Changes Study

Research Report

Number 24
During the spring and summer of 1999, family child care providers who

take part in the U.S. Department of Agriculture’s Child and Adult Care

Food Program (CACFP), parents of children cared for by the providers,

and sponsoring groups took part in a USDA survey.

The survey was conducted within the family child care homes part of

CACFP. It answered questions raised by Congress about the effects of the

new meal reimbursement tiering system that was applied to family child

care homes in July 1997. This report is mostly for the people who

answered survey questions and who said they were interested in seeing

study results; others interested in the study’s findings may also find it useful.

USDA’s Economic Research Service and Food and Nutrition Service

funded the study, and Abt Associates Inc., conducted it. Staff members of

all three organizations join in thanking the people who answered the

survey for their time and effort, which helped make the study successful.

The CACFP and Tiering 

The Child and Adult Care Food Program is run by USDA at the Federal

level and by State agencies, mostly departments of health or education, at

the local level. CACFP helps pay for meals and snacks served in child and

adult daycare facilities that sign up to be part of the program. The program

pays care providers a fixed amount for each meal they serve that meets

CACFP standards.

Seeking to focus CACFP benefits more tightly on feeding low-income

children, Congress passed a 1996 law that set up a two-tier system of

CACFP meal repayment rates for family child care homes. That law, the

Personal Responsibility and Work Opportunity Reconciliation Act

(PRWORA), is best known for the major changes it made in the U.S.

welfare system.

2 Effects of CACFP Meal Reimbursement Tiering / FANRR-24
July 1997. Homes in low-income areas or homes in which the care

providers are low-income are in the Tier 1 group (see low-income

definition, page 4). Meal reimbursement rates for Tier 1 homes are almost

the same as the rates that existed for all CACFP homes before PRWORA.

Family child care homes that do not qualify as low income are in the Tier 2

group. Reimbursement rates are lower for Tier 2 homes, but they can be

reimbursed at Tier 1 rates for meals served to low-income children (see

table 1 for the rates that were in effect during the study).

Tiering cut meal reimbursements almost in half for Tier 2 providers. In

fiscal 1999, Tier 2 homes received meal repayments averaging $177 per

month (including some meals reimbursed at the Tier 1 rate). Had they

been repaid at the Tier 1 rates for all meals, their monthly reimbursements

would have averaged $326.

Sponsors Allow “Care’’ Homes To Be Part of CACFP

To participate in the CACFP, family child care homes must be sponsored

by a public or private nonprofit organization that has an agreement with a

State CACFP agency. The agreement allows the organization to run the

CACFP at the local level.

Sponsors recruit providers into the CACFP, train and monitor them to make

sure they follow program rules, and handle meal reimbursement claims

and payments. When tiering started, sponsors had to use the low-income

rules to put each home care provider into the Tier 1 or Tier 2 group. If Tier

2 providers requested it, sponsors also had to determine whether any of

the children in the providers’ care came from low-income households and,

therefore, qualified for Tier 1 reimbursed meals. Tiering gave sponsors

more CACFP duties, but the sponsors’ costs to run the program are paid

back under rules that did not change when tiering started.

Economic Research Service / USDA 3
4 Effects of CACFP Meal Reimbursement Tiering / FANRR-24

b) Personal low income–the child care provider’s household income is at or below

185 percent of the Federal poverty guidelines (with appropriate documentation by

the home’s sponsor).

2) For a child in a Tier 2 home to have meals reimbursed at the Tier 1 rates

–the child lives in a family with income at or below 185 percent of the Federal

poverty guidelines (with appropriate documentation by the home’s sponsor).

The Federal poverty guidelines are determined by the U.S. Department of Health

and Human Services and are used by many Federal programs. They include

adjusted poverty levels for Alaska and Hawaii, which the U.S. Census Bureau’s

poverty thresholds do not. When this study was conducted, the 1999 poverty

guidelines and the 185 percent level used by the CACFP were:

Table 2—1999 HHS poverty guidelines and 185 percent of the guidelines

Number 48 Contiguous

of persons States and DC Alaska Hawaii

in family Poverty Poverty Poverty

unit Level 185% Level 185% Level 185%

1 $8,240 $15,244 $10,320 $19,092 $9,490 $17,557

2 11,060 20,461 13,840 25,604 12,730 23,551

3 13,880 25,678 17,360 32,116 15,970 29,545

4 16,700 30,895 20,880 38,628 19,210 35,539

5 19,520 36,112 24,400 45,140 22,450 41,533

6 22,340 41,329 27,920 51,652 25,690 47,527

7 25,160 46,546 31,440 58,164 28,930 53,521

8 27,980 51,763 34,960 64,676 32,170 59,515

For each additional person, add:

2,820 5,217 3,520 6,512 3,240 5,994
participating as CACFP homes in January 1997 but not in January 1998—

were tracked to find out whether they currently provide child care and their

reasons for leaving the CACFP.

