Cost and Price in Massachusetts Center-Based Care and Results of the 2009 Price Study

Overview Highlights from the price and cost surveys* Findings and Future Analysis of the 2009 Market Price Study *Highlights from A.D. Witte et al. (2008) The Massachusetts 2006 Provider Cost Study Wellesley College, for the Department of Early Education and Care. 2

Purposes of the Cost Survey To assess the cost of providing early education and care services in centers, after school programs and family child care across Massachusetts To determine the relationship between provider costs and prices for early education and care services; To examine the relation of structural quality measures to the cost of providing care 3

Cost Survey Design Three different detailed surveys were used to determine cost in centers, school age, and family child care programs. Survey Sample consisted of 1,000 programs (300 centers, 300 school age, and 400 family child care). The elements included in the determination of cost were: Teachers Salaries, Operating Costs, Implicit Donations costs, and Implicit Housing costs The findings for family child care were of limited use due to the reliance on estimated costs for family providers and the high degree of variability of family child care costs. 4

Cost Findings Center costs vary across the state with costs higher in the eastern part of the state and lower in central and Western Massachusetts. Accredited centers have higher classroom costs than non-accredited centers. Specifically infant and toddler classrooms have 20% to 33% higher costs. Preschool Programs with accreditation and more educated staff have 19% higher costs than other centers. Infant and Toddler Centers that are accredited or have more educated staff have costs 22% higher than those programs with less educated staff or are not accredited. Centers that provide a high level of supplemental services have costs that are 32-40% higher than other providers. 5

Comparing Cost to Price Prices in this report were the regional private-pay full-day median price derived from the 2006 Market Rate Survey completed several months before the Cost Survey. For Centers, the comparison between price and cost show significant variation across regions and types of care, but generally the regions with the highest costs also tend to have the highest prices. This relationship indicates that prices are indicative of costs and reflect market forces. 6

Costs and Prices are related to each other in the following ways: Generally, Infant prices are slightly lower than costs. Toddler prices are equal to or slightly higher than cost Preschool prices are higher than costs in all regions except Boston. These differences in price and cost support the common view that many providers who provide infant/toddler care supplement the cost with preschool tuitions. 7

DescriptionWesternCentralNortheastern *2 Greater Boston *2 Southeast Boston Infant Care Median Market Price$ 225$ 245$ 304$ 333$ 245$ 300 Median Average Cost NA 233NA State Reimbursement Rate Variability in Sample *1ModerateLowNA ModerateNA Toddler Care Median Market Price $ 210$ 224$ 264$ 300$ 220$ 251 Median Average Cost NA$ State Reimbursement Rate Variability in SampleHighLow NAModerate Low Preschool Care Median Market Price $ 165$ 185$ 211$ 248$ 185$ 180 Median Average Cost State Reimbursement Rate Variability in SampleHighModerate Low 2007 Median Weekly Prices, Cost and State Reimbursement (Per Child) [1] The cost variability is a measure of the degree to which the per-child costs vary between providers sampled within a region. For regions in which the variability is low (coefficient of variation.5). [2] The average cost per child could not be calculated for these regions due to samples sizes that were too small. 8

Next Steps and Research Questions While the cost study determined non- causal relationship between structural quality and costs, other important elements of quality such as child/teacher interactions and relationships were not included in the study. EEC would need to study how programs use which resources to improve quality and at what cost to analyze the cost of specific quality characteristics. 9

2009 Market Price Study Completed by Mills Consulting Group and Goodman Research Group with the Child Care Resource and Referral Network 10

Reasons for Market Rate Studies and the Importance of Accurate Findings The Administration for Children and Families (ACF) requires states to perform a Market Price Survey (MPS) every two years. The MPS influences maximum subsidy rates Setting maximum subsidy rates that match community prices are most likely to provide access Providing access to community child care facilities may affect family financial independence, parental choice, and child care quality The MPS provides insight into how the child care market operates in a state Learn about characteristics that are associated with price differences Study child care prices, a market price study 11

Changes to the Design of the 2009 Market Price Study Data for the 2009 Market Price Study was collected at the zip code level. In prior surveys a sample of providers was used to survey the price of care in each region. Collecting rate information at the zip code level required that EEC collect data from more providers than in the past. This year EEC collected data from all active full day, full week providers to allow analysis at a finer level. This data allow EEC to review the existing rate regions and explore amending these regions to better reflect actual provider price groupings. 12

