Federal Medicaid Funding for Most Noncitizens Ends October 1 as CMS Issues Implementation Guidance
CMS Administrator Mehmet Oz issued guidance directing states to stop claiming federal matching funds for Medicaid and CHIP coverage of most noncitizens starting October 1, 2026, implementing Section 71109 of the Working Families Tax Cut Act.
The Centers for Medicare and Medicaid Services issued guidance on April 8 directing all 50 states to stop claiming federal matching funds for Medicaid and CHIP coverage of most noncitizens beginning October 1, 2026. The guidance implements Section 71109 of the Working Families Tax Cut legislation, signed into law as Public Law 119-21.
CMS Administrator Dr. Mehmet Oz framed the change as a mandate:
"The Trump Administration has a public mandate, a statutory obligation, and a moral duty to safeguard our federal healthcare programs. Today, we're honoring all three by providing clear guidelines to help states follow the law and safeguard taxpayer dollars."
What Changes
Starting October 1, 2026, states will no longer be able to claim federal matching funds for Medicaid or CHIP coverage of individuals who are not U.S. citizens or U.S. nationals, unless they fall into specific exempt categories identified in the statute.
The State Health Official letter issued alongside the guidance provides states with operational instructions covering eligibility systems, applications, verification procedures, and claims processing. CMS says it will provide technical assistance and use existing oversight tools to enforce compliance.
Who Is Exempt
The law preserves federal matching for three categories:
| Category | Federal matching continues? |
|---|---|
| Emergency medical conditions | Yes |
| Lawfully residing children (state option) | Yes |
| Lawfully residing pregnant women (state option) | Yes |
| Health Services Initiatives in CHIP | Yes |
| All other noncitizens | No -- federal match ends Oct. 1 |
The emergency exception means hospitals will still receive federal reimbursement for treating noncitizens in emergency rooms, consistent with longstanding federal law. But routine care, preventive services, and ongoing treatment will lose federal support.
Who Is Affected
The Congressional Budget Office has estimated that the narrower eligibility definition will cause approximately 100,000 people to lose Medicaid coverage and another 100,000 to lose Medicare coverage. Independent analyses have projected broader impacts -- Georgetown University's Center for Children and Families estimated that 1.4 million lawfully present immigrants could lose health coverage under the full scope of the budget reconciliation law's health provisions.
The gap between the estimates reflects uncertainty about how states will respond. Some states currently use their own funds, in addition to federal matching dollars, to cover noncitizen populations. When the federal match disappears, each state faces a choice: absorb the full cost or drop the coverage.
What States Must Do
The SHO letter gives states until October 1 to:
- Update eligibility systems to identify and reclassify affected enrollees
- Modify applications and verification procedures
- Adjust claims processing to stop claiming federal funds for ineligible individuals
- Implement the changes while maintaining coverage for exempt populations
Medicaid is jointly funded by the federal government and states, with the federal share (the "FMAP") covering between 50% and 77% of costs depending on the state. For states with large noncitizen populations -- California, Texas, New York, Florida -- losing the federal match on this population represents a significant budget gap that must be filled with state dollars or not filled at all.
Context
Total Medicaid and CHIP enrollment stood at approximately 77.1 million as of September 2025. The noncitizen population affected by this change is a fraction of that total, but it is concentrated in states and communities where coverage losses will be felt sharply.
The guidance arrives during a broader restructuring of federal health programs under the Trump administration. CMS has separately issued Medicaid integrity rules, proposed hospice transparency requirements, and finalized 2027 Medicare Advantage payment policies in recent weeks. The noncitizen funding change is the most consequential of these actions in terms of direct coverage impact.