Expanding on “Rate Setting in Reality” from a Colorado Perspective

If you have not had the opportunity to read Opportunities Exchange’s new article, “Rate Setting in Reality: Moving Beyond the Myth of Market-Based Pricing,” we highly recommend adding it to your reading list. It dives into many of the harmful myths surrounding child care cost and pricing, backing up these societal fallacies with research and data and supplying recommendations for the industry moving ahead.

While there is a veritable wealth of knowledge housed within their article (again – please read!), we wanted to highlight two of the article’s specific findings and examine them from a Colorado and Early Learning Ventures (ELV) perspective.

Response 1: Relationship between Cost and Quality Rating

Myth Fact
Because it costs so much more for a child care program to meet quality standards, higher quality child care programs charge higher prices. Child care programs set prices based on what families can afford, and are willing, to pay. Child care programs that meet higher quality standards often lose money – especially in infants and toddlers.

One of the main studies that supports this assertion is the 2018 North Carolina Child Care Market Rate Study, which showcases the disconnect between pricing and quality rating. North Carolina, like Colorado, utilizes a Quality Rating and Improvement System (QRIS) as a measure of quality. The study found that many of the state’s largest cities, including Charlotte, actually had lower prices at higher-rated (by QRIS) sites.

That matches the QRIS findings that I’ve personally been collecting for the ELV network in Colorado. While we have not yet looked at market pricing for our network, we know that our network works predominantly with low-income families. Although we work with just under 10% of all licensed providers in Colorado, we are serving almost 25% of all children on the Colorado Child Care Assistance Program (CCCAP).

These high-CCCAP percentages present in our network, and our organization’s commitment to working with providers who support low-income families, are enough for me to assert that our network typically has lower market pricing compared to the state average. Assuming this, we can then look at our network’s QRIS ratings compared to non-ELV providers in Colorado.

Figure 1

Our data supports Opportunities Exchange’s finding – while ELV providers in Colorado serve a higher percentage of low-income families than the average Colorado child care provider, the quality rating average of ELV providers in Colorado is 45% higher than average (fig. 1).

Response 2: Government Funding – Enrollment or Attendance

Myth Fact
Government funding for child care should be linked to attendance, to prevent fraud and ensure that children show up every day. Paying for child care on the basis of attendance, rather than enrollment, can significantly reduce provider income as well as teacher compensation.

Opportunities Exchange lays out succinctly the troubles that occur for child care providers when their government funding / tuition subsidy is based off of attendance in lieu of enrollment. Rather than look at new data or look at this from a different perspective, we want to affirm two of the statements present in this section of the article.

  • Basing funding on student enrollment is common practice among K-12 schools and Head Start programs.

ELV houses 350 Early Head Start slots amongst 42 child care providers across 6 Colorado counties. When analyzing the real-time data for our network, we found that, by mid-June, all of our Early Head Start providers were performing above their non-EHS counterparts in terms of daily attendance averages. We believe this is largely due to the continued federal EHS funding helping to keep their doors open, keep their teachers paid, and be in a solid place to care for their kids when the market reopened.

The coronavirus pandemic has been hard on the child care industry, but ELV’s Early Head Start sites had more stable footing to weather the initial few months thanks to this enrollment-based compensation. Our experience highlights the success of supporting providers via enrollment-based government funding.

  • Many states have revised payment policies during the COVID pandemic and, to mitigate the impact of low attendance, are now paying on the basis of enrollment rather than attendance.

While Colorado’s adherence to local rule means that various counties had different responses to supporting CCCAP-providing programs, there was top-down governmental response in Colorado to address this exact issue. Pre-pandemic, many providers were only allowed one CCCAP absence per month – that number has increased across the board. For instance, it is currently 22 absences in Denver County.

These measures have been critical to CCCAP-providing child care providers. While CARES Act funding has been slow to reach many providers, the state’s shift to a more responsive, more enrollment-based approach to Colorado’s tuition subsidy has helped keep these businesses afloat. We are hopeful that many of these new experiences in the pandemic will influence Colorado towards decisions more in line with the recommendations espoused by Opportunities Exchange.

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