CMS launches initiative to crack down on Medicaid funding for undocumented immigrants
Seven states offer broad-based coverage to undocumented residents using state funds.
CMS is launching a series of reviews to crack down on federal Medicaid funds going to cover those unlawfully present in the country and is planning to recoup any affected federal funds.
Federal law has barred Medicaid funding for undocumented immigrants — in most cases — since 1996 “but some states have pushed the boundaries, putting taxpayers on the hook for benefits that are not allowed,” CMS wrote in a press release on the initiatives.
Letters sent May 27 to states said CMS is planning several reviews as part of the effort:
- Conducting focused evaluations of select state Medicaid spending reports, (which are CMS-64 form submissions)
- Performing in-depth reviews of select states’ financial management systems
- Assessing existing eligibility rules and policies to close loopholes and strengthen enforcement
“Medicaid is not, and cannot be, a backdoor pathway to subsidize open borders,” Dr. Mehmet Oz, administrator of CMS, said in the release. “States have a duty to uphold the law and protect taxpayer funds. We are putting them on notice — CMS will not allow federal dollars to be diverted to cover those who are not lawfully eligible.”
CMS urged all states to “immediately examine and update internal controls, eligibility systems and cost allocation policies to ensure full compliance with federal law. Any improper spending on noncitizens will be subject to recoupment of the federal share.”
Latest effort
The latest CMS initiative stems from a Feb. 19 executive order that aimed, in part, to “enhance eligibility verification systems to the maximum extent possible, to ensure that taxpayer-funded benefits exclude any ineligible alien who entered the United States illegally or is otherwise unlawfully present in the United States.”
The new initiative followed a May 12 proposed rule that targeted a “loophole” in Medicaid provider taxes with changes it says would reduce Medicaid funding by $52 billion over the next five years. CMS explicitly framed the change as preserving Medicaid for those who are its traditional beneficiaries and preventing states from using it to allow them to fund other spending, such as coverage for illegal immigrants.
Hospital executives have warned that restrictions on payment for undocumented immigrants won’t prevent such patients from seeking care but would increase an unfunded burden on their organizations. Federal and state funding through Medicaid to hospitals that provide emergency treatment of those unlawfully present was expected to continue.
Legislative connection
The budget reconciliation bill passed May 22 by the House similarly focuses on federal funding for illegal immigrants. It would end federal funding when an individual’s citizenship or immigration status has not been verified. States may still provide coverage during a reasonable verification opportunity period, however, the bill would restrict federal dollars until the applicant’s citizenship or immigration status is verified.
Advocates for the change said it 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.
The provision would provide $844 million in federal saving over 10 years, according to Congressional Budget Office (CBO) estimates.
Another provision of the bill would reduce the federal medical assistance percentage (FMAP) by 10 percentage points for states that provide Medicaid coverage for illegal immigrants or cover illegal immigrants through state-based programs. The bill’s supporters argued states have used provider and health plan taxes through Medicaid to fund the coverage expansions for unauthorized immigrants.
That provision would cut federal spending by $11 billion over 10 years, according to CBO.
“Federal policymakers should ensure that resources are reserved for U.S. citizens and lawful residents,” said an analysis from the conservative Paragon Institute.
As of April 2025, seven states (California, Colorado, Illinois, Minnesota, New York, Oregon, Washington) plus Washington, D.C. have expanded fully state-funded coverage to broad classes of undocumented immigrants, according to a KFF analysis.
