This article explains how the Department of Health and Human Services moved to undo a Biden-era child care rule that allowed states to pay daycare providers before confirming kids actually attended, the fraud risks that emerged, and the specific changes HHS is restoring to tighten oversight and protect taxpayer dollars.
The story broke amid reports of “ghost centers”—daycare storefronts that had signage and paperwork but few or no children in care while still receiving federal payments. Investigations in Minnesota and elsewhere exposed how enrollment-based payments created an opening for abuse when no attendance verification was required. The scale is striking: federal payments that skirted basic checks are tied to billions in taxpayer dollars.
Under the Biden policy enacted in 2024, states were pushed to base payments on paper enrollment rather than verified attendance, and to make payments in advance of services. That system meant money flowed to providers before any care had been delivered, creating strong incentives for exploitation. Estimates put the amount routed through these relaxed rules in the billions, with reports citing as much as $19 billion moving without adequate verification.
HHS has now moved to reverse those provisions and restore common-sense controls, saying the prior approach weakened oversight and increased the risk of waste, fraud and abuse. The department singled out programs under investigation in Minnesota as examples where the enrollment-first model failed. The undoing of the Biden-era rule signals a return to accountability and tighter standards for how federal child care dollars are distributed.
“Congress appropriated this funding to support working families and ensure children have safe places to grow and learn. 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,” said HHS Secretary Robert F. Kennedy, Jr. That statement frames the move as reclaiming funds for their intended purpose and closing doors that allowed misconduct.
Health and Human Services Deputy Secretary Jim O’Neill put it bluntly: “Paying providers upfront based on paper enrollment instead of actual attendance invites abuse.” He noted the Minnesota allegations, describing them as credible and widespread, and argued the reforms will make fraud harder to perpetrate. The administration’s message is clear: payments tied to mere paperwork are insufficient protection for taxpayers or children.
HHS described three major restorations of policy that reverse the prior approach and restore parental control and verification. The department announced it would return to attendance-based billing, end the requirement for upfront payments, and restore voucher flexibility so parents have more choice in how funds are used. Those are practical fixes aimed at cutting the profit motive out of paper-only models.
Under HHS’s rule changes:
- Attendance-based billing will be restored. States may require payment based on verified attendance rather than enrollment alone.
- Upfront payments will no longer be required. States may again pay providers after care is delivered.
- Voucher flexibility will return. States are no longer steered toward contracts over parent-directed vouchers, restoring parental choice.
The department also opened a 30-day public comment period on the rollback, a routine part of rulemaking that gives states and stakeholders a chance to weigh in. That step creates a formal path for input but does not change the direction: oversight will be strengthened and payment practices tightened. The public comment period also provides time for states to prepare for changes in how federal funds are administered.
Beyond rule language, the broader lesson is about incentives. When federal money flows ahead of service and oversight is weakened, bad actors can exploit the gap. Republicans and conservatives have long argued that federal programs need clear accountability and local enforcement to prevent waste, and this policy reversal embodies that approach. Restoring attendance verification aligns funding with actual services and helps close avenues for fraud.
Examples from the field showed how paperwork can mask empty classrooms, and how motivated fraudsters can turn an enrollment-based system into a revenue stream that never touches a single child. Fixing that means more than changing forms: it means reestablishing verification, tightening audits, and ensuring payments follow verified care. It also means giving parents control through vouchers so funds follow the child rather than institutional contracts that can be abused.
The decision to rescind the Biden-era loosened rules is a concrete step toward restoring fiscal responsibility and protecting the integrity of child care funding. It seeks to ensure taxpayer dollars support real services for working families rather than padding operations that never served children. The changes are not a panacea, but they remove a glaring and exploit-friendly loophole from how federal child care money has been paid out.
Add comment