All states have considerable flexibility in the design and operation of their child care systems under existing federal statute and rules. This includes the payment practices they implement for their child care subsidy program. Consistent and timely subsidy payment policies and practices are critical to support the stability of child care operations, strengthen provider participation, and increase family choice by expanding access to child care that meets families’ individual needs.
Strategies for Improving Payment Practices
The Child Care and Development Block Grant Act requires states to certify that payment practices for child care providers reflect generally accepted payment practices for the private-pay market (42 USC § 9858c). States must also, to the extent that they can, implement policies that support the fixed costs of providing child care services by delinking provider payment rates from an eligible child’s attendance (42 USC 9858c).
Two ways that states can improve payment practices for providers are to pay prospectively (or ahead of services being provided) and to pay based on enrollment. Both policies provide consistent, timely payments that help support the stability of child care operations. A recent workforce survey from the National Association for the Education of Young Children (NAEYC) found that nearly 70% of program directors and administrators indicated they’d be more likely to accept subsidies if they were paid in advance and based on enrollment rather than attendance.
Under a 2024 federal rule, states had to begin implementing these policies, though many states received waivers to delay implementation until August 2026. In January 2026, the federal government proposed reversing that rule by removing requirements around paying prospectively and based on enrollment, while preserving state flexibility to adopt these policies. Read more about CCAoA’s response to those changes in our letter to the Department of Health and Human Services.
This blog explores which states are improving their payment practices to reflect those generally accepted in the private-pay child care market through the implementation of prospective payments and payments based on enrollment. The information in this blog is reflective of state policy implementation as of early February 2026.
Payments based on enrollment
Child care provider reimbursements for families eligible for and receiving a subsidy can vary based on a child’s attendance, even though provider costs (like teacher salaries or rent) are not decided by how many days each child is present. This monthly variation causes it to be difficult for programs to make informed decisions around budgeting, staffing, and enrollment.
Paying programs based on total enrollment instead of based on fluctuating attendance helps provide greater predictability for providers and reflects the way fixed operational costs work. Typically, enrollment numbers are higher than daily attendance, because children can be absent and not attend for a variety of reasons such as illness or vacation. In 2020, CCAoA, in partnership with New America, analyzed how this policy impacted providers in Massachusetts and southern California. Our analysis showed a stabilizing effect when reimbursing providers based on enrollment.
Paying based on enrollment was commonly implemented during the pandemic with federal relief funding, and many states continued this policy after this funding expired. Upon submission of the 2025-2027 CCDF Plans in fall 2024, 22 states and Washington, D.C., have moved to paying subsidy-eligible providers based on enrollment. This includes Alabama, California, Connecticut, Hawaii, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maryland, Mississippi, North Dakota, New Hampshire, New Jersey, New Mexico, South Dakota, Tennessee, Texas, Utah, Wisconsin, West Virginia, and Wyoming. Since then, Maine, Michigan, and South Carolina also implemented payments based on enrollment. In 2025, Washington appropriated new funding to support enrollment-based pay and is in the process of moving toward implementation.
Some states have paused the implementation of this policy. Ohio passed legislation in December 2025 to pause payments based on enrollment until July 2028. Missouri was anticipating launching payments based on enrollment in January 2026. But in December 2025, the Lead Agency announced it was pausing implementation until further notice.
As of February 2026, at least 26 states and Washington, D.C., have made progress towards implementing payments based on enrollment.
Prospective payments
In most states, providers serving subsidy-eligible children are paid only after care has been delivered, often weeks later. These delays can cause significant financial strain and threaten program stability. Providers have reported that delays in reimbursement makes participation in the subsidy system challenging, leading some to limit the number of children receiving subsidies or to forgo participation altogether.
On the other hand, private-pay families commonly pay for child care services in advance of care weekly, bi-weekly, or monthly. The same recent survey conducted by NAEYC found that 77% of child care directors and administrators require families to pay prospectively, or payments in advance of services rendered.
To address this issue, several states have implemented prospective payment models, or payments in advance of services being rendered, as part of their subsidy program. Upon submission of the 2025-2027 CCDF Plans in fall 2024, this included Hawaii, Kansas, Maryland, North Dakota, Utah and Wisconsin. Since then, Maine, New Hampshire, South Carolina, and Texas have implemented this policy.
In 2025, both California’s and Washington’s final budgets appropriated new funding to support prospective payments for providers, though neither state has fully implemented this policy as of February 2026.
Missouri was anticipating launching prospective payments in January 2026. In December 2025, the Lead Agency announced it was pausing implementation until further notice.
Maintaining Program Integrity
Under these two policies, states have processes to assess the eligibility of children and child care programs. Paying based on enrollment does not end the need for collecting attendance data, and states who pay based on enrollment set up clear rules and policies for providers for monitoring and reviewing attendance. Additionally, CCDF rules allow states to discontinue assistance prior to the next minimum 12-month redetermination if there are excessive unexplained absences despite multiple attempts to contact the family and provider. These practices help ensure and maintain program integrity.
North Dakota, for example, began prospective payments and payments based on enrollment in 2023. Providers use a self-service portal to record attendance for the previous month and to certify the child enrollment roster for the next month. To receive payment, providers must certify attendance. If a child does not attend at least 8 hours a month, an overpayment may result in and is addressed by reducing future payments to the provider or through direct repayment.
Effective implementation of these policies depends on state agencies having sufficient technological and human capacity to support program integrity and minimize the risk of errors and fraud.
Next Steps
CCAoA is encouraged by the progress states continue to make toward adopting payment practices that reflect those generally accepted in the private-pay child care market and will continue to monitor changes.
States set a variety of other policies regarding access to quality, affordable child care. CCAoA tracks policy changes in our State Policy Dashboard.
