How have federal agencies changed childcare and Medicaid payment rules after the Minnesota investigations?
Executive summary
Federal agencies, led by the Department of Health and Human Services (HHS), have rolled back a Biden-era child care payment practice that allowed states to pay providers before verifying attendance and have imposed new nationwide verification and documentation requirements for Child Care and Development Fund (CCDF) disbursements; simultaneous federal enforcement actions have frozen payments to Minnesota while expanding scrutiny of suspected fraud [1] [2] [3]. Reporting shows robust new documentation, photo/receipt and “justification” demands for child care dollars and a suite of enforcement steps, while changes to Medicaid payment rules are not documented in the available reporting beyond intensified investigations into Medicaid-related fraud [2] [4] [5].
1. HHS reversed advance-payment policy and tightened verification requirements
HHS announced it is rescinding portions of the 2024 CCDF rule that permitted states to make advance payments to child care providers before verifying attendance or delivery of care, explicitly citing those provisions as increasing risk of waste, fraud and abuse and linking the change to investigations in Minnesota [1]. The administration has ordered that states must now provide stronger verification — including attendance records, licensing and inspection reports and other administrative data — before drawing down federal child care funds, a change applied nationwide though Minnesota faces heightened demands [6] [7].
2. Prior justification, receipts and photo evidence are now required for disbursements
In practice HHS has required that CCDF payments to states be accompanied by “justification” that funds go to legitimate providers and, as of the agency’s directive, that payments include prior justification and a receipt or photographic evidence before funds are released — a procedural shift that pauses automatic draws and directs states to document transactions more granularly [2] [8]. HHS officials characterized this as “turning off the money spigot” until federal reviewers can confirm legitimate provider activity [9] [3].
3. Payment freezes, temporary restrictions and other enforcement levers have been deployed
The department froze all federal child care payments to Minnesota pending an investigative review and set a deadline for the state to produce extensive provider and attendance records or risk further withholding of CCDF and other federal funds [5] [10]. HHS signaled it may impose broader payment withholds, program suspensions and temporary restrictions on drawdowns if states cannot meet new verification demands [3] [11].
4. New oversight systems, hotlines and interagency investigations amplify enforcement
HHS said it is activating a “Defend the Spend” system and launched a fraud-reporting hotline and email specifically for child care matters to centralize tips and audits [1]. Federal agencies including the FBI and Department of Homeland Security have been reported as surging resources to Minnesota investigations that also touch pandemic-era and Medicaid-related schemes, increasing the likelihood of criminal referrals and interagency audits [5] [4].
5. Medicaid: investigations intensified, but rule changes are not documented in the reporting
While multiple outlets note extensive federal probes into Medicaid-related fraud in Minnesota and link earlier convictions in pandemic-aid schemes to the current scrutiny, the sourced reporting does not document a parallel, nationwide change to Medicaid payment rules comparable to the CCDF reversals; instead the record shows heightened enforcement, audits and criminal investigations targeting alleged Medicaid fraud rather than a published rule rollback [4] [5] [12]. Reporting does include claims by federal officials that they are “following the money” in Medicaid programs, but specifics about revised federal Medicaid payment policy are not provided in the available sources [5] [12].
6. Political context, legal pushback and limits of the public record
Officials in Minnesota and state leaders have accused the federal response of political grandstanding and warned of harm to families if payments stop abruptly; Attorney General Keith Ellison and Governor Tim Walz called the move potentially pretextual and signaled legal challenges, and HHS’s actions came after a viral social-media video that federal officials cited in justifying rapid action [9] [13] [7]. Sources also show partisan framing from federal leaders emphasizing fraud in Minnesota and signaling possible expansion of scrutiny to other states, an implicit political agenda critics say colors the enforcement push [13] [3]. Finally, the reporting does not provide full procedural details for how the new verification will be operationalized across every state or whether any formal rulemaking (with public comment) will follow the immediate administrative directives [1] [8].