Requires States to conduct market rate surveys, at least once every two years, to determine their child care payment rates under the block grant program, including cost-of-living adjustments and consideration of variations in localities, children's ages, and types of services.
Establishes a program of incentive grants to States and Indian tribes to improve the quality of, and access to, child care by increasing child care payment rates. Makes separate appropriations for such incentive grants in specified amounts for FY 2004 through FY 2008 (prohibiting use of block grant funds for such incentive grants).
Authorizes the Secretary of Health and Human Services to make an annual incentive grant payment to an eligible State only if the State has conducted a statistically valid survey of the market rates for child care services in the State within the two years before it submits an application containing information on such survey and the State's plans to increase its child care payment rates. Requires an eligible State that receives such a grant to make priority use of its funds to increase significantly (up to the 100th percentile of the market rate survey) the rate of reimbursement to providers for subsidized child care (with any remaining funds to be used to improve the quality of child care services). Requires a State matching contribution of at least 20 percent of incentive grant program activity costs.