and after the reauthorization using data from the National Survey of Early Care and Education, state-submitted CCDF plans, and other state-level data. We find that only a handful of states reached the 75th percentile threshold four years after the reauthorization. Home-based providers in states meeting the 75th percentile threshold post- reauthorization cared for 1.5 more preschoolers and were 49 percentage points (pp) more likely to offer nonstandard hours of care. In contrast, center-based providers in states that reached the 75th percentile post-reauthorization were 22 pp less likely to provide nonstandard care hours, supplied .10 percent fewer subsidized child care slots, but were more likely to have a quality rating. Although small reimbursement increases benefited home-based providers, the overall impact on providers was minimal, highlighting that those accepting CCDF subsidies remain underpaid for their services despite substantial CCDF reform.