Issue: The tiered meal reimbursement system instituted in

1997 within the child care homes portion of the Child and

Adult Care Food Program (CACFP) has refocused the program on low-income children. It has also reduced the

number of child care homes participating in the program.

Is the two-tiered reimbursement system effectively targeting low-income children? Is it driving homes out of the

program?

Background: The Personal Responsibility and Work

Opportunity Reconciliation Act (PRWORA) established a

two-tier meal reimbursement rate structure for CACFP

family child care homes. As of July 1997, homes located

in low-income areas or run by low-income providers were

designated as Tier I. An area is considered low-income if

50 percent or more of the children at the local elementary

school have been approved for free or reduced-price

school meals or if 50 percent or more of the children 

in the area are in families with incomes at or below 185

percent of the Federal poverty guidelines, as measured by

the most recent decennial census. A provider is lowincome if family income is below 185 percent of the

Federal poverty guidelines. Tier I meal reimbursement

rates are comparable to the rates that existed for all

CACFP homes before PRWORA. Family child care homes

that do not meet the low-income criteria are designated as

Tier II. Tier II homes receive lower reimbursements,

although they can be reimbursed at Tier I rates for meals

served to low-income children, given appropriate documentation (table 1).

Findings: The Economic Research Service’s Family Child

Care Homes Legislative Changes Study found that CACFP

family child care homes serve fewer children, but more of

them are from low-income families. Comparison of 1995

and 1999 survey results shows that, prior to the tiering of

meal reimbursements, 21 percent of children served were

from low-income families and 79 percent came from middle- and high-income families. Post-tiering, 45 percent of

children served now come from low-income families, with

a corresponding drop to 55 percent of children from middle- and high-income families (fig. 1). The reallocation

resulted from three factors: 1) the number of low-income

children served by CACFP homes grew by 165,000 (80

percent); 2) the number of higher-income children fell by

174,000 (23 percent); and 3) meals for nearly all lowincome children were reimbursed at the higher rate, while

meals for 42 percent of higher income children were reimbursed at the lower Tier II rate. More than half of higher

income children receive Tier I reimbursed meals because

they are cared for by Tier I providers.

The Legislative Changes Study also found that tiering

reduced the number of family child care homes participating in the CACFP. The number of CACFP family child

care homes declined by 10 percent from 1996 to 1999 (fig.

2). Projections based on economic and demographic

trends indicate that the number of homes would have

grown in the absence of tiering. The number of participating homes continues to decline, falling from an FY 2000

average of 171,708 to an average of 167,479 in FY 2001.

United States

Department of

Agriculture

Economic 

Research

Service

Food Assistance and Nutrition Research Report Number 34-9 July 2003

WIC School

meals

CACFP General

Table 1. CACFP Child Care Home Meal Reimbursement Rates, July 1, 2002–June 30, 2003

Breakfast Lunch and supper Supplement (Snack)

Tier I Tier II Tier I Tier II Tier I Tier II

Contiguous States 0.98 0.37 1.80 1.09 0.53 0.14

Alaska 1.55 0.56 2.93 1.76 0.87 0.24

Hawaii 1.13 0.42 2.11 1.27 0.63 0.17

Source: Food and Nutrition Service, USDA

Reimbursement Tiering

Improves Targeting but

Decreases Participation in

the Child and Adult Care

Food Program

Food Assistance Research Brief

Linda M. Ghelfi, lghelfi@ers.usda.gov, (202) 694-5437
2 Economic Research Service / USDA

Reimbursement Tiering Improves Targeting but Decreases Participation in the Child and Adult Care Food Program / FANRR-34-9

Tiering is conducted on a low-income area/provider basis

to avoid a child means test that was blamed for low participation by homes when they were first allowed into the

program in 1976. Parents were required to disclose their

family income to CACFP family child care providers; this

means test was viewed as burdensome for providers to

administer and too invasive for their relationship with the

few families for whom they each provided child care. The

child means test and a three-level reimbursement tiering

system based on their family income levels was removed

from the child care homes portion of the CACFP in 1978.

To restrict Tier I reimbursements exclusively to lowincome children’s meals, a more direct means test is

required. How such a test could be designed and operationalized without causing a larger dampening effect on

participation by child care homes is an open question.

Information Sources:

Hamilton, William L., Nancy R. Burstein, and Mary Kay Crepinsek,

Reimbursement Tiering in the CACFP: Summary of the Family Child

Care Homes Legislative Changes Study. FANRR-22. U.S. Department

of Agriculture. Economic Research Service. March 2002. Available at:

http://www.ers.usda.gov/publications/fanrr22

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, a report of the Family Child

Care Homes Legislative Changes Study. E-FAN-02-002. U.S.

Department of Agriculture. Economic Research Service. April 2002.

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

Additional Information:

http://www.ers.usda.gov/briefing/foodnutritionassistance/childnutrition

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religion, age, disability, political beliefs, sexual orientation, or marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET

Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue,

SW, Washington, DC 20250-9410, or call (202) 720-5964 (voice and TDD). USDA is an equal opportunity provider and employer.

Figure 1. Share of meal reimbursements in 1995 and 

1999 by ratio of children's family to the Federal 

poverty guideline

Source: Administrative data on CACFP family child care homes 

and surveys of parents of children in CACFP family child care.

Income

131-185%

1995: $793 million (in 1999 dollars)

1999: $668 million

Income

0-130%

Income

>185%

Income

131-185%

Income

0-130%

Income

>185%

$82

10.3%

$88

11.1%

$624

78.6%

$134

20.1%

$166

24.9%

$368

55.1%

Figure 2. Actual and projected numbers of

participating CACFP homes

250,000

200,000

150,000

100,000

50,000

0 1989 91 93 95 97 99

Fiscal year

Actual

Projected