Which States Would Be Affected by a House Proposal to Cut Federal Medicaid Funding for States That Cover Undocumented Immigrants?

Copy link to quick take

The House Energy and Commerce Committee released its bill to reduce the federal deficit as part of budget reconciliation. The bill includes substantial proposed cuts to Medicaid that could have far reaching implications and which the Congressional Budget Office projects will increase the number of uninsured. While many of the provisions would make changes to the Medicaid program itself, one provision seeks to reduce federal Medicaid funding to states as a penalty for providing coverage to immigrants with their own state funds. Specifically, the bill proposes reducing the federal matching rate for the Affordable Care Act Medicaid expansion population from 90% to 80% for states that either provide health coverage or financial assistance to purchase health coverage to individuals who are not lawfully residing in the United States.

KFF data show that as of April 2025, 14 states plus DC use state-only dollars to provide health coverage to children regardless of immigration status, including 7 states that also do so for at least some adults (Figure 1). These state-funded programs fill gaps in coverage for immigrants who are ineligible for federally funded coverage, helping to reduce uninsured rates and increase access to care. Some additional states cover some adults using state-only funds but limit coverage to specific groups or provide more limited benefits; it is not clear if they would be considered as providing “comprehensive coverage” under the proposal.

Federal savings from the provision would only be realized if states maintain their programs and have their federal match rate for the Medicaid expansion population reduced from 90% to 80%. If states eliminate their programs, there would likely be increased uninsured rates and barriers to care for immigrant families. The proposal also raises questions related to the balance of power between the federal government and states and whether the federal government can condition federal Medicaid financing on state actions with their own funds. In 2012, the Supreme Court ruled that the Medicaid expansion mandate under the Affordable Care Act was unconstitutional because it conditioned states’ receipt of federal Medicaid funds on implementing the expansion and the potential loss of funding left states with no real option but to expand. As a result of the ruling, the expansion was effectively made optional to states.