Trump Admin Ends Biden-Era Daycare Rule That Enabled Fraud, Targets ‘Loophole’ in Minnesota Scandal
The Trump administration took decisive action Monday to reverse a Biden-era policy that officials say opened the floodgates to fraud and abuse in daycare funding programs — especially in scandal-plagued Minnesota.
The Department of Health and Human Services, led by Secretary Robert F. Kennedy, Jr., proposed a rule to eliminate a controversial requirement that forced agencies to pay daycare providers upfront, based on enrollment alone — even before any care was delivered.
“Congress appropriated this funding to support working families and ensure children have safe places to grow and learn,” Kennedy said. “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.”
The move comes amid a federal investigation into rampant fraud in Minnesota, where HHS recently froze all childcare-related payments to the state. Reports indicate millions in taxpayer funds were siphoned off over a decade by daycare centers claiming to serve children who, in many cases, didn’t even exist.
HHS Deputy Secretary Jim O’Neill was blunt: “Paying providers upfront based on paper enrollment instead of actual attendance invites abuse. 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.”
The Biden administration’s original changes to the Child Care and Development Fund had mandated that payments be made prospectively, based solely on enrollment — not attendance — creating what critics have called a “blank check system” vulnerable to exploitation.
The Trump administration’s rule change flips that model on its head. Under the new proposal, payments will be based on real attendance data, issued only after care is provided. The plan also gives more control to parents, allowing them greater oversight and direction over how funds are used.
The policy shift is especially timely in light of recent revelations from whistleblowers and independent journalists who’ve uncovered extensive daycare fraud in Minnesota — a state already in political turmoil after Governor Tim Walz announced he would not seek re-election amid the scandal.
According to HHS, roughly $19 billion was paid out under the Biden-era rules. The new proposal from Kennedy is now subject to a 30-day public comment period before it takes effect.
The Child Care and Development Fund is a joint federal-state program designed to help low-income families cover the cost of childcare while parents work or attend school. Under the Trump administration’s reforms, the program will be recalibrated to prevent abuse and ensure resources reach real children and real families — not phantom claims from fraudulent operations.
With multiple investigations ongoing and state-level accountability looming, the Trump administration’s move sends a clear message: the days of cash-first, oversight-last are over.