HHS Shuts Down Childcare Fraud Scheme
The Department of Health and Human Services moved quickly this week to roll back parts of the Biden-era child care rule that critics say opened the door to massive abuse.
Under the change, HHS — through the Administration for Children and Families — is rescinding provisions of the 2024 Child Care and Development Fund rule that allowed states to pay providers without verifying attendance. The agency says that approach invited fraud and misdirected taxpayer dollars.
HHS Secretary Robert F. Kennedy Jr. put it bluntly: “Congress appropriated this funding to support working families and ensure children have safe places to grow and learn,” he said. “Loopholes and fraud diverted that money to bad actors instead. Today, we are correcting that failure and returning these funds to the working families they were meant to serve.”
The policy shift restores attendance-based billing. That means states can demand proof kids were actually present before money is released. It also cuts back on upfront lump-sum payments to providers and emphasizes parent-directed vouchers over provider contracts.
HHS officials tied the change to a wave of fraud allegations. The administration froze future CCDF funding until states can show systems to verify attendance and guard against abuse. That block grant is one of the federal government’s largest child-care funding streams.
Deputy Secretary Jim O’Neill warned about the old approach: “Paying providers upfront based on paper enrollment instead of actual attendance invites abuse,” he said. He added, “We have turned off the money spigot.”
Assistant Secretary for Family Support Alex Adams echoed the need for verification: “When controls are not in place, bad actors can bill for children who aren’t there,” he said. “Families and taxpayers deserve proof that services are being delivered to children. These rule changes emphasize the critical role federal investments in child care play for the American workforce.”
Media outlets reported the scale of the spending under the CCDF program. The New York Post noted the Biden rule took effect in April 2024 and pointed to billions distributed across states over recent years. HHS data cited in coverage shows large outlays during pandemic years, and officials say tens of billions in payments flowed through the fund between 2021 and 2024.
Minnesota has become a focal point for investigations. Local reporting and viral videos have alleged that some daycares collected huge sums while showing few or no children in operation. One online video claimed nearly a dozen centers took in $111 million in federal funding while appearing to have no kids present. Since late December 2025, outlets reported more than 245 fraud reports tied to child-care funding in that state.
HHS says it has taken steps specifically aimed at suspected fraud in Minnesota, including freezing payments there while investigations proceed. The department also said it will require stronger documentation — including photo evidence in some cases — before releasing federal cash.
Republican critics called the rollback overdue. They argue the Biden-era rules prioritized speed and payouts over oversight and accountability, and they praised HHS for restoring basic checks. Supporters of the original approach countered that the prior rules sought to stabilize providers during a crisis, but HHS leaders say reforms are necessary now to stop bad actors and protect taxpayer money.
The net effect: attendance verification is back, upfront payouts are curtailed, and states must tighten controls. HHS frames the move as a correction. Its message to states is simple — prove services were delivered, or federal funds will be paused until you can.