What HHS's Early 2026 Actions Signal For Program Integrity, Child Care Funding And Telehealth

The U.S. Department of Health and Human Services ("HHS") commenced 2026 with a series of targeted actions focused on program integrity, fraud prevention, and safeguarding access to care. These activities impact child care and family assistance grant administration, payment rules applicable to child care providers, and telemedicine flexibilities for prescribing controlled medications. The recent actions are discussed in more detail below.

Recent HHS Actions Targeting Program Integrity and Fraud Prevention

HHS Temporarily Restricts Access to Child Care Grants in Five States Pending Fraud Review

On January 6, 2026, HHS, through its Administration for Children and Families ("ACF"), notified California, Colorado, Illinois, Minnesota, and New York that access to select federal child care and family assistance grant funds would be temporarily restricted pending a program integrity review.¹ The restriction applies to three ACF programs: (1) Child Care and Development Fund ("CCDF") (nearly $2.4 billion), (2) Temporary Assistance for Needy Families ("TANF") ($7.35 billion), and (3) the Social Services Block Grant ("SSBG") ($869 million), for a combined total of approximately $10.6 billion. Going forward, the five affected states must submit justification and supporting documentation before any federal payment is released.² ACF has also launched a dedicated fraud reporting portal at childcare.gov for individuals to report suspected fraud and program misuse.³ The restriction is expected to remain in place until ACF completes its review and determines compliance with applicable federal requirements, and it has already been challenged in court (with enforcement temporarily enjoined while litigation proceeds).⁴ The action follows ACF's nationwide activation of its "Defend the Spend" system and illustrates HHS's increased focus on program oversight.⁵

HHS Proposes Changes to Child Care Provider Payment Rules

In addition to the funding restrictions, HHS, through ACF, has proposed to roll back certain provisions in the 2024 Child Care and Development Fund rule issued under the prior Administration.⁶ Specifically, HHS has proposed rescinding provisions that: (1) required states to pay child care providers based on enrollment rather than verified attendance, (2) required advance (prospective) payments (i.e., before care is provided), and (3) favored guaranteed contract slots with providers over parent-directed vouchers.⁷

If finalized, the proposed changes would allow states to again use attendance-based billing and post-service payment approaches and would remove federal preferences that steered states toward contracts over parent-directed vouchers.⁸ Through these changes, HHS aims to strengthen program oversight and decrease waste, fraud, and abuse in federally funded state child care programs. The proposed changes are subject to a 30-day public comment period.⁹

Extension of Telemedicine Flexibilities for Prescribing Controlled Medications

In coordination with the Drug Enforcement Administration ("DEA"), HHS announced a fourth temporary extension of telemedicine flexibilities originally implemented during the COVID-19 public health emergency that allow patients to receive prescriptions for certain controlled medications without a prior in-person visit.¹⁰,¹¹ The extension runs from January 1, 2026 through December 31, 2026, and applies to Schedule II-V controlled medications prescribed via telemedicine in accordance with DEA guidance and applicable federal and state law.¹² The extension is intended to prevent abrupt disruptions in care for vulnerable populations such as seniors, individuals with disabilities, rural residents, and those undergoing treatment for mental health or substance use disorders who rely on telemedicine to access care and medications.¹³ The extension does not change existing requirements that prescriptions be issued by appropriately licensed practitioners for legitimate medical purposes and in compliance with federal and state law.

Recent utilization data likely influenced the decision to extend the telemedicine prescribing flexibilities. In 2024, more than seven million prescriptions for controlled medications were issued via telemedicine without a prior in-person visit.¹⁴ This fourth extension gives the DEA and HHS additional time to finalize permanent regulations, including the proposed Special Registration for Telemedicine,¹⁵ which would establish clear standards for prescribing controlled substances via telemedicine while preserving patient safety and preventing misuse.

