Immigration and Health Care in the One Big Beautiful Bill: How the New Law Reforms Eligibility for Medicaid, Medicare, and ACA Subsidies

This brief examines the provisions of the One Big Beautiful Bill Act (OBBBA) that address federal funding for health services for unauthorized immigrants and certain legal immigrants in Medicaid, Medicare, and the Affordable Care Act (ACA). These provisions seek to restrict federally subsidized coverage to U.S. citizens and certain lawful residents.

For Medicaid, Medicare, and the ACA, this brief summarizes pre-OBBBA law around health coverage for non-citizens, the relevant provisions of OBBBA (and what the law omits), and the expected impact.

Key Takeaways

Medicaid Rules Before and After OBBBA

Pre-OBBBA

Medicaid could pay for services for legal immigrants, and, in some cases, the federal government could pay for emergency care for unauthorized immigrants.

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), signed by President Clinton, allowed certain “qualified aliens” to access welfare (including Medicaid) while excluding non-qualified aliens. Under PRWORA, lawful permanent residents were still required to wait five years before becoming eligible for Medicaid. However, those entering the United States illegally who claimed asylum or were released with grants of parole were eligible for Medicaid immediately. Under the Biden administration, millions of unauthorized aliens abused these designations to stay in the country longer¹ and were thus able to enroll in Medicaid. As of 2023, previously eligible qualified aliens (noncitizens) comprised 6 percent of individuals under the age of 65 with Medicaid, or approximately 4.6 million people.²

Regarding unauthorized immigrants, there have been some circumstances in which the federal government paid for their emergency care. Generally, federal law does not reimburse states for Medicaid services to unauthorized immigrants. If states wish to have Medicaid cover services for unauthorized immigrants, they must pay for that coverage with state-only dollars. As Paragon has documented, states such as California circumvented this restriction using legalized money laundering techniques to obtain federal Medicaid dollars, which they then used on medical services for unauthorized immigrants.³

States are also affected by the Emergency Medical Treatment and Labor Act, which requires⁴ that if an individual shows up to the hospital with an emergency medical condition, hospitals must either provide stabilization treatment or transfer the individual to another medical facility. This rule applies regardless of immigration status.

Whether or not Medicaid pays for these services, however, relates to another provision of law. Section 1903 of the Social Security Act generally prohibits federal reimbursement for services received by anyone who is not a lawful permanent resident. However, the law specifically makes an exception and allows payments for non-lawful permanent residents if the following two conditions are met:

1. The services “are necessary for the treatment of an emergency medical condition of the alien.”⁵
2. The alien meets the state’s other eligibility requirements.⁶

This exception created a situation in which the federal government was required to pay for emergency services for unauthorized immigrants at a higher rate than for citizens if states chose to (a) expand Medicaid under the ACA and (b) expand its program with state-only dollars to include unauthorized immigrants. Non-expansion states receive the normal federal medical assistance percentage (FMAP, typically around 60 percent) for their emergency services.

Some states that expanded Medicaid under the ACA also expanded the program to provide comprehensive Medicaid benefits to unauthorized immigrants. As of April 2025, seven states (California, Colorado, Illinois, Minnesota, New York, Oregon, and Washington) and the District of Columbia had expanded fully state-funded coverage to some income-eligible adults regardless of immigration status.⁷ So if an unauthorized immigrant has access to an expansion state’s Medicaid program as part of the expansion population, the federal government must reimburse his or her emergency room care at the 90 percent FMAP. Thus, the law results in the federal government making Medicaid reimbursements to states for able-bodied unauthorized immigrants at a much higher FMAP (90 percent) than U.S. citizens in the traditional, more vulnerable population in most of these states (50 percent FMAP). Thus, the federal government spent nearly nine times more for each dollar of state spending on the able-bodied unauthorized immigrants’ emergency services than for state spending for traditional enrollees’ emergency services.

What OBBBA Did and Did Not Do

Beginning October 1, 2026, Section 71109 of OBBBA prohibits the federal government from reimbursing states for Medicaid or the Children’s Health Insurance Program (CHIP) for anyone other than:

• citizens,
• lawful permanent residents,
• Cuban and Haitian entrants, and
• individuals lawfully residing in the United States through a Compact of Free Association.

