What oversight changes have states implemented nationally after HHS rescinded rules that allowed prepayment to child-care providers?
Executive summary
Within days of announcing it would rescind parts of the 2024 Child Care and Development Fund rule, HHS moved to restore attendance-based billing, require additional verification from states before disbursing CCDF funds, and activate new national fraud controls — steps HHS says are intended to reduce waste, fraud and abuse exposed by recent investigations such as those in Minnesota [1] [2] [3]. States are being asked to produce more administrative data and attendance documentation to unlock federal payments even as HHS freezes some funding while it builds centralized oversight tools [3] [4].
1. HHS rescinded advance‑payment provisions; states must now verify attendance before payment
The central policy reversal is a return to attendance-verified payments: HHS announced it will no longer permit advance payments to providers without verified attendance, effectively directing states that distribute CCDF funds to secure attendance records and other documentation prior to disbursing money [1] [5] [6]. That change reverses a 2024 requirement that had given states the option to pay on the basis of enrollment to stabilize provider revenue, a policy HHS and advocates originally argued would expand provider participation and parental choice [7].
2. States now face additional verification and administrative-data requirements to receive funds
HHS told states that all 50 must provide “additional levels of verification and administrative data” before they receive more CCDF funding, an instruction reported by AP and echoed across other outlets; the new demand effectively shifts oversight upstream, conditioning federal disbursements on state-level evidence that payments are justified [3]. Officials framed this as a nationwide tightening after allegations of fraudulent day care payments prompted freezes of federal transfers while HHS reviews state systems and paperwork [4] [8].
3. HHS is deploying national tools that will change state reporting and audit pathways
Beyond paperwork, HHS said it will activate a “national Defend the Spend” system and launch a dedicated fraud‑reporting hotline and email to centralize detection and tip intake, signaling a move to federalize certain audit and investigative functions that states previously handled with federal oversight support [1] [9]. Reporting indicates HHS has already received hundreds of fraud reports since late December, suggesting the federal system will become a primary channel for complaints that states will need to respond to or integrate with [9].
4. States’ practical responses vary between tightening controls and pushing back on costs
While HHS presses for stricter documentation, the Federal Register record makes clear many states had told HHS the 2024 attendance and payment rules were costly and difficult to implement, and had sought flexibility — a rationale behind previous enrollment‑based payment allowances [7]. This creates a practical tension: some states will quickly adopt stringent verification steps to restore funding, while others may push back or request implementation time to meet new requirements, arguing the earlier rule’s intent was to support provider cash flow and parental choice [7].
5. Political framing and investigations are shaping how states act and how HHS directs them
HHS’ actions followed high-profile fraud allegations in Minnesota and public statements by federal officials that tied rescissions to concerns about “rampant” fraud, an explicit framing that has provoked partisan claims of politicization even as agencies emphasize fraud controls [2] [3]. States facing investigations or evidence gaps appear to have seen the most immediate federal pressure (including freezes), while others are being told to document systems improvements to avoid future interruptions [4] [3].
6. What remains unclear and what states still must decide
Sources document the broad strokes of HHS’ requirements — attendance verification, administrative-data submissions, centralized fraud reporting, and restoration of attendance-based billing — but they do not provide a state‑by‑state inventory of implemented practices or timelines, so the precise mix of new procedures, IT changes, and audit protocols each state will adopt remains unreported in these sources [1] [7] [9]. Likewise, the Federal Register materials show HHS weighing flexibility and cost concerns, leaving open how HHS will reconcile state capacity limits with its tightened oversight demands [7].