Trump Administration Closes Child Care Payment Loophole
President Donald Trump’s Department of Health and Human Services (HHS) announced on Monday that it will close a loophole left by the Biden administration concerning child care payments. This loophole allowed states to make payments to child care providers before ensuring that children were actually in attendance.
This move comes in the wake of a significant fraud scandal involving a Somali-operated child care center in Minnesota. The HHS stated that prior rules mandated states to issue payments based on enrollment figures rather than actual attendance. Consequently, funds were disbursed before services were confirmed.
“Paying health care providers upfront based on paper registration rather than actual attendance invites abuse,” noted HHS Deputy Secretary Jim O’Neill. He also mentioned that Minnesota has faced numerous credible allegations of fraudulent child care providers who didn’t provide care at all. The upcoming reforms aim to make such fraud more challenging.
The Biden administration’s governance had resulted in, according to reports, over $19.3 billion in taxpayer dollars potentially misused within a 20-month period before these provisions were addressed by President Trump. The report pointed out that from 2021 to 2024, the Department of Children and Families disbursed more than $91.8 billion from the Child Care Development Fund, which supports child care across various states and territories.
The HHS plans to rescind the earlier rule through the Administration for Children and Families (ACF), allowing 30 days for public feedback. The intention is to shift back to billing based on attendance and eliminate the upfront payment requirement. It will also encourage states to prioritize vouchers for parents rather than contracts.
“Congress allocated this funding to assist working families and ensure safe environments for children,” HHS remarked. Secretary Robert F. Kennedy Jr. emphasized that funds were diverted through loopholes and fraud, and now the department is rectifying this by redirecting the funds to their intended purpose.
Alex Adams, Assistant Secretary for Family Support, added that without proper checks, fraudulent claims could be made for children who weren’t present. “Families and taxpayers deserve to confirm that children are receiving the services they require. These regulatory changes highlight the essential role of federal investment in child care for the American workforce,” he stated.
This rule change follows a recent suspension of federal payments to Minnesota’s child care operations amid increasing evidence of fraud. Furthermore, HHS recently launched a fraud reporting hotline, which has already received 245 reports of potential fraud to date.
