Federal Proposal To Roll Back Enrollment-Based Child-Care Rules Could Trigger Rate Hikes And Closures

For months Shannon Hampson has been counting down to August 1. That date represented a major policy shift for her and other early care providers in Nebraska who serve low-income families: the state planned to begin paying a steady monthly rate based on enrollment for children whose families use government child-care subsidies.

Instead of reimbursing providers by daily attendance — which can swing dramatically with holidays, travel and seasonal illness — Nebraska intended to pay a consistent monthly amount tied to enrollment, giving providers predictable revenue.

Background

The enrollment-based approach was part of a slate of changes tied to the Child Care and Development Fund (CCDF) finalized in 2024. Those rules encouraged states to pay providers based on enrollment, to pay certain providers up front rather than reimbursing them the next month, and to expand use of grants and contracts to stabilize the sector. By September 2025, 24 states had adopted enrollment-based payments, according to an analysis by New America, and federal guidance set August 1, 2026 as the latest implementation deadline for remaining states.

Proposed Rescission and Federal Rationale

This week the U.S. Department of Health and Human Services, through the Administration for Children and Families (ACF), proposed rescinding many of the 2024 rules and returning policy discretion to the states. ACF Director Alex Adams said the agency was acting after all 50 states requested waivers on some or all of the new requirements, citing budget constraints and implementation difficulties. Adams also argued that attendance-verified payments are a better deterrent to fraud and raised concerns about alleged "phantom attendance."

Process And Timing

The proposed changes cannot take effect immediately. Federal law requires HHS to publish the proposal, accept public comments, review those comments and finalize any regulatory adjustments. ACF has not provided a timeline for completing that process.

Why Providers Worry

Providers and early-childhood advocates warn that reverting to attendance-based payments would reintroduce volatile monthly revenue and could force tuition increases, staff cuts, or even center closures—especially in a sector with razor-thin margins. Industry profit margins are estimated at less than 1%, leaving little buffer against swings in attendance.

Voices From The Field

Hampson, who runs a home-based program in Lincoln, Nebraska, said that anticipating the enrollment-based change led her to fill more slots with subsidy-funded children; today she has no private-paying families. "I was super excited to know more of these families were going to get that quality, consistent care," she said. Now she must revisit her budget: in December she was paid for 18 child-care days under attendance billing, versus 23 days she would have received from private payers, while her operating costs remained largely unchanged.

Katelyn Vandal, director of A Place to Grow in Oak Hill, West Virginia, where enrollment-based payments have been in place since 2020, said consistent monthly payments are essential to keeping her rural center open. "Our mortgage payment doesn’t cost less because two kids in the classroom have the flu," she said. Vandal warned that returning to attendance-based pay could imperil centers that already operate on very thin margins.

Sheryl Hutzenbiler, owner of Munchkin Land Daycare in Billings, Montana, said the shift to enrollment-based pay allowed her to avoid missed paychecks and hire additional staff. Montana adopted enrollment-based pay into state law in 2023, protecting providers in that state from federal rollbacks.

Debate And Stakes

Supporters of the rescission point to concerns about fraud and the need for oversight of federal dollars. But many advocates and policy experts question the scale of those fraud allegations and warn that rescinding the rules would undo progress in stabilizing child-care providers and expanding access for low-income families.

Casey Peeks, senior director of early childhood policy at the Center for American Progress, called the fraud claims "unfounded" and said rescinding foundational supports would be "destabilizing to the sector" in both the short and long term.

What Happens Next

The proposal will enter a public comment period. If finalized, the rollback would restore pre-2024 federal discretion and return many choices to states — but it would also heighten uncertainty for thousands of providers who already adjusted operations based on the 2024 guidance. How states, providers and families respond will determine whether access to affordable, stable child care expands or contracts in the coming months.