What's Happening?
The Centers for Medicare & Medicaid Services (CMS) has issued new guidance that will result in thousands of people losing federally funded Medicaid or Children's Health Insurance Program (CHIP) coverage later this year. This change is part of a law passed
in 2025 that restricts federal funding for certain noncitizens. The updated policy allows states to claim federal matching funds only for U.S. citizens, nationals, lawful permanent residents, certain Cuban and Haitian entrants, and migrants lawfully residing in the U.S. under the Compacts of Free Association. The new rules are set to take effect on October 1, requiring states to update eligibility systems and notify affected enrollees.
Why It's Important?
The changes could lead to an increase in the number of uninsured individuals, particularly among immigrant populations who were previously eligible for full Medicaid or CHIP benefits. This shift places additional financial strain on states with large immigrant communities, as they must decide whether to absorb the cost of continued coverage or allow residents to transition to more limited care options. The CMS guidance aims to enforce existing federal law and safeguard taxpayer-funded healthcare programs, but it also raises concerns about the potential impact on public health and state budgets.
What's Next?
States are required to conduct eligibility redeterminations, revise application systems, update verification processes, amend insurance contracts, and update billing systems by the October 1 deadline. The CMS will provide technical assistance and oversight to ensure compliance and accurate claiming of federal funds. States must decide whether to provide state-funded coverage for individuals who lose access to federal funding, which could mitigate the impact on affected populations.
