With the passage of the BBB by the Senate today, one of the issues I was interested in was what happened to plans to eliminate Medicaid funding for illegal immigrants. And it’s actually a bit difficult to figure out what is going to happen now.
So the backstory here is that the feds haven’t agreed to directly fund Medicaid for illegal immigrants anywhere. However, some states have rolled out versions of Medicaid which cover some illegal immigrants using state funds. California in particular has expanded Medical to cover all immigrants who meet the income threshold. However, that expansion cost the state a lot of money, creating a big budget gap this year. So in the newly announced budget, Gov. Newsom cut off new enrollment in the program and required those immigrants who have already enrolled to start paying a monthly premium for the coverage.
In signing the budget, Mr. Newsom backtracked on his earlier pledge to insure all low-income residents, regardless of their immigration status. But it came as the state faced a $12 billion deficit, driven in part by a large cost overrun in the state’s insurance plan for undocumented immigrants, and it would have been politically difficult to cut programs for citizens without reducing benefits for undocumented immigrants…
The California budget for the fiscal year that starts Tuesday relies on prohibiting new enrollment of undocumented immigrants in the state’s Medicaid program, known as Medi-Cal, starting in January. Adults between the ages of 19 and 59 who were already enrolled will have to pay a new $30 monthly premium beginning in 2027.
But getting back to the BBB, there were actually two provisions in the bill dealing with illegal immigrants and Medicaid. As I understand it, one section of the BBB was intended to cut reimbursement for states that chose to use their own money to fund coverage for illegal migrants. In essence the feds were pushing the states to drop such coverage. There had been a lot of concern that this would work because the states would not be able to cover the shortfall.
The cuts, if approved by the Senate, would pose a tricky political and economic hurdle for the states and Washington, D.C., which use their own funds to provide health insurance to some people in the U.S. without authorization.
Those states would see their federal reimbursement for people covered under the Affordable Care Act’s Medicaid expansion cut by 10 percentage points. The cuts would cost California, the state with the most to lose, as much as $3 billion a year, according to an analysis by KFF, a health information nonprofit that includes KFF Health News.
Luckily for California, that portion of the bill was stripped out last week by the Senate parliamentarian.
Parliamentarian Elizabeth MacDonough determined that some of the megabill’s Medicaid provisions — including changes to federal funding for US states’ share of health care provider taxes — were not eligible for approval via the simple-majority gambit, known as reconciliation.
Other axed provisions eliminated some Medicaid eligibility for non-citizen adults and children and lowered Federal Medical Assistance Percentage (FMAP) funding percentages for states that let non-citizens obtain health care coverage from 90% to 80%.
However, according to Missouri Sen. Eric Schmitt there is still a section of the bill limiting eligibility for illegal immigrants.
Here’s where the rumor came from: During yesterday’s vote-a-rama, an amendment banning Medicaid for illegal immigrants was voted down.
The clip of that vote started circulating online—and folks took that to mean that the provision had been stripped from the bill altogether.
— Senator Eric Schmitt (@SenEricSchmitt) July 1, 2025
The ban itself was ALREADY in the bill. It was never taken out.
And it wasn’t just a ban on some Medicaid for illegal immigrants who commit heinous crimes—it applies to ALL Medicaid for ALL illegal immigrants. (And most noncitizens generally).
— Senator Eric Schmitt (@SenEricSchmitt) July 1, 2025
According to the Congressional Budget Office, roughly 1.4 million illegal immigrants are currently on Medicaid, despite the fact that they don’t meet federal enrollment requirements—because blue states have expanded their (federally funded) Medicaid programs to include them.
— Senator Eric Schmitt (@SenEricSchmitt) July 1, 2025
The Big Beautiful Bill ends that arrangement by restricting Medicaid eligibility.
According to the official data from the CBO (see below), that kicks a whopping 1.4 million illegal immigrants off the Medicaid rolls. pic.twitter.com/zTeutcnpIz
— Senator Eric Schmitt (@SenEricSchmitt) July 1, 2025
That means blue states are left with a choice: Either send your illegal immigrants home, or you’re going to be paying their bills yourself.
It’s easy when you’re doing it on the American taxpayer’s dime. It’s a lot tougher when it’s all coming from your own constituents.
— Senator Eric Schmitt (@SenEricSchmitt) July 1, 2025
Here’s what doesn’t make sense to me about this. Most of the coverage being targeted here is in California because California was the first state to expand this coverage to everyone of every age who met the income threshold. But California was paying for that expansion of coverage, not the feds. That’s why California had a massive budget deficit and why Gov. Newsom had to dial it back in the latest budget.
In other words, the state wasn’t being reimbursed for this already and now they still won’t be reimbursed for it. The cuts to funding would have come from the other section of the bill which reduced they coverage amount by 10% for states who were offering coverage to illegal immigrants. But as I mentioned, that was ruled out by the parliamentarian before the bill was passed.
So as I said up top, it’s actually difficult to figure out what is happening here. Will the new eligibility requirement force cuts and if so how will it work. I’m sure someone is going to write a story explaining what the remaining section of the bill does but so far I’m not seeing it. I’ll try to update this today or tomorrow once it’s more clear.
