Congress could target $35 billion in Medicaid for undocumented patients

Congress is considering a range of up to $880 billion in Medicaid cuts over the next 10 years, which could include funding for undocumented immigrant care.

The House of Representatives approved a federal budget resolution that directed its Energy and Commerce Committee to identify $880 billion in cuts to help fund the remainder of the 2025 fiscal year and offset extension of expiring tax cuts. Policy watchers expected much of the $880 billion to come from Medicaid’s projected spending for the next 10 years.

Among the range of potential Medicaid cuts the House is considering are new policies to restrict federal funding for undocumented immigrants, according to a Republican budget document. Although federal law generally prohibits federal healthcare funding for people without legal presence in the country, there are many categories of exceptions, such as asylum seekers. Additionally, a growing number of states use their own funds to pay for Medicaid coverage of undocumented immigrants.

One federal proposal would generate $35 billion in federal savings by eliminating some the excepted categories of undocumented immigrants for eligibility for either Medicaid or the Affordable Care Act (ACA) marketplace subsidies.

The proposal could increase uncompensated care costs for hospitals.

“We have hospitals around the country that are really dependent on that coverage because they still have so many folks who are seeking care that are not U.S. citizens and how does that care get paid for?” said Shawn Stack, director, perspectives and analysis at HFMA. “Hospitals can’t turn them away at the emergency room, nor would they want to, for critical care and oncology care and treatment. So that leaves the hospitals really holding the bag there for those folks, as well.”

Among programs the federal savings option appeared to target was a 2024 Biden administration rule change that opened eligibility for ACA marketplace coverage and subsidies this year to an estimated 100,000 Deferred Action for Childhood Arrival undocumented immigrants.

Federal law allows 12 categories of undocumented immigrants to receive Medicaid benefits, according to a Congressional Research Service report.

Conservatives said the policy changes would target spending that includes the 90 days of temporary Medicaid coverage and retroactive coverage provided while a patient gathers documents to prove their legal immigration status. They said hospitals use such approaches to fund the care provided and do not have to repay the money when a patient is later found ineligible due to immigration status.

Immigration surge

The U.S. unauthorized immigrant population grew to 11 million in 2022, according to Pew Research Center estimates based on the 2022 American Community Survey, the most recent year available. However, U.S. Customs and Border Protection (CBP) recorded more than 10.8 million encounters with undocumented immigrants just since the start of the Biden administration.

The immigration surge led to the largest share of Americans wanting less immigration since 2001, according to a 2024 Gallup tracking poll. 

The public backlash against the recent surge in undocumented immigrants could increase the likelihood Republicans include the in their budget bill the measures targeting federal spending on healthcare services for those illegally present.

“They’re spending tens of millions of dollars funding healthcare for illegal immigrants, instead of cutting fraud, waste and abuse,” Rep. Gabe Evans (R-Colo.) said after he voted to advance the budget blueprint.

Conservatives also emphasized that even after an $880 billion cut, Medicaid spending would still increase by 25% over the coming 10 years. The federal government will spend $8.6 trillion on Medicaid from 2026 to 2035 or more than $2 trillion higher than if 2026 levels remained flat, according to the latest projection from the Congressional Budget Office.

The proposed federal program eligibility cut for undocumented immigrants comes after hospitals have reported increasing financial burdens from uninsured undocumented immigrants.

For example, University of Colorado Hospital said as part of a funding appeal to the state that it provided $10 million in uncompensated care to undocumented immigrants from just November 2023 to January 2024. UCHealth estimated its other hospitals provided about $7 million in uncompensated care to such patients in the same timeframe.

FMAP targeted

Another option Republicans have identified to obtain Medicaid savings is through reducing the federal share of Medicaid funding — called the federal medical assistance percentage (FMAP) — to any state that uses state-only funding to provide Medicaid coverage to undocumented immigrants. The Republican budget options document did not provide a potential federal savings amount for the option.

Fourteen states offer Medicaid or Children’s Health Insurance Program benefits to at least some people living in their area without legal status, and 12 of those states have an approved Medicaid waiver. Five states with waivers cover illegal immigrants of all ages and categories.

Leaders of states that have extended such benefits have argued undocumented immigrants are usually uninsured and Medicaid can prevent them from increasing uncompensated care costs for hospitals, which are required to care for them in emergent situations.

One recent study estimated that in 2023 50% of unauthorized adult immigrants were uninsured.

Republicans said the federal matching cut was needed, in part, to offset the cost of emergency services that hospitals provided to those unlawfully present. In fiscal 2023, the federal government funded $2.7 billion out of the $3.7 billion in such services that Medicaid funded. Additionally, the federal government funds the full administrative cost of all enrollments, including those of undocumented immigrants in parts of Medicaid funded solely by state money.

One of the highest profile Medicaid coverage expansions to those unlawfully present was implemented by California this year. California extended full Medicaid coverage to all categories of undocumented immigrants in the state at a cost of more than $4 billion annually. This year’s expansion was just the latest in a series of Medicaid coverage expansions to different categories of undocumented immigrants that the state started in 2016 and brought total Medicaid coverage to 1.9 million undocumented immigrants at an annual cost of $9.5 billion.

Other states have gone in the opposite direction by requiring hospitals to report their numbers of undocumented patients and how much is spent on their uncompensated care. Hospitals in Florida reported $556 million in total uncompensated care for 54,443 hospital admissions and emergency room visits by patients who self-reported as unlawfully present, according to a state report. That amount was 21% of the $2.6 billion in total uncompensated care provided at hospitals in the state in 2023.