House Republican Bill Would Cut Medicaid Funding to States Providing Own Health Coverage to People Who Are Undocumented

The House Republican reconciliation legislation currently under consideration in the Energy & Commerce Committee would take away health coverage and leave at least 8.6 million people uninsured as it cuts at least $715 billion in health care spending, mostly from Medicaid, according to initial estimates by the Congressional Budget Office.^[1] Among other harmful proposals, the bill would cut the federal matching rate for the Affordable Care Act’s (ACA) Medicaid expansion in the 14 states plus the District of Columbia that created and fund, solely with their own state funds, comprehensive health coverage programs to cover people without a documented immigration status. This policy would substantially cut federal support for Medicaid expansion and encroach on state sovereignty. (See table below for federal funding impacts on each of these states.)

Medicaid is a shared responsibility between states and the federal government to provide health coverage for people who meet income, residency, and immigration status requirements, including many eligibility rules set at the federal level. The federal Medicaid program has harsh immigration-related requirements that exclude from eligibility all people who are undocumented and many people who have lawful immigration status, including lawful permanent residents in their first five years in the United States.^[2]

Given these coverage prohibitions, 14 states and D.C. use state dollars to cover some people who aren’t eligible for Medicaid due to their immigration status in programs that provide comprehensive coverage but are not part of the federal Medicaid program and receive no federal funding.^[3] State legislatures and governors have opted to invest in these programs using state-only funding, recognizing that their residents having health coverage brings both individual benefits such as improved health outcomes and reduced medical-related debt, and community benefits such as improved public health outcomes and less uncompensated care.

The federal government now pays 90 percent of the costs of covering Medicaid enrollees who gained coverage through the expansion. The House Republican legislation would penalize states that cover people who are undocumented with state-only funds by cutting their Medicaid expansion match rates from 90 to 80 percent. The reduction would begin October 1, 2027. Federal funding to the Medicaid expansion group — the vast majority of whom are U.S. citizens — would be cut substantially in the affected states unless the state ends the state-funded coverage of immigrants. This proposal is a substantial overreach of federal authority, attempting to coerce states into not spending state funds in particular ways.

We estimate that reducing the federal matching rate for the Medicaid expansion in D.C. and states that use their own funding to cover people who are not otherwise eligible for Medicaid because they are undocumented would cut $76 billion in funds to these states from 2028 to 2034, doubling the expansion group costs that each state would be required to fund to maintain their current programs. (See table and methodology below.) Facing these large funding cuts, states could respond by dropping their state-funded programs that cover people who are undocumented, or by cutting enrollment, benefits, or provider payments for enrollees in these state-funded programs or in Medicaid.

CBPP estimates measure reductions in federal funding that states would have to assume to maintain their current programs, including both their Medicaid expansion and their state-funded program covering people who are undocumented. The estimates do not incorporate assumptions about how states might respond to the cuts in federal funding, which CBO estimates typically do. CBPP estimates also do not include interactions with other provisions in the House Energy and Commerce reconciliation bill.

Methodology

We estimate enrollment and spending using MBES data collected by the Centers for Medicare & Medicaid Services and the Congressional Budget Office’s (CBO’s) June 2024 Medicaid baseline.^[4] For states that adopted Medicaid expansion before 2019, enrollment and spending is projected from fiscal year 2019 to account for differences in pandemic-era enrollment trends; otherwise, we project enrollment and spending from fiscal year 2023.

In line with the proposed policy, we estimate the federal funding cut to states and D.C. from 2028 to 2034 by comparing state spending under the 90 percent federal match rate and under the reduced 80 percent match rate.