The U.S. Department of Health and Human Services (HHS) is implementing significant changes to child care payment rules. These changes aim to enhance oversight and reduce risks associated with fraud and waste in federally-funded state child care programs.
Rescinding Biden-Era Child Care Policies
On January 5, 2026, HHS announced the withdrawal of certain Biden-era regulations. These rules had allowed states to pay child care providers in advance, without verifying attendance or ensuring care was delivered.
Concerns Over Fraud and Waste
The previous regulations were criticized for undermining oversight, which increased vulnerability to fraud. Reports of fraudulent activities in Minnesota highlighted the need for reform.
Key Issues with Prior Rules
- Payments were based on enrollment rather than verified attendance.
- Providers received upfront payments before services were rendered.
- The system favored contracts over parent-directed vouchers.
New HHS Reforms
Under the revised rules, HHS is reinstating several important measures:
- Attendance-Based Billing: States are now required to verify attendance before making payments.
- Post-Service Payments: Child care providers will receive payments after services have been delivered.
- Restoration of Parental Choice: Increased flexibility in using parent-directed vouchers will be allowed.
Statements from HHS Officials
HHS Secretary Robert F. Kennedy, Jr. stated the importance of ensuring that federal funds are used to benefit working families, not fraudsters. Deputy Secretary Jim O’Neill emphasized that upfront payments based on theoretical enrollment could lead to serious abuses.
Assistant Secretary for Family Support Alex Adams called for proper verification to ensure services are actually being provided to children, highlighting the significance of these policy changes for families and taxpayers.
Implementation and Oversight
The transition to these new regulations includes a 30-day public comment period. HHS is simultaneously enhancing oversight measures within child care programs nationally.
These efforts include:
- Activation of a national “Defend the Spend” system.
- Additional verification requirements for all states.
- Establishment of a fraud-reporting hotline and dedicated email at childcare.gov.
Since launching the tip line on December 30, 2025, HHS received over 245 reports of potential fraud. The department remains committed to ensuring child care programs safeguard children and serve eligible families responsibly.