States will be ineligible for federal Medicaid funds for services received by refugees, aliens granted parole for at least one year, aliens granted asylum, and “alien visitors, tourists, diplomats, and students who enter the United States temporarily with no intention of abandoning their residence in a foreign country.”¹¹ The statute still allows federal reimbursement for emergency services and, per states’ election, children and pregnant women who lawfully reside in the United States.¹²

To address emergency care, Section 71110 of OBBBA reduces the FMAP from 90 percent to the state’s normal FMAP for emergency medical services provided through Medicaid for unauthorized immigrants—effective October 1, 2026. This section does not eliminate Medicaid funding emergency services for unauthorized immigrants. It simply ensures the federal match for unauthorized immigrants does not exceed that for citizens.

Medicaid House-Enacted Elements Dropped in the Senate

Projected Impact

According to CBO, between 2017 and 2023, the federal government paid a total of $9 billion “on emergency Medicaid services for non‑U.S. nationals who were ineligible for comprehensive Medicaid by reason of immigration status or because they were still within the five-year waiting period.”¹³ CBO projects that over 10 years, Section 71109 will save $6.2 billion while Section 71110 will save $28.0 billion. CBO did not release coverage estimates specific to these provisions.

Medicare’s Revised Eligibility Rules

Pre-OBBBA

The statute explicitly authorized Medicare to allow certain noncitizens to access the program. For both Medicare Parts A and B, an individual could only access benefits if he or she was a “resident of the United States, and is either (A) a citizen or (B) an alien lawfully admitted for permanent residence.”¹⁴ While the statute allowed those groups onto the Medicare program, the statute did not specifically prohibit other groups from joining the program. Thus, certain non-permanent residents have still accessed Medicare.¹⁵

What OBBBA Did and Did Not Do

Section 71201 restricts Medicare eligibility to U.S. citizens, aliens who are “lawfully admitted for permanent residence under the Immigration and Nationality Act,” Cuban and Haitian entrants, and individuals lawfully residing in the United States under Compacts of Free Association.

This section also requires the Commissioner of Social Security to review individuals enrolled in Medicare who do not meet the new criteria and to notify them that their enrollment is terminated.

Projected Impact

CBO estimates that this section will save $5 billion over 10 years. This section takes effect on January 1, 2027. CBO has not released specific estimates on how this provision would affect coverage.

ACA Subsidies and Closing Loopholes

Pre-OBBBA

The ACA prohibits “individuals who are not lawfully present” from receiving ACA subsidies.¹⁶ But many individuals who are here legally but are not permanent residents (parolees, asylees) are eligible for a premium tax credit (PTC) to purchase exchange plans. Data from the Urban Institute indicates that in 2024 approximately 4.0 percent of noncitizens were insured with exchange plans and received PTCs, while an additional 1.7 percent of noncitizens were enrolled in the Basic Health Program (BHP).¹⁷ Under Section 1331 of the ACA, BHPs receive federal funding.¹⁸ States with the largest asylee populations are California, Texas, Virginia, New York, and Florida.¹⁹

The ACA permitted certain qualified aliens²⁰ to enroll in the ACA, even though U.S. policy includes a waiting period for new immigrants before they can enroll in federally subsidized health care. PRWORA imposed a five-year period before qualified aliens would be eligible to enroll in Medicaid (with exceptions).²¹ However, the ACA allowed those affected to bypass the PRWORA waiting period to obtain a PTC, even if they earn less than 100 percent of the federal poverty level (FPL). Below is a list of the “qualified aliens” listed in Title 8, Section 1641, of the U.S. Code that do not get exceptions (listed in Title 8, Section 1613(b)) and would thus be affected by this waiting period:

• Lawfully admitted permanent residents
• Parolees after 1 year
• Those granted conditional entry²²

Section 36B(c)(1)(B) of the ACA included individuals who make less than 100 percent FPL and who are not eligible for Medicaid due to their alien status as “applicable individuals.” This ACA provision directly opened the door for those in the Medicaid waiting period (listed above) to receive PTCs (regardless of length of residency) even if their incomes are below 100 percent of FPL in non-Medicaid-expansion states and below 138 percent FPL in Medicaid expansion states. Defining applicable individual to include this group allows them to receive PTCs, a benefit not legally available to U.S. citizens who make below 100 percent FPL. In other words, non-U.S. citizens are the only individuals who can legally obtain PTCs if their incomes are below 138 percent FPL in Medicaid expansion states or 100 percent FPL in non-Medicaid expansion states.

