Trump Administration Reverses Child Care Rules Amid Fraud Allegations

The Department of Health and Human Services announced Monday it is rescinding a series of Biden-era child care rules that required states to pay providers before verifying any attendance and before care was delivered.

The move, announced through HHS’ Administration for Children and Families, rolls back provisions in the 2024 Child Care and Development Fund rule that the Trump administration says weakened oversight and increased the risk of waste, fraud, and abuse—a growing concern after allegations of widespread day care fraud in Minnesota.

“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 the department’s release. “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.”

Under the Biden-era framework, states were pushed to base payments on enrollment rather than verified attendance, pay providers up front, and steer funding toward guaranteed contracts instead of parent-directed vouchers. HHS is now reversing that approach, restoring attendance-based billing, letting states pay after care is delivered, and returning flexibility to voucher programs—changes the administration says strengthen parental choice and reduce opportunities for manipulation.

“Paying providers up front based on paper enrollment instead of actual attendance invites abuse,” Deputy HHS Secretary Jim O’Neill said, pointing to “credible and widespread allegations” in Minnesota that day care operators were billing taxpayers while not caring for children.

The policy reversal comes as the administration also tightens enforcement nationwide. HHS activated a national “Defend the Spend” system, imposed additional verification requirements, and launched a fraud-reporting hotline and email address at childcare.gov. Since the tip line launched December 30, the agency has received more than 245 reports of potential fraud.

The issue exploded into the national spotlight after a viral video from YouTuber Nick Shirley exposed alleged “ghost day cares” operating in Somali communities in Minneapolis—claims Minnesota officials have disputed. The administration announced on December 31 that it had paused child care funding for all states, stating funds would be released only after states demonstrated legitimate spending. Reports from San Antonio indicate the funding pause is tied to the Minnesota allegations and could affect 1.4 million children nationwide.

The administration reported Monday that it is also freezing more than $10 billion in broader social services and child care-related funding—including CCDF, Temporary Assistance for Needy Families, and the Social Services Block Grant—with several Democrat-led states most affected. At least $7.35 billion in TANF funds and nearly $2.4 billion in CCDF funding are being held back from states such as California, Colorado, Illinois, Minnesota, and New York, along with $869 million in social services block grant money.

Minnesota Democrat Gov. Tim Walz has criticized the crackdown as politically motivated, but conservatives argue the real scandal is that lax Biden-era rules effectively wrote checks first and asked questions later, creating ripe conditions for fraud. The administration says its reforms are about restoring basic accountability by verifying children are present, services are delivered, then paying—standard practices working Americans rely on every day.