Quality, Cost, and Purpose: Comparisons of Government and Private Sector Payments for Similar Services

Source: Kristina Richardi, Luc Schuster, and Nancy Wagman, Massachusetts Budget and Policy Center, January 23, 2011

This paper looks at what our state government pays for child care (which Massachusetts calls ”early education and care” in recognition of the importance of quality early care in the educational development of children), health care, and education, and compares those costs to what is paid for those services in the private sector. We find that in providing child care for lower-income working parents, the state purchases care from providers who also provide care to private clients. The rates that the state pays these providers range from 66 percent to 96 percent of the median market rate in each region. Our state Medicaid program buys health care in the same market as private payers, but pays only 80 percent of the rates paid by private payers. Finally, this paper finds that the average cost of public schools, $13,142 per student, is dramatically below the cost of private schools, which average $32,084 per student – and generally educate children from less challenging backgrounds.

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