Starting October 1, 2026, the federal government will stop matching state spending on full Medicaid and Children’s Health Insurance Program coverage for many lawfully present immigrants who are not green-card holders, Cuban or Haitian entrants, or migrants covered under a Compact of Free Association. The change comes from a provision buried in the 2025 federal tax and spending law, and it reaches into Medicaid rolls in every state, the District of Columbia, and several U.S. territories.
For a household that includes a refugee grandparent, an asylee parent, or a child covered through a state’s lawfully-present-immigrant option, the shift determines whether a state can still get federal help paying that person’s medical bills, or whether the state has to cover the cost entirely on its own, or stop the coverage.
Which Immigration Categories Still Draw Federal Matching Funds
The Centers for Medicare & Medicaid Services released the operational guidance states need to carry out the change on April 8, 2026, in a State Health Official letter implementing Section 71109 of the Working Families Tax Cut law, Public Law 119-21. The letter, known as SHO #26-001, spells out that beginning October 1, 2026, federal matching funds for full Medicaid benefits and for CHIP will generally be limited to four groups: U.S. citizens and U.S. nationals, lawful permanent residents (green-card holders), Cuban or Haitian entrants, and Compact of Free Association migrants who lawfully reside in the country.
Other noncitizens who have long qualified for full Medicaid or CHIP coverage under a 1996 welfare law — including refugees, asylees, certain parolees, and victims of human trafficking — will no longer draw federal matching dollars for that coverage unless they also happen to hold one of the four protected statuses. The CMS announcement quoted Administrator Dr. Mehmet Oz saying the agency has “a public mandate, a statutory obligation, and a moral duty to safeguard our federal healthcare programs.” Lawful permanent residents themselves are not automatically covered the day they get a green card — the older five-year waiting period for LPRs, with its existing exceptions for veterans and active-duty service members, still applies and was not changed by the new law.
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Three Carve-Outs CMS Left in Place
The underlying statute lists only three exceptions to the new limits, and CMS’s letter confirms none of them changed. Emergency Medicaid — coverage for the treatment of an emergency medical condition — remains available regardless of a person’s immigration category, exactly as it did before October 1. States that already use the CHIPRA 214 option to cover lawfully residing children and pregnant women without the five-year wait may keep doing so with federal money; Medicaid.gov’s own CHIP eligibility guidance describes that state option and the waiting period it exists alongside. And CHIP Health Services Initiatives, the programs states run to improve children’s health more broadly, are untouched as well.
States Are Not Required to Cover the Gap Themselves
One of the sharper details in the SHO letter is CMS’s legal position on what happens to the people who lose federal matching eligibility. The letter states plainly that neither the text of Section 71109 nor its legislative history shows Congress intended to require states to keep providing full Medicaid or CHIP benefits to affected noncitizens using state-only dollars. Citing Supreme Court precedent on the structure of Medicaid as a joint federal-state program, CMS says it will not require states to fund replacement coverage out of their own budgets, and that any coverage a state chooses to fund entirely on its own would not be considered “Medicaid” or “CHIP” going forward. That leaves each state legislature, not the federal government, to decide whether affected residents keep any coverage at all after October 1.
Current Enrollees Face Redeterminations, Not Just New Applicants
The change is not limited to people applying for coverage after October 1. According to the SHO letter, states must also reassess people already enrolled in Medicaid or CHIP on that date, because CMS treats the loss of federal matching eligibility as a change affecting a beneficiary’s “satisfactory immigration status” for full benefits. States are required to update their eligibility systems, applications, renewal forms, and immigration-status verification processes before the deadline, and to submit state plan amendments reflecting the new federal claiming rules. A household whose coverage was approved months or years ago is not exempt from the review simply because nothing about its own paperwork has changed.
A Related, Later Deadline Is Coming for Medicare
The same law also narrows Medicare eligibility for noncitizens under a separate provision, Section 1899C, limiting it to the same four groups that keep Medicaid and CHIP matching funds. Unlike the Medicaid and CHIP change, the Medicare provision applies eighteen months after the law’s July 2025 enactment, putting its effective date roughly in early 2027, and CMS says in the same letter that more detailed Medicare guidance is still forthcoming. For a household with a noncitizen relative approaching Medicare age, the Medicaid and CHIP deadline arriving first does not mean Medicare rules are staying the same — it means a second, later change is still working its way through the same agency.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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