Thursday, October 1, 2009

What RMRS are

About once a month I hear a provider say the Regional Marker Rates are too low. "We only get 85% of what other providers get."

This reflects a deep misunderstanding of how RMRs work. What we call the RMR is the maximum payment rate for APP child care. It is 85th percentile of the regional market rate.

It's not the case that there is a single regional market rate for a type of care, a single number that represents how much care costs in that county. Rather there is a range of prices, a list of what every private facility charges for that type of care. For full-time weekly 3 to 5 year old center-based care, this is what center A charges, this is what center B charges, center C, etc. A particular county might have 100 centers offering preschool care. Arrange these in a list from lowest charge to highest. Find the spot where 85 of the centers charges less and 15 charge more. That is the RMR for that county. That's what the 85th percentile means: 85% charge less.

If you look at this in a real county, some centers will be in  poor areas (because parents in the neighborhood qualify for subsidized care) and some in richer areas (where parents can afford to pay), but fewer in areas with a median income a little over 75% of the State Median Income; they don't get subsidized, and they can't afford private child care.

Under the RMR system, a center in a poor area can charge more than 85% of all centers in the whole county, including those in rich areas. This means APP-subsidized providers in poor areas of town get much more than private providers in that same part of town. They make their the private pay cost equal to the RMR, which means no local private pay kids can afford to go there, so they end up with only subsidized kids. Basically it means providers in the poorer parts of Long Beach get paid  Malibu child care prices. This makes everybody want to have only subsidized kids, which reduces the local supply of private child care and raises its price, which raises the RMR the next time it is calculated.

In short, RMRs are a hell of a deal for providers in poor areas of a county but not so good for parents who don't get APP-subsidized care. I have mixed feelings about it. It's not fair in the sense that we are giving them more money than the private pay providers in their neighborhood get. This makes it effectively a transfer of money from the state to poor parts of town. Being an unrepentant tax-and-spend liberal, I'm not sure that's a bad thing. I'm not sure this is the mechanism I would chose to redistribute the money, but I'm willing to accept it since it already exists.

CDE tried to do something about this  a couple of years ago, when they put out draft RMRs by zip code, but people rebelled, because it was too hard to figure out, and providers in poor areas would get less money.

Yes, I know SRRs are often lower than RMRs. That's a different issue I'll tackle another time.

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