Changes too Federal Medicaid Reimbursement for Non-Citizens: A Breakdown of Section 1903 and the OBBBA
Federal law, specifically Section 1903 of the Social Security Act, generally restricts federal funding for medical services provided to individuals who are not lawful permanent residents. However, an exception exists for emergency medical conditions.This exception allows federal reimbursement for emergency care provided to non-lawful permanent residents, provided they also meet a state’s other eligibility criteria for Medicaid.
This existing framework created a financial disparity between states that expanded Medicaid under the Affordable Care Act (ACA) and those that did not. States expanding Medicaid, particularly those utilizing state-only funds to extend coverage to unauthorized immigrants, found themselves in a position where the federal government was obligated to reimburse emergency services for this population at a higher rate than for citizens. Non-expansion states receive reimbursement at the standard Federal Medical Assistance Percentage (FMAP), typically around 60%.
In states that both expanded Medicaid under the ACA and broadened their programs to include unauthorized immigrants, the federal government was required to reimburse emergency room care at a 90% FMAP. As of April 2025, seven states – California, Colorado, Illinois, Minnesota, New York, Oregon, and Washington – along with the district of Columbia, had implemented such fully state-funded coverage for some income-eligible adults irrespective of immigration status. This resulted in a substantially higher federal reimbursement rate (90% FMAP) for emergency services for able-bodied unauthorized immigrants compared to the 50% FMAP typically applied to traditional Medicaid enrollees (often more vulnerable populations) in those same states. Data indicated the federal government spent approximately nine times more for each dollar of state spending on emergency services for unauthorized immigrants than for traditional enrollees.
The Omnibus budget and Border Security Bill of 2024 (OBBBA) addresses this situation through Sections 71109 and 71110.
Section 71109, effective October 1, 2026, restricts federal Medicaid and Children’s Health Insurance Program (CHIP) reimbursement to individuals who are: citizens, lawful permanent residents, Cuban and Haitian entrants, or individuals lawfully residing in the United States through a Compact of Free Association.This means federal funds will no longer be available for services provided to refugees, aliens granted parole for at least one year, asylees, or temporary visitors like tourists, students, and diplomats. However,the law maintains federal reimbursement for emergency services and,at the state’s discretion,for children and pregnant women who lawfully reside in the United States.
Section 71110 specifically targets the higher FMAP for emergency services provided to unauthorized immigrants. Also effective October 1, 2026, it reduces the FMAP for these services from 90% to the state’s standard FMAP. This change does not eliminate federal funding for emergency services for unauthorized immigrants; it simply aligns the federal matching rate with that provided for citizens.
