Cap On Fed Share Of Emergency Medicaid For Undocumented Has Broader Implications

By Jalen Brown / August 26, 2025

As part of Republicans’ ongoing agenda to curb federal health care spending and restrict the use of taxpayer dollars for undocumented immigrants, a little-publicized piece of their recently enacted One Big Beautiful Bill Act will essentially reduce the federal government’s share of emergency Medicaid costs for care provided to undocumented individuals.

According to a source, if states are required to shoulder a larger share of Emergency Medicaid costs, they could respond by lowering reimbursement rates for emergency services, narrowing the definition of what qualifies as a covered emergency, or tightening eligibility criteria for their emergency Medicaid programs.

Undocumented immigrants are not eligible for federally funded Medicaid, but hospitals must still provide emergency care to anyone in need. Through Emergency Medicaid, states receive federal reimbursement for services provided to individuals who meet Medicaid’s income and residency requirements but lack an eligible immigration status.

In some cases, states have been receiving higher enhanced federal matching rates for this emergency care. For example, services for patients who would have qualified under the Affordable Care Act’s (ACA) Medicaid expansion population were reimbursed at the enhanced 90% FMAP, even if the patient was ineligible solely because of immigration status.

Starting Oct. 1, 2026, however, Section 71110 of the law will cap the FMAP for Emergency Medicaid services at each state’s regular Medicaid match rate, which is typically between 50% and 80%. As a result, states will no longer receive enhanced federal funds for providing emergency care to undocumented immigrants, effectively shifting more of the cost burden onto state budgets.

The statute allocates $1 million to CMS in fiscal 2026 to implement this change.

While Republicans believe the provision will help rein in federal costs, Emergency Medicaid spending totaled just $3.8 billion in fiscal 2023 -- only 0.4% of overall Medicaid spending, according to KFF. The Congressional Budget Office estimates the provision will save about $28 billion from 2025 through 2034.

When asked about the potential for a chilling effect on immigrants seeking care, the source told Inside Health Policy that because the provision does not change who qualifies for Emergency Medicaid, how care is delivered, or whether hospitals are reimbursed, patients are therefore unlikely to notice any immediate difference.

If a chilling effect does occur, it would be difficult to attribute it directly to this policy given that it coincides with many other immigration-related actions from the current administration, according to the source.

For example, the Trump administration recently moved to share Medicaid enrollee data -- including names, addresses, Social Security numbers, and claims information -- with Immigration and Customs Enforcement (ICE) to help identify and deport immigrants. Legal advocates immediately blasted the move as an unprecedented step that violates health privacy laws and could deter people from seeking coverage or care. Earlier this month, however, a federal judge temporarily blocked the initiative -- not on the basis that sharing the data with ICE violates HIPAA, but because HHS failed to adequately justify the policy under the Administrative Procedure Act (APA).

With that in mind, when asked about potential privacy concerns, such as whether the policy could unintentionally lead hospitals to share patients’ immigration status with the federal government, the National Health Law Program (NHeLP) told Inside Health Policy that Section 71110 doesn’t raise such issues.

“That provision reduces the federal matching rate available to states for emergency services provided to certain immigrants. It doesn't affect the nature of the data that hospitals provide to states or that states provide to CMS,” the group said in an emailed statement.

But as if doubling down on their goal of preventing undocumented immigrants from accessing Medicaid, despite the fact that most are already ineligible for full coverage, the GOP’s OBBB Act also includes Section 71109, which narrows Medicaid and the Children’s Health Insurance Program (CHIP) eligibility by explicitly barring undocumented immigrants and most temporary visa holders from receiving coverage.

Before OBBB passed, Medicaid and CHIP eligibility extended to certain “qualified” immigrants -- including lawful permanent residents, refugees and asylees, certain parolees, trafficking victims, battered spouses and children, individuals granted withholding of deportation, and COFA migrants from the Marshall Islands, Micronesia, and Palau.

But because of Section 71109, beginning Oct. 2026, federal Medicaid and CHIP payments will be restricted to U.S. citizens or nationals, lawful permanent residents, Cuban and Haitian entrants, and COFA migrants. All other groups -- including undocumented immigrants, refugees, asylum seekers and individuals on temporary visas like students -- will be explicitly excluded.

According to the statute, CMS will receive $15 million in fiscal 2026 to implement these eligibility changes.

Just last week, CMS launched a nationwide oversight initiative to review the citizenship and immigration status of Medicaid and CHIP enrollees on a a monthly basis, flagging individuals whose information cannot be verified through federal databases. The agency will be requiring state Medicaid agencies to follow up on those cases, request additional documentation from beneficiaries, and disenroll individuals deemed ineligible.