Association for Public Policy Analysis & Management

In 2016, 1.37 million children received subsidies under the U.S. Department of Health and Human Services’ $8.7 billion Child Care Development Fund (CCDF), though care is often of low-quality. One way a state can incentivize providers to offer high-quality care is by providing larger child care subsidies to high-quality providers through a tiered reimbursement system. This research used a sequential explanatory equal status mixed method design to answer the question, Does Maryland’s tiered reimbursement system incentivize child care centers to be rated high-quality rated on Maryland’s Quality Rating and Improvement System (QRIS)?

The first stage of research consisted of multilevel logistic regressions (nested at the county level) to determine the association between child care centers’ reliance on subsidy payments and whether the center was rated highly enough on Maryland’s QRIS (called Maryland EXCELS) to receive an incentive payment. Reliance on subsidy payments was defined as the percentage of licensed slots filled by children in Maryland’s Child Care Subsidy Program (CCSP) (i.e., “subsidy density). The regressions used administrative data from the Maryland State Department of Education (MSDE) and demographic data from the U.S. Census. The analyses included all child care centers in Maryland that received payments from the CCSP in January 2018. The second stage of research consisted of 14 interviews with child care center directors across five counties to understand how they made decisions about which EXCELS rating to attain and how tiered reimbursements factored into their decisions.

Results from my quantitative research found that a greater subsidy density was associated with a greater likelihood of a center being rated high-quality and receiving a tiered child care payment. These results indicate Maryland’s tiered reimbursement was working as intended. However, results of my qualitative research found that few center directors reported that EXCELS payments factored into their decision on what EXCELS level to reach and none of the centers were singularly motived by the bonuses. Rather, directors reported being intrinsically motivated to improve EXCELS ratings or motivated by technical assistance providers. Additionally, directors found it difficult to spend the time on EXCELS that is necessary to become a high-quality center.

Despite tiered reimbursement systems existing for two decades, there is very little research on how providers respond to the systems (Adams et al., 2003; Gormley & Lucas, 2000; Greenberg et al., 2018), and no research analyzing how providers in a single state respond to tiered reimbursement systems that are tied to a QRIS. My research is the first in-depth look at how a tiered reimbursement system functions in a single state and it is an important contribution to the field by determining whether a tiered reimbursement system functions as theory predicts.