EXCLUSIVE: A trio of Republican senators are moving to overhaul how federal childcare funds are distributed after what they call “mass fraud” in Minnesota exposed a system that paid providers before verifying children were ever in the room.
Sen. Ted Cruz, R-Texas, joined by senators Mike Lee, R-Utah, and Rick Scott, R-Fla., is introducing the Payment Integrity Act, legislation that would require states to distribute federally funded childcare dollars based on verified attendance, not enrollment claims.
“Programs in Minnesota for welfare and childcare were designed to channel resources into protecting vulnerable children but were treated like an open ATM by criminals,” Cruz told Fox News Digital.
“The mass fraud in Minnesota shows that American taxpayers can no longer rely on local and state politicians to prevent abuses because those politicians often have electoral and partisan incentives to look the other way. My legislation reduces the risk of the waste and fraud we’ve seen and ensures that resources are provided to children and families who need it.”
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The bill would reverse a 2024 Biden administration rule requiring states to pay childcare providers before attendance verification. Under Cruz’s proposal, providers would be paid only after services are confirmed, shifting from enrollment-based payments to attendance-based billing.
Cruz’s bill comes as the outspoken Texan led a Senate Judiciary Subcommittee hearing on alleged Somali fraudsters last week. There, lawmakers heard directly from David Hoch, a journalist who accompanied blogger Nick Shirley to sites claiming to be Somali daycare centers.
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“There are few crimes more morally repugnant than stealing from vulnerable children. Every dollar stolen is a meal not eaten, a doctor’s visit missed and a future diminished,” Cruz said, adding that such fraud “plunders our children’s potential.”
Gesturing toward a photo of the “Quality Learing Center” in Minneapolis during the hearing, an alleged fraudulent childcare provider Cruz called “emblematic” of the crisis, he said the fraud was occurring not in “some distant or lawless place, but in the heart of America’s Midwest.”
Co-sponsor Lee said support for childcare should “go to real kids, not empty rooms.”
“Fake childcare operations are stealing funding from the ones who are actually taking care of America’s children in need. Our bill will address this massive fraud by granting funding based on actual attendance rather than reported enrollment and allowing states to pay retroactively instead of in advance,” Lee said, adding such “diligence” should have been the law all along.
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The Payment Integrity Act also puts into law the January rule from Health and Human Services that established attendance-based billing procedures.
That rule, according to Secretary Robert F. Kennedy’s deputy, Jim O’Neill, was also spurred by what has been happening 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,” O’Neill said in a statement.
The Payment Integrity Act amends the Child Care and Development Block Grant Act signed into law by President George H.W. Bush, to include such “attendance-based billing.”
“Nothing in this subchapter shall be construed to require a lead agency to make a payment to a child care provider prior to the provision of child care services,” the bill states in a direct reversal of the prepayment system Cruz says allowed fraud to flourish.