Because tiering started nationwide on July 1,

1997, we examined its effect by looking at

conditions before and after that date, most

often comparing our 1999 survey data with

survey data collected for the 1995 Early

Childhood and Child Care Study. In analyzing

changes, whenever possible we considered

the effects of other factors—such as the

strong economy, changes in the child care

industry, and changing dietary patterns—

along with tiering’s effects.

Selected major study findings follow. More

detailed results are available in six related

reports posted on the ERS website in Adobe

Acrobat readable files. Those reports and

their Web addresses are listed on the back

cover.

Family child care homes component focused more on 

low-income children after tiering started

In 1995, just 21 percent of CACFP meal reimbursements to family child

care homes were for meals served to low-income children (those from

families with income at or below 185 percent of the Federal poverty

guidelines). That figure more than doubled, to 45 percent, by 1999.

The increase was particularly strong among the lowest income children, 

those from families with income at or below 130 percent of the poverty

guidelines (fig. 1).

Economic Research Service / USDA 5
The reallocation of dollars results from three factors:

• The number of low-income children served by CACFP homes grew

by 165,000 (80 percent);

• The number of higher income children served by CACFP homes fell

by 174,000 (23 percent);

• Meals for nearly all low-income children were reimbursed at the higher rate, while meals for 42 percent of higher income children were

reimbursed at the lower Tier 2 rate. The 58 percent of higher income

children who receive meals reimbursed at the Tier 1 rates are cared

for by providers who meet the Tier 1 criteria.

Tiering reduced the number of family child care homes 

participating in the CACFP

Tiering greatly reduced the financial reasons for Tier 2 providers to be part

of the CACFP. Program data show that the number of CACFP family child

care homes declined 10 percent from 1996 to 1999. Although factors other

than tiering might have caused a decline, projections based on economic

and demographic trends indicate that the number of family child care

homes would have grown slightly over this period. The study estimates that

the number of participating CACFP homes in 1999 was about 14 percent

lower than it would have been in the absence of tiering (fig. 2).

Tiering might have reduced the number of CACFP homes either because it

caused some CACFP providers to leave the program earlier than they

6 Effects of CACFP Meal Reimbursement Tiering / FANRR-24

1995

$793 million (in 1999 dollars)

1999

$668 million 

Source: Administrative data on CACFP family child care homes and surveys of parents 

of children in CACFP family child care.
A corresponding drop in the number of children receiving program benefits

did not accompany the decline in CACFP homes. Children’s attendance in

CACFP homes grew rapidly during the early 1990s, but then changed only

a little from 1995 to 1999. Attendance increased 1 percent or less in 1996

and 1997 and then decreased by similar percentages in 1998 and 1999.

The extent to which tiering influenced this trend was not analyzed. But, if

the number of CACFP homes had increased as projected, more children

probably would have been served in 1999.

Tiering did not cause a drop in the number or nutritional quality of

meals and snacks offered to children in Tier 2 CACFP homes 

CACFP meal reimbursements and program rules about what type of food

can be used for a reimbursable meal or snack are intended to help

providers offer healthful food to the children in their care. A key question

Economic Research Service / USDA 7

1989 1991 1993 1995 1997 1999

0

50,000

100,000

150,000

200,000

250,000

Figure 2—Actual and projected numbers of CACFP family child 

care homes

Fiscal year

Projected homes

Actual homes
CACFPrequired meal components are milk; fruit, vegetables, and juice;

bread and bread alternatives such as cereal; and meat and meat

alternatives such as cheese or eggs. The rules specify which components

must be included in each meal and snack. Compliance rates for all meals

and snacks in 1999 were equal to or better than those for similar providers

in 1995.

The CACFP has rules for what food components should be in a meal or

snack, but no rules on nutrient content. To assess the nutrients in meals

served by Tier 2 providers, National School Lunch and School Breakfast

Program nutrition standards were used as benchmarks. According to those

standards, breakfast should provide one-fourth of the Recommended

Dietary Allowances (RDA) for food energy and five nutrients—protein,

vitamin A, vitamin C, calcium, and iron; and lunch should provide one-third.

The meals offered by Tier 2

providers in 1999 contained similar

or greater percentages of those

RDAs than meals offered by similar

providers in 1995. Breakfasts

offered more than one-fourth of the

RDA for all five nutrients, and

lunches offered more than one-third

of all but iron. Both breakfasts and

lunches fell somewhat short of the

targets for food energy. Tier 2

providers in 1999 moved closer to

the standards by offering larger

portion sizes and therefore more

food energy at both meals than

similar providers did in 1995.

8 Effects of CACFP Meal Reimbursement Tiering / FANRR-24
patterns were essentially the same

for Tier 2 providers in 1999 as for

similar providers in 1995.

