Two Sides of the Child Care Coin: Current Costs Versus Adequacy Costs

• In Event: AERA Roundtable Session Thursday 5:25 pm Four Seasons Ballroom 2-3
  In Roundtable Session: Costing the Rubicon: Addressing Methodological and Conceptual Complexities in Cost Analysis (Table 10)

Abstract

Objective
A growing body of research seeks to estimate the cost of child care to inform policy decisions, including the child care subsidy rates. While some states are interested in modeling present costs of care, others seek to understand the cost of child care when high quality standards are met.
The American Institutes for Research (AIR) partnered with the North Carolina Division of Child Development and Early Education (DCDEE) to estimate the current per-child cost of care and the cost of care if providers achieve the highest quality rating in North Carolina, aiming to ultimately recommend an alternative market rate model for child care subsidies.
We will present our approach to addressing the methodological challenges of prospectively estimating the costs required for an intervention to meet a certain level of quality, particularly when examples of high-quality implementation are scarce. We will also share our findings – that there is a substantial gap between present childcare costs and the costs needed to attain high-quality care.
Methods
The study team used an ingredients approach to identify the universe of costs involved in producing an outcome (Levin et al., 2018). Ingredients identified include compensated/purchased and volunteered personnel time, spaces, and operational supplies.
Data
We collected data from four primary sources to understand the resources currently used and the resources that would be needed to achieve North Carolina’s highest quality rating:
1. Focus groups with providers throughout North Carolina representing various settings (e.g., center-based, family child care homes), ages served, and services offered (e.g., meeting special needs or nontraditional hours of care).
2. A survey to all licensed providers in the state to understand needs across the state.
3. Discussions with local and state subsidy administrators and leaders at DCDEE to ensure assumptions and decision points reflected the real contexts of child care providers
4. A national advisory group with child care policy, healthcare, financial, and commerce experts that provided input throughout the project.
Results
We demonstrate there is a substantial difference between the estimated per-child cost of current quality child care and the per-child cost if providers had the resources needed to meet the state’s highest quality rating. This difference was observed across all child care settings, counties, and age groups, and these differences could be as much as 101 percent. The cost estimates, contextual information, and discussions with NC DCDEE led to a recommended alternative market rate model that is most likely to support providers in meeting the highest level of quality.
Significance
States must consider the differential cost of the highest quality level if they intend to set subsidy rates at a level that incentivized providers in meeting those criteria. Our work provides a methodological template that researchers and child care policy stakeholders may adopt to develop alternative market rate subsidy models for supporting the transition from present to desired levels of quality, a methodology that can potentially be applied to the difficult task of estimating the cost of programs at desired-but-rarely-met levels of quality in other policy areas.

Author

• Amanda E. Danks, American Institutes for Research