The Trump administration is threatening to halt federal Medicaid funding to states it says are illegally using the safety-net insurance program to cover healthcare for undocumented immigrants.
Under federal law, states are only allowed to use federal Medicaid funds for emergency medical services for people in the country illegally. But “some states have pushed the boundaries,” the CMS said in a press release on Tuesday announcing that regulators would ramp up oversight in the area.
That includes heightened evaluations of states’ quarterly Medicaid spending reports, reviewing states’ financial management systems and looking for ways to close loopholes in existing Medicaid eligibility rules, the CMS said.
The agency also urged states to update their internal controls, eligibility systems and cost allocation policies to ensure Medicaid funds are being used for citizens only.
“Any improper spending on noncitizens will be subject to recoupment of the federal share,” the CMS said.
The announcement from the Trump administration is a warning shot across the bow for a handful of states that have used Medicaid funds to care for undocumented immigrants.
Currently, 14 states and Washington, D.C. cover children regardless of their immigration status. Seven of those states plus D.C. cover at least some adults regardless of their immigration status.
Those programs are not funded by federal Medicaid dollars. So, it’s unclear specifically what issue the Trump administration is trying to address.
The CMS may be referring to a Medicaid financing loophole that allows states to draw down more federal funding by taxing providers. Critics argue the accounting maneuver unfairly inflates Washington’s Medicaid spending to the detriment of federal taxpayers.
In a rule proposed by the CMS earlier this month to restrict the provider taxes, regulators said preventing the arrangements is necessary to stop states from spending increased federal dollars on benefits for illegal immigrants.
“Some states have exploited these tax loopholes to take money from federal taxpayers and then simultaneously spent ‘state’ money on new benefits for illegal immigrants,” the CMS said in a fact sheet on the rule.
Potentially recouping federal dollars is a serious threat. Medicaid is jointly funded by the states and the federal government, but the federal government assumes a sizeable portion of the spend — more than 50% across the board, but upwards of 80% for some poorer states.
“Medicaid is not, and cannot be, a backdoor pathway to subsidize open borders,” CMS Administrator Mehmet Oz said in a statement Tuesday. “States have a duty to uphold the law and protect taxpayer funds. We are putting them on notice — CMS will not allow federal dollars to be diverted to cover those who are not lawfully eligible.”
The effort follows an executive order President Donald Trump signed in February called “Ending Taxpayer Subsidization of Open Borders” meant to crack down on immigrants in the country illegally from receiving taxpayer-funded benefits. The order directed federal agencies to review their programs and ensure noncitizens with uncertain immigration status aren’t obtaining public benefits.
The issue is complicated by the fact that immigrants without permanent legal status generally do not receive federal benefits — despite paying into many government programs themselves.
It’s part of a larger assault from the Trump administration against undocumented migrants, who the president has blamed for increasing crime and government spending. The president is backed by many Republicans in Congress who are currently working to shrink Medicaid, citing concerns about fraud, waste and abuse in the massive safety-net program — including from undocumented immigrants.
Republicans say the problem has worsened as Medicaid has grown significantly in recent years, in part due to policies meant to keep people insured during the coronavirus pandemic. Currently, almost 80 million Americans are covered by Medicaid and its sister program for children, up from 71 million in 2019.
However, experts believe actual fraud and waste in Medicaid is relatively small, and that measures of improper payments are more so the result of missing documentation, and not true evidence of payments for ineligible enrollees.
Democrats have accused Republicans of using the concerns as a smokescreen to shrink benefits for poor Americans.
On Thursday, Republicans in the House passed a tax and policy megabill that would drastically reduce Medicaid through enacting new work reporting requirements for beneficiaries, among other changes to eligibility and funding.
The bill’s Medicaid provisions would save the government $700 billion, but roughly 8 million people would become uninsured as a result, according to estimates from the Congressional Budget Office, a nonpartisan scorekeeper.
The legislation would also restrict Medicaid for undocumented immigrants, including through cutting funding for states that allow immigrants without proof of citizenship to be on the safety-net insurance. Other policies would prevent a broad swath of immigrants from joining Medicare or receiving premium tax credits to purchase ACA coverage.