Tier 2 providers raised child care fees and held down 

their food spending 

Average child care fees were higher for Tier 2 providers in 1999 than for

similar providers in 1995 by about $0.31 per hour, or $11 per week for a

child in care for 36 hours (adjusted for inflation). Compared with Tier 1

providers, Tier 2 providers’ food spending was about $2 lower per child per

week than was projected based on their operations and locations.

Information on food spending was not collected in the 1995 study.

These differences appear to reflect some providers’ direct responses to the

lower meal reimbursements (about 15 percent said they made these

changes in response to lower reimbursements). The differences may also

reflect the loss of Tier 2 providers who dropped out of the program (or did

not enter it) because the child care markets in their areas would not

support higher fees or lower food spending.

Tiering has added challenges for CACFP sponsors, but it has 

not led to a major decline in the number of sponsors

With the introduction of tiering, sponsors became responsible for:

• classifying homes as Tier 1 or Tier 2;

• determining the eligibility of children in Tier 2 homes for meals reimbursed at Tier 1 rates (if requested by the provider);

• determining each month the number of meals to be reimbursed at

each rate, for Tier 2 providers with some children reimbursed at Tier

1 rates.

Economic Research Service / USDA 9
up recruitment because attracting new homes was more difficult and

competition had gotten stronger among sponsors for homes.

The number of CACFP sponsors peaked in 1994-95 and declined slightly

in each subsequent year. A 3.6-percent decrease occurred from 1997 to

1999. This was essentially the same as the 3.7-percent decrease in the 2

prior years, suggesting that tiering did not have a substantial effect on the

number of participating sponsors (fig. 3).

Tiering had little effect on the total number of licensed 

family child care homes 

States seek to make sure child care facilities operate under correct safety

and sanitary conditions by requiring all or certain classes of family child

care homes to be licensed, certified, or registered (the wording and

10 Effects of CACFP Meal Reimbursement Tiering / FANRR-24

1989 1991 1993 1995 1997 1999

0

200

400

600

800

1,000

1,200

1,400

Source: CACFP administrative data.

Figure 3—Number of sponsors of CACFP family child care homes

Fiscal year
licensing policies vary from State to State). Homes must meet the

applicable State requirements in order to participate in the CACFP. CACFP

benefits—particularly the meal reimbursements—therefore have been seen

as a major incentive for homes to become licensed.

After declining 2 percent from 1995 to 1997, the total number of licensed

homes in the United States increased by 4 percent from 1997 to 1999. In

that 1997-99 period, the number of CACFP homes fell by 8 percent (fig. 4).

Although the possibility cannot be ruled out that the number of licensed

homes would have grown even more without tiering, the national trend

does not indicate a negative impact. State-level data suggest that tiering

may have contributed to a decline in licensed homes in some States, but

that tiering did not play a major role.

Economic Research Service / USDA 11

1989 1991 1993 1995 1997 1999

0

Source: Children's Foundation data on licensed homes and CACFP 

administrative data.

Licensed homes CACFP homes

National Agricultural Library Cataloging Record:

Effects of CACFP meal reimbursement tiering : major findings of the family

child care homes legislative changes study.

(Food Assistance and Nutrition Research report ; no. 24)

1. Food relief--United States--Evaluation. I. Abt Associates. II. Title. HV696F6

THE UNITED STATES DEPARTMENT OF AGRICULTURE IS AN EQUAL OPPORTUNITY

PROVIDER AND EMPLOYER
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Research Service, March 2002.

http://www.ers.usda.gov/publications/efan02003

Crepinsek, Mary Kay, Nancy R. Burstein, Ellen B. Lee, Stephen D.

Kennedy, and William L. Hamilton, Meals Offered by Tier 2 CACFP Family

Child Care Providers: Effects of Lower Meal Reimbursements. E-FAN-02-

006. U.S. Department of Agriculture, Economic Research Service, 

March 2002.

http://www.ers.usda.gov/publications/efan02006

Crepinsek, Mary Kay, Linda M. Ghelfi, and William L. Hamilton,

Households with Children in CACFP Child Care Homes: Effects of Meal

Reimbursement Tiering. E-FAN-02-005. U.S. Department of Agriculture,

Economic Research Service, March 2002.

http://www.ers.usda.gov/publications/efan02005

Hamilton, William L., Eric M. Stickney, Nancy R. Burstein, and Lawrence S.

Bernstein, Family Child Care Home Participation in the CACFP: Effects of

Reimbursement Tiering. E-FAN-02-002. U.S. Department of Agriculture,

Economic Research Service, March 2002.

http://www.ers.usda.gov/publications/efan02002

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Care Providers in the CACFP: Operational Effects of Reimbursement

Tiering. E-FAN-02-004. U.S. Department of Agriculture, Economic

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http://www.ers.usda.gov/publications/efan02004

Economic Research Service/USDA May 2002

1800 M Street, NW www.ers.usda.gov

Washington, DC 20036-5831