Potential Impacts of 2025 Budget Reconciliation on Health Coverage for Immigrant Families

Note: This content was updated on May 20, 2025 to update eligibility for ACA Marketplace coverage.

Introduction

Congressional Republicans are considering a budget reconciliation package that would make significant changes to Medicaid and the Affordable Care Act (ACA), with a number of provisions specifically limiting access to health coverage for immigrants. The House Energy and Commerce Committee released legislative text to meet spending targets that would make significant cuts to the Medicaid program, and the proposed legislation released by the House Ways and Means Committee includes immigrant eligibility restrictions for ACA Marketplaces and Medicare. Beyond these changes, reductions have been proposed in other areas that would have significant impacts for immigrant families, including eligibility restrictions for the Child Tax Credit and the Supplemental Nutrition Assistance Program.

This policy watch discusses key provisions in the draft reconciliation legislation that are aimed at limiting health coverage for immigrant families. These provisions would likely increase the uninsured rate among immigrant families, including citizen children in those families, and have broader ramifications for the nation’s workforce and economy given the role immigrants play.

Proposed Medicaid Changes

Reduce the federal Medicaid match rate for the ACA Medicaid expansion group from 90% to 80% for states that use their own funds to provide health coverage or financial assistance to purchase health coverage to individuals who are not lawfully residing in the United States. Under longstanding policy, undocumented immigrants are not eligible to enroll in federally funded health coverage, including Medicaid, the ACA Marketplaces, or Medicare. Moreover, some lawfully present immigrants face eligibility restrictions on Medicaid, such as a five-year waiting period before they can enroll. Some states have established fully state-funded programs to fill these gaps in coverage for immigrants. A proposed provision in the Energy and Commerce bill would penalize states that offer this coverage by reducing their federal Medicaid match rate for the ACA expansion population from 90% to 80%. As of April 2025, 14 states plus DC provide health coverage to children regardless of immigration status, including 7 states plus DC that extend coverage to at least some adults regardless of immigration status. 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 Congressional Budget Office (CBO) projects that 1.4 million more people would become uninsured by 2034 and projects an $11 billion reduction in the federal deficit between 2025 and 2034 as a result of this provision. 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. This provision would become effective October 1, 2027.

End requirement and federal Medicaid financing for states to cover people while they are verifying immigration or citizenship status. Under current law, states verify an applicant’s immigration status for Medicaid through the Department of Homeland Security’s Systematic Alien Verification for Entitlements (SAVE) system, which can provide automatic real-time verification. If the SAVE system cannot verify immigration status in real time, states are required to provide Medicaid benefits to applicants during a “reasonable opportunity period” of 90 days while their immigration status is being verified, if they meet all other eligibility criteria. Under a proposed provision, states will no longer be required to provide Medicaid benefits to applicants during a “reasonable opportunity period,” although they can do so at state option. The provision also prohibits states from claiming federal matching funds during a reasonable opportunity period, meaning that, if states elect to provide this coverage, they would do so with solely state funds. CBO projects a $0.8 billion reduction in the federal deficit between 2025 and 2034 due to this provision, which would become effective October 1, 2026.

Proposed Changes to ACA Marketplace Coverage

End ACA Marketplace coverage eligibility for Deferred Action for Childhood Arrivals (DACA) recipients. When the ACA was originally implemented, DACA recipients were not considered lawfully present for purposes of eligibility for Medicaid or Marketplace coverage even though they are considered to have lawful status in the country. In May 2024, the Biden administration published new regulations that extended Marketplace eligibility to DACA recipients effective November 2024, which it estimated would extend coverage to about 100,000 uninsured DACA recipients, who are mostly working adults without access to an affordable health coverage option. However, due to ongoing legal challenges, DACA recipients in 19 states remain ineligible for Marketplace coverage. In March 2025, the Trump administration proposed new regulations to exclude DACA recipients from the definition of “lawfully present” immigrants for the purposes of health coverage, which would make them ineligible for Marketplace coverage nationwide. The Energy and Commerce bill would make this change via legislation, making DACA recipients ineligible to purchase ACA Marketplace coverage and to receive premium tax credits or cost sharing reductions to help pay for coverage effective January 2026. Preliminary estimates from CBO show a $1.5 billion reduction in the federal deficit between 2026 and 2034 under this provision.