RegionType Current Rate Median 75 th Percentile Western (Region 1)INF$47.90$51.00$58.00 TOD$43.20$46.00$53.00 PS$33.40$36.00$44.39 Central (Region 2)INF$49.20$54.00$64.90 TOD$44.20$50.00$56.00 PS$33.40$41.00$46.88 Northeast (Region 3)INF$54.95$67.00$76.60 TOD$49.55$60.00$69.60 PS$35.65$46.20$55.80 Greater Boston (Region 4)INF$59.50$73.40$82.60 TOD$52.85$67.80$74.80 PS$36.70$49.70$61.40 Southeast (Region 5)INF$47.90$50.00$59.00 TOD$44.20$47.00$53.80 PS$33.40$40.00$45.40 Boston (Region 6)INF$54.55$62.00$92.40 TOD$48.40$55.00$68.28 PS$36.70$40.00$50.00 Massachusetts2009 Market Price Study GROUP CHILD CARE CENTERS Full Time Group Centers - Current Rates, Median and 75%ile of Prices 13

Group Centers by Region and Program Type Percent Increase and Cost to Reach Median Price RegionType Current Rate Median Percent Increase to Median Cost of Increase to Median Western (Region 1)INF$47.90$51.006%$.26M TOD$43.20$46.006%$.59M PS$33.40$36.008%$1.74M Central (Region 2)INF$49.20$ %$.14M TOD$44.20$ % $.55M PS$33.40$ % $2.14M Northeast (Region 3)INF$54.95$ %$.58M TOD$49.55$ %$1.59M PS$35.65$ %$5.58M Greater (Region 4)INF$59.50$ %$.69M TOD$52.85$ %$2.02M PS$36.70$ %$7.5M Southeast (Region 5)INF$47.90$50.004%$.36M TOD$44.20$47.006%$.93M PS$33.40$ %$4.84M Boston (Region 6)INF$54.55$ %$.75M TOD$48.40$ %$1.73M PS$36.70$40.009%$2.57M 14

RegionCurrent RateMedian75%ile Western (Region 1) Infant$30.10$32.00$38.25 Western (Region 1) Toddler$30.10$32.00$36.00 Central (Region 2) Infant$31.80$37.00$40.50 Central (Region 2) Toddler$31.80$36.00$40.00 Northeast (Region 3) Infant$31.50$40.00$50.00 Northeast (Region 3) Toddler$31.50$38.00$50.00 Greater Boston (Region 4) Infant$34.35$54.00$60.00 Greater Boston (Region 4) Toddler$34.35$50.00$60.00 Southeast (Region 5) Infant$31.80$40.00$47.00 Southeast (Region 5) Toddler$31.80$40.00$45.00 Boston (Region 6) Infant$31.50$33.00$40.00 Boston (Region 6) Toddler$31.50$30.00$ Full Time Family Child Care (< 2 Years) Current Rates, Median and 75%ile of Prices

RegionCurrent RateMedian75%ile Western (Region 1)$26.40$31.00$35.00 Central (Region 2)$26.40$35.00$40.00 Northeast (Region 3)$27.85$37.00$50.00 Greater (Region 4)$27.85$50.00$60.00 Southeast (Region 5)$26.40$40.00$45.00 (Region 6)$27.85$30.00$35.00 Full Time Family Child Care ( 2 Years) Current Rates, Median and 75%ile of Prices 16

All Family Providers by Region Percent and Cost to Increase to Median Region Percentage Increase for Family Providers with Children under 2 Percentage Increase for Family Providers with Children over 2 Cost to Median for ALL Family Providers serving children of all ages Western (Region 1)6%17%$1.89M Central (Region 2)15%33%$3.39M Northeast (Region 3)24%33%$8.83M Greater (Region 4)50%80%$3.75M Southeast (Region 5)26%51%$4.03M Boston (Region 6)5%7%$1.08M 17

Future Analyses Options Using Price Data Determine the percentile of the current EEC rates. Determine if adjustments should be made to EEC rates and reimbursement regions Examine Rate Disparities : Dollar difference between current rate and the median price in market areas Determine the percentile of the prices at which programs should be reimbursed in each region and program type. Examine the relation between Price and characteristics of Quality: For example; what is the price difference between accredited and non-accredited programs? 18