To date, child care subsidies have not been studied extensively as a state-wide policy; existing evidence points to the effectiveness of child care subsidies as a strategy to improve outcomes in the birth-to-3 period, but does not provide guidance to states on optimal subsidy levels to promote access to quality care. Evidence fairly consistently links both subsidy receipt and higher state subsidy expenditures to positive outcomes for access to services (e.g., use of more formal care arrangements) and the ability of parents to work (e.g., higher maternal employment) in the birth-to-3 period. However, the limited evidence base on the link between subsidy receipt and spending policies and outcomes related to parental health and emotional wellbeing, nurturing and responsive child-parent relationships, nurturing and responsive care in safe settings, and optimal child health and development for the birth-to-3 period suggests mostly null findings. Additional research in these areas is needed to better understand the impacts of subsidies on caregiver and child outcomes, as well as impacts on quality of care settings.
Research is also needed on the potential for subsidies to reduce disparities for infants and toddlers by socioeconomic status, race, and ethnicity and on the specific components of subsidy policy (e.g., the optimal provider reimbursement rate). Research on the optimal subsidy level is particularly critical to provide guidance to states on the appropriate rate levels that improve families’ access to high-quality care and subsequently, improve child outcomes.
Although few studies on child care subsidies address the link to type and quality of care received by infants and toddlers, research on children ages 3 to 5 years old may provide useful insight on these potential connections. For example, research on children ages 3 and older supports the positive findings included in this review on the link between subsidy receipt and use of formal care.40 Only one study included in this review examined the link between subsidies and child care quality, however, research on the preschool-age population also provides some evidence on this link: a 2011 study found that subsidy receipt was linked to selection of higher-quality care overall (by one-third of a standard deviation on quality measure scores), although this effect was driven by the fact that subsidy recipients were more likely to select center-based care than nonsubsidy recipeients.40 The authors also found that subsidy recipients selected higher quality home-based care (by 0.6 standard deviations on quality scores), but lower quality center-based care (by less than 0.4 standard deviations on quality scores) than comparable nonsubsidy recipients using the same care arrangement type.xxiv The authors hypothesized that the effects were driven by (a) the selection of more formal home-based providers, rather than informal providers such as relatives, and (b) potentially higher-quality center care used by nonrecipient families, such as Head Start or public pre-kindergarten. In addition, center-based care was generally of higher quality overall than home-based care in this study, likely due, at least in part, to the categorization of kin and kith care alongside formal providers in the home-based care category.xxv
A 2012 study examining child care among children at age 4 similarly found that the type of care mattered for quality: 62 percent of the positive association found between subsidy receipt and quality was attributed to the type of care setting chosen (in particular, higher enrollment in center-based care).51 This evidence on children ages 3 to 5 corroborates the findings of the study included in this review suggesting subsidies may have a positive impact on quality, particularly through the increased use of center-based care among families receiving subsidies.
Two observational studies provide evidence suggesting that child care subsidy policies’ may be able to positively affect the quality of care families receive. One study of a child care affordability program examined the implications of providing additional financial assistance to reduce copayments (to no more than 10 percent of monthly household income) for families receiving subsidies and providing financial assistance to access care for families whose incomes who were too high to qualify for the subsidy program (between 185 and 200 percent of the federal poverty level); in each case, families needed to use the assistance to receive care at quality child care centers or homes.21 Results from mixed-methods analyses suggested that parents in the child care assistance program reported positive impacts from program participation, including that the assistance allowed families to continue using quality providers in the face of financial challenges and, for some families, allowed parents to “purchase quality care for the first time.” Although this study did not directly assess the impacts of subsidy policies, it suggests potential positive implications for family-friendly subsidy copayment and income eligibility policies.
A second observational study examined the association between higher subsidy payment rates and provider-friendly payment policies and child care quality.53 For child care centers participating in the subsidy system, higher base reimbursement rates were associated with a higher likelihood of meeting the quality composite used in the study, an association driven by an increased likelihood of earning a quality rating. Although associations with quality measures were null for the use of tiered reimbursement rates, an additional $100 difference between the lowest and highest tiered subsidy rates were associated with a higher likelihood of meeting the quality composite standard in the study, suggesting that the design of tiered reimbursement rates in subsidy systems may matter. Use of contracts, rather than vouchers were not found to be associated with quality ratings or the quality composite. Additionally, the provider-friendly policy index (based on family fee policies, payment for absences and closings, and 12-month redetermination periods) was not associated with any of the quality measures. For child care homes participating in the subsidy system, increases in base reimbursement rates, use of tiered reimbursement, use of contracts, and the provider-friendly policy index were not associated with quality rating or the quality composite measures. However, the difference between the lowest and highest payment tiers was associated with the quality composite measure, largely through quality ratings.xxvi Additional research is needed to assess how aspects of subsidy policies may affect different types of providers in different ways.
