HHS: Biden-Era Loophole “Invited Abuse,” Funneled Billions to Childcare Centers Without Verifying Attendance

President Donald Trump’s Department of Health and Human Services (HHS) announced on Monday that it is closing a Biden-era loophole that required states to pay childcare centers before verifying attendance. 

The department is initiating the change as fallout from allegations of widespread fraud at Minnesota Somali-run daycare centers continues. According to HHS, the Biden administration’s rule required states to base payments to childcare centers on enrollment instead of verified attendance, and payment was provided in advance of services. 

“Paying providers upfront based on paper enrollment instead of actual attendance invites abuse,” HHS Deputy Secretary Jim O’Neill said in a 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.”

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The Biden administration’s rule went into effect on April 30, 2024, “meaning more than $19.3 billion in taxpayer dollars over 20 months may have been spent before President Trump could correct provisions that could have prolonged massive day care fraud in Minnesota,” the New York Post first reported. 

“Between 2021 and 2024, the Administration for Children and Families shelled out more than $91.8 billion from its Child Care Development Fund (CCDF), a federal block grant program that helps fund child care in states, US territories and tribes,” the report states, citing HHS data. 

HHS is rescinding the rule through its Administration for Children and Families (ACF) and will allow 30 days for public comment.

Under the rule change, attendance-based billing will be restored, states will no longer be made to provide upfront payments, and states will no longer be influenced to prioritize contracts over parent-directed vouchers, HHS said.

“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.”

“When controls are not in place, bad actors can bill for children who aren’t there,” added Assistant Secretary for Family Support Alex Adams. “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.”

The rule change comes a week after HHS suspended federal payments to childcare businesses in Minnesota amid growing evidence of mass fraud.

HHS also launched a hotline for reporting fraud on Dec. 30, 2025, and said the ACF has already received 245 reports of potential fraud so far.