The Biden administration has just announced that it will take unilateral action to make childcare more affordable and accessible to American families. The US Department of Health and Human Services announced on Tuesday that it has proposed a new rule to reduce the out-of-pocket costs for families who receive federal childcare subsidies while offering financial support to providers who accept those subsidies. It’s a far more limited action than what President Joe Biden had been seeking at the start of his administration—only 900,000 families get a childcare subsidy—but it will mean significant relief for the people it reaches.
The new rule would, if finalized, cap co-payments for families who receive federal subsidies at no more than 7 percent of their incomes. It would also encourage states to waive co-payments entirely for families who earn 150 percent of the federal poverty level or less, or $45,000 a year for a family of four, by explicitly giving them the ability to do so. Indiana and New Mexico have already waived co-pays, but most states require parents to pay something out of pocket, and low-income families pay more than 7 percent of their incomes in 16 states. “The president and I have been talking about that 7 percent for two and a half years,” Vice President Kamala Harris said on a call with the press.
Currently, only 14 states have set co-pay rates at 7 percent or lower, the threshold that HHS has established as a benchmark of affordability, but this rule would require all of them to do so. HHS estimates that average co-pays increased by nearly 20 percent between 2005 and 2021, which means that even with subsidies, “families still pay hundreds of dollars every month out of pocket for care,” Harris said. The administration estimates that nearly 80,000 families would pay lower co-pays if the rule is finalized. As an example, Harris said a family in Montana making $46,000 a year would save about $80 a month. “That money could go to gas or groceries or to fix a leak in their roof,” she said. “No family should have to choose between high-quality care for their child or to give up their career or to put food on the table.”
The department also announced that it will offer relief for the 230,000 providers who accept subsidies. The proposed rule would require states to pay them based on enrollment, rather than attendance, ensuring that they can count on funding no matter which children show up each day. It also promised to ensure that providers are paid “faster and more fairly,” Harris said, including paying providers ahead of time so they can cover costs like rent and payroll, the way they are on the private market, rather than retroactively as in most states now.
The administration also wants to make it easier for families to sign up for subsidies. The rule would encourage state and local childcare agencies to extend presumptive eligibility to siblings rather than making parents apply all over again, as well as allowing families to enroll online. Currently a third of states still make families apply with paper forms.
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“For millions of parents, childcare makes it possible to go to work and to be productive during the course of their day,” Harris said. “Childcare helps them determine their own future and live with dignity.” She recounted her own story: Her mother was able to pursue her career as a breast cancer researcher because she was able to send Harris and her sister to a childcare center just down the road. “This fight is personal for me,” she said.
The proposed rule will be published on July 13. The public will then have 45 days to comment, and the administration hopes that a final rule will be published in the spring of 2024.
The proposal echoes some of the administration’s original goals in its Build Back Better plan. That plan would have used federal funding to ensure that all American families, both those who get subsidies and those who don’t, who earned 250 percent of their state’s median income or less paid no more than 7 percent of their incomes on childcare, while also spending money to increase compensation for providers and funding universal, free preschool. But thanks to opposition from conservative Democratic lawmakers, that plank was eventually stripped from Democrats’ reconciliation package along with all other provisions that would have directly supported families.
Since Build Back Better collapsed, the administration has since taken other steps aimed at making childcare more affordable and accessible. It has required companies that seek incentives through the CHIPS and Science Act for building semiconductor plans to outline how they will help employees afford childcare. In December, Biden signed an appropriations bill into law that increased funding for the Child Care and Development Block Grant, which funds subsidies for parents, by $1.9 billion, the second-largest increase in the grant’s history. Biden called for $600 billion over a decade for childcare and early education in his annual budget, which would go toward ensuring families earning $200,000 or less would pay no more than $10 a day and was the largest amount any president has included in a budget, although it’s extremely unlikely to actually be enacted by Congress. Then, in April, Biden signed an executive order that, among other things, directed federal agencies to identify grant programs that can require childcare considerations similar to the CHIPS Act.
Any relief for childcare providers and families can’t come fast enough, however. Democrats included $39 billion in funding for childcare providers in the American Rescue Plan in March of 2021, including $24 billion in stabilization grants. The money helped 220,000 providers, a third of whom would have closed without it, while states used the money to create 300,000 new slots and make care more affordable for 700,000 families. But the funding will begin to run out in the fall, and a projected 70,000 programs are expected to close.
Meanwhile, parents are already paying exorbitant costs for the care that they can find. Childcare is unaffordable all across the country, with costs ranging from $5,357 to $17,171 at the median, consuming 8 to 19.30 percent of median family income.
