Over 1.4 million children in the United States receive child care subsidies each month, provided through the Child Care and Development Fund (CCDF) and administered at the state or local level (U.S. Department of Health and Human Services, 2015). Subsidies assist families in paying for child care arrangements so that low-income parents, including parents transitioning from welfare, can work or attend training and education programs.

One of the key determinants of access to child care for families receiving CCDF subsidies is provider payment rates set by States and Territories. When payment rates are low relative to market prices, providers may choose not to serve children using subsidies or may charge parents the difference between the subsidy payment rate and the price the provider charges parents who do not receive a subsidy (where allowed).

States and Territories now face new considerations when collecting data to inform the process of setting provider payment rates. This brief provides information on key issues and criteria for choosing whether to conduct a market rate survey, use an alternative methodology such as a cost model, or both.