Although we could not find estimates of how many noncitizens receive PTCs in the United States, below is a non-exhaustive list of certain groups of noncitizens who, depending on whether they also fall under an exception, might have qualified for the ACA’s authorization to access PTCs:

• 12.8 million lawfully permanent residents, as of January 1, 2024²³
• 1 million individuals with Temporary Protected Status²⁴
• 531,690 individuals in the Cuban, Haitian, Nicaraguan, and Venezuelan parole program²⁵
• 169,000 individuals with U Visas or Special Immigrant Juvenile Status²⁶
• 651,000 Ukrainian parolees²⁷
• 133,000 Afghan parolees²⁸
• 535,030 individuals with Deferred Action for Childhood Arrivals (DACA)²⁹

Prior to OBBBA, automatic re-enrollment facilitated widespread improper and even fraudulent ACA enrollment.³⁰ In addition to putting many people at risk of accumulating tax liabilities, automatic re-enrollment also ensured the continuance of large subsidy payments for those who were ineligibly enrolled at any point in time.

What OBBBA Did and Did Not Do

Section 71301 of OBBBA further limits which aliens can qualify for PTCs. Like OBBBA’s restrictions on Medicaid (see Section 71109 above), the only noncitizens who can get PTCs are lawful permanent residents, Cuban and Haitian entrants, and individuals lawfully residing in the United States under Compacts of Free Association.

This section amends the ACA to require the Secretary of Health and Human Services (HHS) to verify whether an individual is an “eligible alien,” as defined by Section 36B(e)(2) of the Internal Revenue Code of 1986. It also amends the code to:

• require anyone who claims an advanced PTC or reduced cost-sharing and who is eligible based on immigration status to also attest that he or she is an “eligible alien”;
• require the Secretary to include information regarding whether enrollees are “eligible aliens” when he submits records to DHS to determine eligibility; and
• prohibit any payments, credits, or cost-sharing reductions for individuals who are not “eligible aliens” rather than “not lawfully present.”³¹

OBBBA also addresses the Medicaid-waiting-list loophole in Section 71302 by removing the policy that currently allows lawful permanent residents, parolees, and those granted conditional entry to receive PTCs if their income is below the FPL in non-expansion states or below 138 percent FPL in expansion states.

Furthermore, Section 71303 will prevent those already enrolled from automatically receiving APTCs by requiring exchanges to verify eligibility for PTCs before enrollment and every year afterward. This policy essentially restores a basic program integrity measure  reversed under the Biden administration. It requires an individual to affirm that he or she is in an eligible alien status.

ACA House-Enacted Elements Dropped in the Senate

Projected Fiscal Impacts

CBO projects substantial savings from OBBBA’s provisions that restrict unauthorized immigrant eligibility for federally subsidized health programs. Section 71109 limits Medicaid and CHIP reimbursement to citizens, lawful permanent residents, Cuban and Haitian entrants, and those covered under Compacts of Free Association. Section 71110 reduces the enhanced federal match for emergency services provided to unauthorized immigrants from 90 percent to the state’s regular FMAP. Section 71201 narrows Medicare eligibility to the same limited groups, with the Social Security Administration required to terminate enrollment for individuals who no longer qualify. Together, CBO estimates these three provisions will save $39.2 billion over ten years.

The largest projected savings come from OBBBA’s reforms to the Affordable Care Act. Section 71301 tightens the definition of who may receive PTCs, restricting subsidies to lawful permanent residents, Cuban and Haitian entrants, and Compact migrants, with expected savings of $74.5 billion. Section 71302 closes the loophole that allowed certain noncitizens in the Medicaid waiting period to bypass restrictions and access ACA subsidies, saving $49.7 billion. Section 71303 ends automatic re-enrollment into subsidized exchange plans without verification of immigration eligibility, saving $41.3 billion. Altogether, these three sections account for more than $165 billion in projected deficit reduction over the next decade, making them the most significant fiscal components of OBBBA’s immigration provisions. The actual level of savings will depend heavily on the size of the affected populations. If current data undercounts unauthorized immigrants or other ineligible individuals, the potential savings would likely be greater than projected.

Key Immigration Terms Used in this Brief

Footnotes