Forward-Looking Considerations

These early 2026 activities track HHS's stated budgetary priorities for FY 2026, including strengthening program integrity and safeguarding access to health services.¹⁶ Specifically, HHS's early 2026 activity suggests an intent to (1) prevent fraud, waste, and abuse by responding to emergent risks and increasing program oversight, and (2) ensure patient access to care and essential medications by maintaining telehealth flexibilities. Looking ahead, these actions indicate an increased emphasis on fiscal oversight while preserving access to essential services.

Key Takeaways from HHS Actions

• Heightened Intergovernmental Accountability: The temporary restriction on access to certain grant funds, along with increased federal oversight, signals the potential for closer scrutiny of state-level administration of federally funded programs, which could lead to more frequent audits across state agencies and additional revisions to payment and documentation processes.
• Potential Impact on Service Delivery: Pending resolution of the funding restrictions (including ongoing litigation) and potential revisions to CCDF payment rules, child care providers and eligible families in affected states may experience disruptions if states adopt stricter billing rules or child care providers respond by raising rates or limiting slots.
• Engaging the Public to Increase Program Oversight: The implementation of new fraud reporting hotlines and portals offers opportunities for parents, providers, and community members to actively participate in program oversight, which may foster earlier detection of program fraud and misuse.
• Continued Telehealth Flexibilities in the Near Term: The repeated extension of telemedicine prescribing flexibilities suggests that the Administration, HHS, and the DEA recognize the evolving role of technology in healthcare delivery and may be moving toward permanent regulatory frameworks in response to utilization data and patient needs.
• Operational and Compliance Implications for Providers: HHS's actions underscore an increased focus on fraud prevention, and in turn, healthcare providers may see increased scrutiny of their compliance with applicable regulatory requirements as HHS seeks to increase accountability.

These takeaways underscore the evolving regulatory and oversight environment and highlight areas for ongoing vigilance, stakeholder engagement, and compliance readiness. Providers, payors, and other healthcare stakeholders should continue monitoring litigation developments, public comment opportunities, and further regulatory actions to ensure continued compliance with legal requirements and healthcare program participation standards.

Footnotes

1 HHS Freezes Child Care and Family Assistance Grants in Five States for Fraud Concerns, https://www.hhs.gov/press-room/hhs-freezes-child-care-family-assistance-grants-five-states-fraud-concerns.html (Jan. 6, 2026).

2 Id.

3 Report Suspected Child Care Fraud, https://childcare.gov/contact.

4 See State of New York et al v. Administration for Children and Families et al, No. 26-cv-00172 (S.D.N.Y. Jan. 8, 2026).

5 CCDF Defend the Spend (DTS) Activation, https://content.govdelivery.com/accounts/USACFOCC/bulletins/402ea5e (Jan. 5, 2026).

6 HHS to Close Biden-Era Loophole That Let States Pay Child Care Providers Without Counting Attendance, https://www.hhs.gov/press-room/hhs-close-biden-era-loophole-states-pay-child-care-providers-without-counting-attendance.html (Jan. 5, 2026).

7 Restoring Flexibility in the Child Care and Development Fund (CCDF), Proposed Rule, 91 Fed. Reg. 207, 208 (Jan. 5, 2026).

8 Id.

9 Id. at 207.

10 HHS & DEA Extend Telemedicine Flexibilities for Prescribing Controlled Medications Through 2026, https://www.hhs.gov/press-room/dea-telemedicine-extension-2026.html (Jan. 2, 2026).

11 Fourth Temporary Extension of COVID-19 Telemedicine Flexibilities for Prescription of Controlled Medications, 90 Fed. Reg. 61301 (Dec. 31, 2025).

12 Id.

13 Id. at 61303.

14 Id.

15 See Special Registrations for Telemedicine and Limited State Telemedicine Registrations, Proposed Rule, 90 Fed. Reg. 6541 (Jan. 17, 2025).

16 See U.S. Dep't of Health & Human Servs., Fiscal Year 2026, Budget in Brief, hhs.gov/sites/default/files/fy-2026-budget-in-brief.pdf (May 2025).

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