Federal Childcare Policy

Sens. Ted Cruz of Texas, Mike Lee of Utah and Rick Scott of Florida are introducing the Payment Integrity Act, a federal bill that would require states to pay childcare providers with federal funds only after children’s attendance is verified, rather than based on enrollment claims. The legislation would roll back a 2024 Biden administration rule that pushed states to pay providers up front—before attendance checks—and instead formalize attendance‑based billing, which HHS began encouraging in January after high‑profile fraud cases in Minnesota’s welfare and childcare programs. Cruz and his co‑sponsors describe Minnesota’s alleged 'Somali daycare' and related welfare schemes as proof that enrollment‑based, prepayment models turned federal programs into an 'open ATM' and argue the new system will better protect taxpayers and ensure money reaches 'real kids, not empty rooms.' The bill effectively nationalizes a response to Minnesota’s scandal, forcing every state to retool billing and verification systems that administer billions in childcare subsidies, a shift that anti‑fraud advocates welcome but that may raise administrative burdens for states and bona fide providers already struggling with thin margins. HHS officials, for their part, have publicly said their January attendance rule was itself spurred by reports of fraudulent providers in Minnesota who claimed subsidies without caring for children, underscoring how a state‑level scandal is now driving federal lawmaking.