Today, the White House announced a new set of proposed rules for the Child Care Development Block Grant (CCDBG). In an earlier post, I talked about the potential impact of capping the parental co-pay. Now, let’s take a look at how the rules might impact providers.
CCDBG rules and policies are largely made at the state level, which means that there is a lot of variation in what a family or a provider might experience depending on where they live. But, these rules do propose some important changes that will help to stabilize the tenuous business of providing child care. (For more on the challenges of the child care business model, check out this great report from Colorado EPIC and The Common Sense Institute).
tl;dr
The new CCDBG proposed rules would require that providers are paid in advance of each month rather than in arrears and would also require that they be paid based on enrollment rather than attendance. These two changes would create increased financial stability for providers and could incentivize more providers to accept subsidy payments.
Pay ahead to help with cash flow
In 42 states, providers are paid at the end of the month (i.e., after they’ve already paid for payroll, rent, and other expenses). The proposed rule would require that providers be paid at the beginning of the month instead. According to the White House press release, this change would impact nearly 200,000 providers. In an industry with very, very tight margins, this type of cash flow can make a huge difference. This is a great step forward for CCDBG.
Pay based on enrollment
One critical reform that advocates have asked for for years is for child care subsidy payments to be based on enrollment rather than attendance. Many states have made this change already. In most CCDBG programs, a child is made eligible for subsidy payments and those payments are made (minus a parent copay) directly to the provider. When payments are based on attendance, however, if a child is absent, the provider does not get paid for that child for that day. This creates a lot of financial instability and uncertainty for providers. And generally speaking, they are just out that money, because they can’t reduce staffing based on one child’s absence and they do not have another child to fill the spot on a temporary basis.
The preferred model is for providers to be paid a set amount based on the children enrolled which does not change. During the COVID pandemic, many places adjusted their policies to cover an increased number of absences (for example, they might cover 10 absences per month rather than only 3). However, the proposed rule would remove payment based on attendance entirely. This rule change would give providers a significant amount of stability, and could incentivize more providers to accept subsidy payments. According to the White House press release, about 1/3 of states currently pay based on attendance, and over 100,000 providers would be impacted by this change.