Finally, other studies of state and local quality rating and improvement systems (QRIS) also provide some evidence that suggests potentially positive links between subsidy reimbursement rates and child care quality. For example, a study of the North Carolina QRIS found that lower quality ratings led to future quality improvements; the authors hypothesized that tiered subsidy reimbursement rates attached to quality ratings, along with market pressures, may be driving this impact.54 Additionally, recent analyses of state QRIS have started to examine patterns of quality ratings among QRIS offering tiered reimbursement rates (and among states requiring QRIS participation and/or quality rating requirements to participate in the subsidy system);55 research is needed that can assess casual effectiveness of these financial incentives.
Because a critical objective of the child care subsidy program is to increase low-income families’ access to high-quality care, the findings of these studies are important. The field first needs to understand if subsidies can impact the quality of care a child receives and then understand the optimal reimbursement rate level that leads to an improvement in the quality of care families with subsidies can access and select. To date, little research exists on the optimal reimbursement rate levels needed to allow families to access high-quality care. Based on current evidence, there is not a clear understanding of whether the 75th percentile threshold is sufficient: market rates collected through surveys reflect the rates providers charge, but may not be reflective of the true cost of high-quality care, especially if they are not current. Given, many state reimbursement rates fall below recommended levels to allow equal access to the child care market52 and fall far short of covering the costs to providers of high-quality care,16 more research is needed to assess whether families can access quality care through the subsidy program, particularly among families with infants and toddlers.
Once the link between subsidy receipt and subsidy rate levels and child care quality is established and guidance on a state policy lever can be identified, additional research is needed on the other aspects of child care subsidy policy implementation. For example, states have flexibility in determining payment methods (e.g., contracts with providers or vouchers), income eligibility requirements, and family copayment levels, among others. Studies on the implementation of child care subsidies can provide a better understanding how each of these policy decisions have implications for the effectiveness of subsidies in improving outcomes during the birth-to-3 period and families’ access to high-quality care.
In 2001, the Office of Child Care and the Office of Planning, Research, and Evaluation (OPRE) in the Administration for Children and Families launched several experiments on subsidy program strategies, including two experiments testing the effects of specific subsidy implementation and administration policies. One study in Washington State, tested the effect of standard versus an alternative (reduced) copayment schedules on subsidy receipt (total months, consecutive months), parental employment (including the number of hours worked), earnings, and receipt of public benefits.6 The study found that lower copayments increased the continuity of subsidy use, especially for those families who saw the greatest reduction in their copayments. For the overall study population, the reduced copayment schedule led to 0.7 more months of subsidy receipt and a greater percentage of families receiving subsidies for at least 13 consecutive months (39.9 percent in the treatment group versus 35.4 percent in the control group). Important limitations to this study include that study enrollment took place for one month, applied to one geographic area, and included families with children ages 11 and younger, so the results are not limited to impacts affecting the care of infants and toddlers.
Another OPRE study in Cook County, Illinois examining the impacts of expanded income eligibility and longer redetermination periods also found positive and significant impacts on subsidy receipt, although these results are intended, given the program design.56 Compared to the control group, families in the program group received subsidies for 8 months longer and were more likely to receive subsidies for 7 and 13 consecutive months (64.2 percent and 36.1 percent of the treatment group received subsidies for 7 months and 13 months consecutively, respectively, compared to 21.6 percent and 11.4 percent for the control group). These effects were consistent, but varied in size of impacts, depending on the specific intervention in this study. Although both policy changes had positive impacts on families’ receipt of subsidies, the largest effects were the result of expanded income eligibility, rather than the longer redetermination period. It is important to note that this study was limited to a small geographic area and was not limited to families with young children; the authors also noted recruitment difficulties, so results should be generalized cautiously. For both the Washington and Cook County studies, only null impacts were found for employment and household resource indicators.6,56
These studies represent an important start to what needs to be known about the impacts of specific elements of subsidy policies, but more research is still needed to better understand how policy changes can help more families access child care subsidies. For example, states vary in the generosity of both initial and continuing income eligibility requirements and these policies affect how many low-income families have access to subsidized care. A recent report found that in 13 states, families with income above 150 percent of the federal poverty level were ineligible for child care subsidies7 and families just above this threshold may still struggle to pay for child care. However, setting higher income eligibility levels without funding increases may result in longer wait lists or reduced per child spending. State variation in copayment levels is also important: if copayment levels are high relative to family financial resources, this may have implications for families’ ability to participate in the subsidy program even if they qualify for assistance. Future research is needed to address these and other implementation concerns.
- Quality of center-based care was measured using the Early Childhood Environment Rating Scale- Revised (ECERS-R) and quality of home-based care was assessed using the Family Day Care Rating Scale (FDCRS).
- The mean quality score for center-based care was 5.01 (standard deviation 1.39), as compared to 3.13 (standard deviation 1.28) for home-based care in this sample. Subsidy recipients were also more likely to choose formal home-based care, rather than kith or kin care, which affected quality averages.
- This study also looked at workforce qualifications, use of curriculum, and financial support for paid time off (PTO) or professional development (PD) as indicators of quality. For centers, increases in the base reimbursement rate was associated with financial support for PTO and PD and use of contracts was associated with the use of curriculum in models with covariates. For homes, the provider-friendly policy index was associated with the use of curriculum and financial support for PTO or PD in the full models with all control covariates.