Amid fraud claims, HHS reveals changes to child care funding

The U.S. Department of Health and Human Services announced Monday that it would rescind a series of Biden-era rules governing one of the largest federal funding sources for child care. The move comes less than a week after HHS confirmed it was freezing all federal funding through that same program.

The Child Care and Development Fund (CCDF) sends money to states, tribes and territories to help make child care more affordable for low-income families.

The Biden administration’s rules encouraged states to base payments to child care providers on enrollment rather than verified attendance, pay providers in advance of services and favor guaranteed slots with providers over vouchers.

Now, HHS says it plans to restore attendance-based billing, it will no longer require that providers be paid in advance and it will reprioritize vouchers.

“When controls are not in place, bad actors can bill for children who aren’t there,” said Alex Adams, assistant secretary for family support at HHS’s Administration for Children and Families. “Families and taxpayers deserve proof that services are being delivered to children.”

“What we know to be true is that there are longstanding program integrity requirements that have been in place and are regularly updated, annually updated,” said Susan Gale Perry, CEO of Child Care Aware of America, which helps families access affordable child care across the country.

Approximately 1.4 million children and 857,700 families per month received child care assistance through CCDF in 2019, according to the latest data posted on the HHS website.

Melissa Boteach, chief policy officer at Zero to Three, a nonprofit that advocates for infants, toddlers and families, said the proposed policy changes introduce “chaos and confusion” by rolling back provisions that aimed to make the child care industry more stable and affordable.

This follows a funding freeze announced over the holidays

Monday’s announcement comes days after HHS said it was freezing the federal funding provided through CCDF.

“It’s still unclear to many states who have to administer these programs what exactly this means.” Boteach said. “And that lack of clarity has real consequences for families and for early educators.”

She also said there has “not been clarity provided on whether or not funding is forthcoming, on what needs to be done for it to turn back on and what states are supposed to do in the meantime.”

“What we do know is that child care providers operate on [a] very thin … margin of profit,” said Perry of Child Care Aware of America.

She said going “even a month” without funding could result in child care centers closing – which would impact both children who benefit from CCDF funding and those who do not.

A focus on child care providers in Minnesota

The recent focus on federal child care funding comes in response to allegations of fraud by Minnesota day care providers.

On Dec. 30, HHS Deputy Secretary Jim O’Neill posted on X about “the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade.” He announced actions “against the blatant fraud that appears to be rampant in Minnesota and across the country,” including requiring “a justification and a receipt or photo evidence before we send money to a state.”

In Monday’s HHS announcement, O’Neill said, “The reforms we are enacting will make fraud harder to perpetrate.”

According to HHS, the rule changes are subject to a 30-day public comment period.