Eliminate ACA Marketplace coverage for many lawfully present immigrants. Under existing law, citizens and lawfully present immigrants are eligible to enroll in ACA Marketplace coverage and receive premium subsidies and cost-sharing reductions. The group of lawfully present immigrants eligible for Marketplace coverage is broader than the group of “qualified immigrants” who are eligible for Medicaid. In general, Marketplace coverage is limited to individuals with incomes at or above 100% of the federal poverty level (FPL), since most of those with lower incomes would be eligible for Medicaid. However, because some lawfully present immigrants with lower incomes remain ineligible for Medicaid (e.g., due to the five-year waiting period), Marketplace eligibility was also extended to lawfully present immigrants with incomes under 100% FPL who do not qualify for Medicaid due to their immigration status. The Ways and Means Committee’s draft reconciliation legislation would limit eligibility for subsidized ACA Marketplace coverage to lawfully present immigrants who are lawful permanent residents (LPRs or “green card” holders), Compact of Free Association (COFA) migrants residing in the U.S., or certain immigrants from Cuba, eliminating eligibility for many lawfully present immigrants, including asylees, refugees, and people with Temporary Protected Status, beginning January 1, 2027. The bill would also eliminate Marketplace eligibility for all lawfully present immigrants with incomes under 100% of the federal poverty level beginning January 1, 2026, leaving some ineligible for either Medicaid or Marketplace coverage. The Joint Committee on Taxation estimates that these changes will result in federal savings of about $117 billion between 2025 and 2034.

Proposed Changes to Medicare Coverage

Eliminate Medicare eligibility for many lawfully present immigrants. Currently, lawfully present immigrants are eligible for Medicare if they have the required work quarters and meet the disability or age requirements. Those without required work history can also purchase Medicare Part A after residing legally in the U.S. for five years continuously. Under proposed changes in the Ways and Means bill, Medicare eligibility would be limited to lawfully present immigrants who are LPRs (“green card” holders), COFA migrants residing in the United States, or certain immigrants from Cuba. This would eliminate eligibility for many lawfully present immigrants including refugees, asylees, and people with Temporary Protected Status. Current beneficiaries subject to the new restrictions would lose coverage one year from the date of enactment of the legislation. The Commissioner of Social Security would review beneficiaries to identify those who would be subject to the restrictions and notify them that their benefits will be terminated.

Health Coverage and Economic Implications

Noncitizen immigrants already are disproportionately likely to be uninsured due to limited access to health coverage options. Although most are working, they tend to be employed in industries and jobs that are less likely to offer employer-sponsored health coverage and face eligibility restrictions for federally funded health coverage. The provisions proposed in the budget reconciliation bills would further curtail access to health coverage for both undocumented and lawfully present immigrants and will likely lead to coverage losses and increased barriers to care among immigrant families. Because parental coverage has spillover effects on children’s coverage, coverage losses among immigrant parents may also lead to coverage losses for citizen children in immigrant families. Overall, one in four children in the U.S. lives with an immigrant parent, including one in ten (12%), or 9 million, who are citizen children with a noncitizen parent. People who are uninsured often delay or go without needed care, which can contribute to health conditions becoming worse and more costly. Data from the 2023 KFF/LA Times Survey of Immigrants show that uninsured immigrant adults are about three times as likely as their insured counterparts to report not having a usual source of care other than an emergency room (42% vs. 13%) and not having had a doctor’s visit in the past 12 months (52% vs. 18%); they also are about twice as likely to report skipping or postponing care in the past 12 months (36% vs. 19%). Reduced coverage and access to care may also negatively impact the U.S. economy and workforce due to lost productivity since immigrants play an outsized role in many occupations including health care, construction, and agriculture.