House Bill Would Penalize More States for Covering Immigrants, Including Lawfully Residing Children and Pregnant People

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Note: This piece was originally published on May 21, 2025 and was updated on May 22, 2025 to reflect revisions made in the version of the bill passed by the House.

A small language change in the version of the reconciliation bill that is being considered by the House rules committee made a big change in what’s at stake for health coverage of lawfully residing children and pregnant people. The reconciliation bill would penalize states that have expanded coverage to immigrants by reducing their federal Medicaid match rate for the ACA expansion from 90% to 80%.

A revision made to the bill before it was considered by the Rules committee expanded the penalty from 14 states and DC that cover undocumented immigrants with state funds to 33 states and DC that use a federal option available in Medicaid and/or CHIP to expand coverage for lawfully residing children and/or pregnant people.

If states maintain their coverage, the federal Medicaid match penalty for expanding coverage to immigrants, including lawfully residing children and/or pregnant people, could shift $153 billion from the federal government to the 33 affected states and DC over the next 10 years (Figure 1). Additionally, 9 of the 33 states that would be affected by penalty have “trigger” laws in place that automatically end expansion or require changes if the federal match rate were to drop, meaning the provision could result in funding and coverage losses for the entire ACA Medicaid expansion in these states.

If states eliminate coverage to avoid the FMAP penalty more than 1.9 million people covered through state-funded programs for immigrants and additional lawfully residing children and pregnant people covered through the Medicaid/CHIP option could lose coverage with most likely becoming uninsured.

Per amendments made to the final version of the bill passed by the House on May 22, 2025, the penalty was limited to states providing coverage to immigrants who are not a “qualified alien” or a “child or pregnant woman who is lawfully residing in the United States” covered under the Medicaid option for these groups. This change appears to largely apply the penalty to the 14 states and DC that cover undocumented immigrants with state funds. However, because the exception is more limited than the prior language, which excluded states covering “otherwise lawfully residing” immigrants from the penalty, additional states that cover lawfully residing groups through other pathways could be affected.