Wisconsin Subsidized Childcare Moves to Parent-Pay System

October 20, 2015 | Norbert Haupt


Starting in the fall of 2015, Wisconsin’s subsidized childcare program, administered by the Wisconsin Department of Children and Family (DCF), will start paying for subsidized childcare by depositing the funds on a debit card to parents, and the parents in turn will use those funds to pay the childcare providers. This process is known in the industry as a parent-pay system. Parent-pay systems have been used in Kansas. Now Wisconsin joins this list.

In a parent-pay system, child care assistance funds are issued to families using the Electronic Benefit transfer (EBT) card.  It is similar to a debit card. Funds are put into a child care account on the card on the first of every month.  Families can then use the funds to pay providers electronically during the month.

There are advantages and disadvantages to this process. An obvious advantage is that when funds are disbursed to parents, and parents may the payments to providers, the ability of providers to possibly defraud the system by creating fictitious children and collecting fees for their care is removed. It now requires the collusion with a parent to commit this type of fraud.

A disadvantage is that the reimbursement for care fees is now disconnected from actual attendance of children at childcare providers. In 2009 and 2010, the Milwaukee Journal Sentinel ran a series of Pulitzer Prize-winning articles documenting childcare subsidy fraud in Wisconsin. In response to this, the state initiated a project to track attendance using finger-scans from parents checking in their children at providers. This would have made fictitious care much more complicated, since registered users had to be present every time a child was checked in and out. Surprisingly, after about six months into the project, the state canceled that program. Several years later, the Wisconsin legislature decided on the parent-pay system.

The parent-pay system will cost $19 million through 2017 to implement, and then $4 million per year to operate. The contract went to FIS Global. Now that the system is coming online, some providers are starting to be concerned about the higher reimbursement they used to receive based on the Wisconsin YoungStar program, which provided incentives for providers to achieve higher quality services. According to the state database, about 11% of the state’s 5,355 Wisconsin Shares day care providers meet the four- or five-star criteria, and have been eligible for a “bonus” of up to 25% of the fees charged. When parents pay directly, they won’t be paying this bonus, but rather the standard, state-approved reimbursement amounts. While the state argues that the YoungStar program was not meant as a bonus, providers now do not agree.

Providers are now claiming that this change in payment strategy jeopardizes the availability of funding for the state’s most vulnerable children. More information on this controversy is in this post by the Milwaukee Journal Sentinel.