A market rate survey measures the price charged by child care providers in a specific geographic area. These surveys can provide valuable information to a state about the price of care in communities across the state and enable it to establish subsidy rates at sufficient levels to allow low-income parents equal access to a range of child care options. However, market rate surveys are difficult to do well so that accurate information is collected from a representative spectrum of child care providers. The problem with this assumption, however, is that child care prices are typically based on what parents can afford or are willing to pay not the actual cost of providing the service. Hence, when a state s reimbursement rate is based on a price that does not fully cover providers costs, providers cut back on such things as wages or facility improvements, which often affect the quality of the care provided, or refuse to serve subsidized children.
Accurate information is critical in establishing sufficient subsidy rates.
However, designing and conducting a useful survey pose a number of challenges to states. For example, to make certain that the data collected are fully reflective of the child care market in a particular area, a state needs to obtain accurate rate information from all providers in that market. Identifying providers and obtaining a sufficient number of responses to the survey so that the information is representative of the price of care for that area takes time, planning, and effort. Further, providers also need to know how to establish rates that do cover their costs, and reflect this information on the survey instrument. Developing other financing strategies that build on and supplement a market rate approach is a step equally challenging and important for states to take in meeting the child care needs of its low-income families.