Child care subsidy reimbursement changes advanced

Lawmakers gave first-round approval March 5 to a bill that seeks to change how child care providers are reimbursed under the state’s Child Care Subsidy program.

Under current Nebraska law, the state Department of Health and Human Services reimburses participating providers based on a child’s attendance with funds from the federal Child Care and Development Block Grant. LB13, as introduced by Omaha Sen. Machaela Cavanaugh, instead would require the department to reimburse child care subsidy providers based on a child’s enrollment or authorized hours.

Cavanaugh said federal provisions of the block grant require participating states to reimburse providers for children in the subsidy program based on enrollment in order to continue receiving funding.

“[LB13] is really [about] creating certainty for the child care industry,” she said.

A Health and Human Services Committee amendment would require the department to change the reimbursement method by July 1, 2026. Cavanaugh offered an amendment to the committee amendment, adopted 35-11, that instead would push the start date to Aug. 1, 2026.

Bennington Sen. Wendy DeBoer spoke in support of LB13 and the amendments. She said the measure would be an important step in supporting workforce development in Nebraska.

Providers that offer child care through the subsidy program receive reimbursement at 75% of the market rate, she said, and withholding payment for children when they are not in attendance makes it even more difficult to cover the costs of operating a business.

“[Nebraska] needs people to be able to work and they can’t do that if they don’t have child care,” DeBoer said. “We need to make accepting child care subsidies a little more palatable to [providers’] business plans so that we can have more people working in Nebraska.”

Syracuse Sen. Bob Hallstrom also spoke in favor, saying parents enrolled in the subsidy program should be offered the same flexibility as parents who pay for their child care independently.

Speaking in opposition, Omaha Sen. Kathleen Kauth expressed concerns about the state paying for child care services that are not being provided. She said the measure could disincentivize parental responsibility and encourage misuse of the program.

Kauth said reimbursing providers based on attendance would assist low-income parents while also ensuring that they have “skin in the game.”

Gering Sen. Brian Hardin also opposed the bill and the amendments, citing uncertainty about the future of federal funding sources under the current administration. For example, he said, the state’s FMAP — the share of Medicaid costs paid by the federal government — recently dropped by $445 million.

“The FMAP is not the only area where we can and probably will see money go down from the federal government … and be handed off to the states,” Hardin said.

Senators voted 40-5 to adopt the committee amendment before advancing LB13 to select file on a 25-14 vote. Twenty-five votes were needed.