The Republican budget bill the U.S. House approved last month includes a surprise for the 40 states that have expanded Medicaid: penalties for providing health care to some immigrants who are here legally.

Along with punishing the 14 states that use their own funds to cover immigrants who are here illegally, analysts say last-minute changes to the bill would make it all but impossible for states to continue helping some immigrants who are in the country legally, on humanitarian parole.

Under the bill, the federal government would slash funding to states that have expanded Medicaid and provide coverage to immigrants who are on humanitarian parole — immigrants who have received permission to temporarily enter the United States due to an emergency or urgent humanitarian reason.

The federal government pays 90% of the cost of covering adults without children who are eligible under Medicaid expansion, but the bill would cut that to 80% for those states, doubling the state portion from 10% to 20%. That’s the same penalty the bill proposes for states that use their own money to help immigrants who are here illegally.

Ironically, states such as Florida that have extended Medicaid coverage to immigrants who are here on humanitarian parole but have not expanded Medicaid under the Affordable Care Act would not be harmed by the bill, said Leonardo Cuello, a Medicaid law and policy expert and research professor at the Center for Children and Families at Georgetown University’s McCourt School of Public Policy.

It is “wildly nonsensical and unfair” to penalize expansion states for covering a population that some non-expansion states, such as Florida, also cover, Cuello said. “It would appear that the purpose is more to punish expansion states than address any genuine concern with immigrant coverage.”

West Virginia is one of the states where lawmakers are nervously watching U.S. Senate discussions on the proposed penalty. Republican state Rep. Matt Rohrbach, a deputy House speaker, said West Virginia legislators tabled a proposal that would have ended Medicaid expansion if the federal government reduced its share of the funding, because the state’s congressional representatives assured them it wasn’t going to happen. Now the future is murkier.

Cuello called the proposed penalty “basically a gun to the head of the states.”

“Congress is framing it as a choice, but the state is being coerced and really has no choice,” he said.

There are about 1.3 million people in the United States on humanitarian parole, from Afghanistan, Cuba, Haiti, Nicaragua, Ukraine and Venezuela as well as some Central American children who have rejoined family here. The Trump administration is trying to end parole from some of those countries. A Supreme Court decision May 30 allows the administration to end humanitarian parole for about 500,000 people from Cuba, Haiti, Nicaragua and Venezuela.

Not many of those parolees qualify for Medicaid, which requires a waiting period or special status, but the 40 states with expanded Medicaid could be penalized if immigrants qualify for the program, said Tanya Broder, senior counsel for health and economic justice policy at the National Immigration Law Center.

Meanwhile, an increasing number of states and the District of Columbia already are considering scaling back Medicaid coverage for immigrants because of the costs.

The federal budget bill, named the One Big Beautiful Bill Act, is now being considered by the Senate, where changes are likely. The fact that so many states could be affected by the last-minute change could mean more scrutiny in that chamber, said Andrea Kovach, senior attorney for health care justice at the Shriver Center on Poverty Law in Chicago.

By her count, at least 38 states and the District of Columbia would be affected by the new restrictions, since they accepted some options now offered by Medicaid to cover at least some humanitarian parolees without a five-year waiting period.

“They’re all going to be penalized because they added in parolees,” Kovach said. “So that’s 38 times two senators who are going to be very interested in this provision to make sure their state doesn’t get their reimbursement knocked down.”

The change to exclude people with humanitarian parole was included in a May 21 amendment by U.S. Rep. Jodey Arrington, a Texas Republican who chairs the House budget committee. Arrington’s office did not reply to a request for comment, though he has stressed the importance of withholding Medicaid from immigrants who are here illegally.

“[Democrats] want to protect health care and welfare at any cost for illegal immigrants at the expense of hardworking taxpayers,” Arrington said in a May 22 floor speech urging passage of the bill. “But by the results of this last election, it’s abundantly clear: The people see through this too and they have totally rejected the Democrats’ radical agenda.”

Some states already are considering cutting Medicaid coverage for immigrants, though Democratic lawmakers and advocates are pushing back.

Washington, D.C., Democratic Mayor Muriel Bowser has proposed phasing out a program that provides Medicaid coverage to adults regardless of their immigration status, a move she says would save the District of Columbia $457 million.

Minnesota advocates protested a state budget deal reached last month with Democratic Gov. Tim Walz to phase out health care coverage for adults who are here illegally, a condition Republican lawmakers insisted on to avoid a shutdown.

Similarly, Illinois advocates are protesting new state rules that will end a program that has provided Medicaid coverage to immigrants aged 42-64 regardless of their legal status. The program cost $1.6 billion over three years, according to a state audit. The state will continue a separate program that provides coverage for older adults.

“Our position is that decision-makers in Illinois shouldn’t be doing Trump’s work for him,” said Kovach, of the Shriver Center on Poverty Law. “Let’s preserve health coverage for immigrants and stand up for Illinois immigrant residents who have been paying taxes into this state for years and need this coverage.”

Illinois state Sen. Graciela Guzmán, a Democrat whose parents are refugees from El Salvador, said many of her constituents in Chicago may be forced to cancel chemotherapy or lifesaving surgery because of the changes.

“It was a state budget, but I think the federal reconciliation bill really set the tone for it,” Guzmán said. “In a tough fiscal environment, it was really hard to set up a defense for this program.”

Oregon Democratic Gov. Tina Kotek is among the governors holding firm, saying that letting immigrants stay uninsured imposes costs on local hospitals and ends up raising prices for everyone.

“The costs will go somewhere. When everyone is insured it is much more helpful to keep costs down and reasonable for everyone. That’s why we’ve taken this approach to give care to everyone,” Kotek said at a news conference last month.

Medicaid does pay for emergency care for low-income patients, regardless of their immigration status, and that would not change under the federal budget bill.

Franny White, a spokesperson for the Oregon Health Authority, said her state’s Medicaid program covers about 105,000 immigrants, some of whom are here illegally. She said the policy, established by a 2021 state law, can save money in the long run.

“Uninsured people are less likely to receive preventive care due to cost and often wait until a condition worsens to the point that it requires more advanced, expensive care at an emergency department or hospital,” she said.

California was among the first states, along with Oregon, to offer health insurance to immigrants of all ages regardless of their legal status. But it now is considering cutting back, looking to save $5 billion as it seeks to close a $12 billion budget deficit. In May, Democratic Gov. Gavin Newsom proposed freezing enrollment of immigrant adults who are here illegally, and charging them premiums to save money.

“It’s possible that other states will decide to cut back these services because of budgetary concerns,” said Drishti Pillai, director of immigrant health policy at KFF, a health policy research organization.

If the federal budget bill passes with the immigrant health care provision intact, states would have more than two years to adjust, since the changes would not take effect until October 2027.

“We have time to really understand what the landscape looks like and really create a legal argument to make sure folks are able to maintain their health care coverage,” said Enddy Almonord, director for Healthy Illinois, an advocacy group supporting universal health care coverage.

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Stateline reporter Tim Henderson can be reached at thenderson@stateline.org.

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