Can differential subsidy reimbursement rates help to build the supply of nontraditional hour care?

• In Event: Nontraditional hour child care provision, practices, and policies: Research findings on provider perspectives across states

Abstract

Addressing the supply of child care during nontraditional hours (NTH)—including early mornings, evenings, and weekends—is a persistent policy challenge, particularly for low-income families working nonstandard schedules. Policymakers have increasingly focused on supply-side strategies to expand access to NTH care through the child care subsidy system, where some states have adopted differential reimbursement rates to encourage providers to offer NTH care. The 2024 Child Care and Development Fund (CCDF) Final Rule reinforced this approach by strongly encouraging states to use differential subsidy reimbursement rates to build the supply of NTH care for families receiving child care assistance. These policies assume, in part, that higher reimbursement rates will encourage subsidized providers to offer care during NTH hours. However, there is little empirical evidence on whether differential reimbursement rates actually increase the availability of NTH care.

This study examines whether differential reimbursement rates for NTH care are associated with the likelihood of providers offering care during these hours.  We construct a longitudinal state-level database of CCDF differential reimbursement rate policies. Differential reimbursement rates are coded using a binary indicator for whether a state implements differential reimbursement rates for NTH care, as well as a continuous measure of the relative size of the differential rate, calculated as the percent increase above a state’s base reimbursement rate. We merge this policy database with pooled provider-level data from 2012 and 2019 National Survey of Early Care and Education. Linear probability models include state and time fixed effects, and control for a series of provider-level and time-varying factors.

Findings highlight both the potential and the limits of differential reimbursement as a supply-building policy mechanism. Among subsidy-participating center-based providers, only 13% offer any NTH care. Differential reimbursement rates are not significantly associated with offering evening or overnight care but are marginally associated with a five percentage point increase in the probability of offering weekend care (p<0.10). Among subsidized family child care providers, 49% offer some nontraditional hour care. However, we find no association between differential reimbursement rates and the probability of offering any NTH care, suggesting that many family child care providers may offer nontraditional hour care for reasons other than differential reimbursement rates. The results using the relative size of the differential rate show similar patterns, with substantively smaller effect sizes.

An important limitation of this analysis is that the available data do not capture early morning care, likely one of the most common forms of nontraditional hour care, which may lead to an underestimation of overall NTH supply and attenuate estimated relationships. Taken together, the findings suggest differential reimbursement rates, as currently implemented, may not be large enough to offset the additional costs and operational challenges associated with providing NTH care. The limited associations also point to the role of broader constraints such as workforce availability, regulatory requirements, and demand uncertainty in shaping supply. As a result, differential reimbursement rates may have limited effects as a standalone policy and may need to be paired with complementary strategies.

Author

• Elizabeth Ann Wong, Boston University
  Presenting Author