The Trump administration took aim on Monday at a Biden-era regulation requiring states to pay child care providers before verifying attendance or delivering services, citing allegations of massive fraud in Minnesota day care centers.
The Department of Health and Human Services announced that it will rescind portions of the 2024 Child Care and Development Fund Final Rule, arguing that the prior administration’s efforts to expand access wound up reducing oversight and increasing the risk of fraud at federally funded facilities.
“The Biden-era rules required states to base payments on enrollment rather than verified attendance, pay child care providers in advance of services, and favor guaranteed contract slots with providers over parent-directed vouchers,” the department said, including at facilities now under investigation in Minnesota.
The proposed policy changes under the Administration for Children and Families would restore attendance-based billing, basing funding on the number of children who show up in person for the program, rather than how many are listed on the books.
In addition, states would no longer require states to pay day-care providers before caring for children, or to steer families away from programs that accept parent-directed vouchers.
“Congress appropriated this funding to support working families and ensure children have safe places to grow and learn,” HHS Secretary Robert F. Kennedy, Jr. said in a statement. “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 Biden-era rules, which were proposed in July 2024 and went into effect last Feb. 6, also encourage states to consider children eligible for federal subsidies before “full documentation and verification” in the interest of making enrollment “easier and faster.”
The regulatory rollback follows a national outcry over the burgeoning Minnesota day-care fraud cases, including videos released last month by independent journalist Nick Shirley showing empty daycare centers in Minneapolis operated largely by Somali residents.
Deputy Health and Human Services Secretary Jim O’Neill said last week that the department has frozen all child-care payments to Minnesota pending a “comprehensive audit of these centers” by the state.
“Paying providers upfront based on paper enrollment instead of actual attendance invites abuse,” Mr. O’Neill said in a Monday statement. “In Minnesota, we’ve seen credible and widespread allegations of fraudulent daycare providers who were not caring for children at all. The reforms we are enacting will make fraud harder to perpetrate.”
The scandal has rocked the political landscape in Minnesota, where the social services system has come under fire in recent years for fraud scams involving federal funds intended for COVID-19, housing and autism support.
Minnesota Gov. Tim Walz, a Democrat, said Monday he will not seek a third term in the November election, saying he wants to give his full attention to the allegations while accusing Republicans of “playing politics with the future of our state.”
Tim Walz, Democrats’ 2024 VP candidate, won’t run for a third term as Minnesota governor https://t.co/tSRpYUnRCo
— The Washington Times (@WashTimes) January 5, 2026
The regulations announced Monday are subject to a 30-day comment period after being published in the Federal Register.
The department said it has sought to strengthen oversight of child-care programs in state-run programs through the administration’s Defend the Spend initiative and its dedicated fraud-reporting hotline.
“When controls are not in place, bad actors can bill for children who aren’t there,” Assistant Secretary for Family Support Alex Adams 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.”
