Policy Brief

Decrease Out-of-Pocket Child Care Costs for Families

According to the US Department of Health and Human Services, out-of-pocket expenses for child care should be no more than 7% of a family’s income. For example, a family with a household income of $60,000/year should not spend more than $4,200/year on child care costs.

Background

A recent report from Child Care Aware of America states that a family in Alaska with two working parents will pay about 11% of their income in child care costs for one child. This percentage increases to 32% for single-parent families. Child care expenses for two children under the age of five rival the cost of housing for most Alaskan families.

While the cost of child care is high in Alaska, the out-of-pocket expenses, even for families receiving a child care subsidy, are some of the highest in the country. Research from Prenatal-to-Three Policy Impact Center indicates that Alaskan families pay some of the country’s highest out-of-pocket rates for child care.

A combination of strategies is needed to decrease out-of-pocket expenses for both subsidy and non-subsidy families while not unintentionally increasing providers’ financial burden. These strategies include increasing provider reimbursement rates to reflect the actual cost of care, reducing co-pays and other required costs paid by families receiving a subsidy, and exploring innovative solutions to reduce out-of-pocket expenses for families with incomes, placing them just outside subsidy eligibility.

Designing a more effective child care assistance program within Alaska is a critical step towards solving our state’s child care crisis and reducing the out-of-pocket child care expenses for all Alaskan families.