Legal Immigrants Lose Eligibility for Medicaid Due to the One Big Beautiful Bill Act’s Costly Trade-off

President Donald Trump delivers remarks at an event promoting his Administration’s “One, Big Beautiful Bill Act”, Thursday, June 26, 2025, in the East Room of the White House. (Official White House Photo by Gabriel B Kotico)

On July 4, 2025, U.S. President Donald Trump signed the One Big Beautiful Bill Act (OBBBA), a sweeping tax and spending package that could reshape federal fiscal policy for decades to come. The act builds upon the Tax Cuts and Jobs Act (TCJA) of 2017, introducing new targeted temporary deductions for tip income, overtime pay, and senior taxpayers; enacting large business tax cuts, providing permanent full expensing of many forms of investment, and increasing spending on border security and defense.

Together, these provisions reflect an effort to stimulate the U.S. economy in the short term, but overlook potential dangers further down the line. Long-term forecasting by the Congressional Budget Office (CBO) predicts the OBBBA will worsen federal deficits and reduce national savings plus national income by pushing up interest rates and crowding out private investment. Specifically, by 2035, the OBBBA is projected to add $4.2 trillion to the national debt through fiscal year 2034 or $4.7 trillion through 2035, making it the most costly reconciliation act in recent history.

OBBBA’s effects extend beyond its fiscal implications, particularly through changes to Medicaid eligibility for lawfully present immigrants. Starting on Oct. 1, 2026, the bill restricted federally funded Medicaid and CHIP eligibility to a narrower group of noncitizens.

Before Oct. 1, 2026, a much broader set of qualified noncitizens could receive federally funded Medicaid if they met requirements that varied by their immigration status. In the past, most green card holders faced a five-year waiting period to obtain Medicaid after meeting qualifications, while refugees, asylees, certain humanitarian immigrants, veterans and military families, and citizens of the Compact of Free Association (COFA) were generally exempt.

Additionally, some states could waive the waiting period and extend coverage to lawfully residing children and pregnant people, including some without a qualifying immigration status. Now, however, only permanent residents, Cuban and Haitian entrants, people residing in the U.S. under Compacts of Free Association (COFA), which are a set of international agreements between the United States and three sovereign Pacific Island nations, and lawfully residing children and pregnant immigrants in states that cover them under the Medicaid or CHIP option remain eligible.

Thus, one’s status as a legal immigrant alone no longer fulfills their eligibility for federally funded health care, complicating the already strained relationship between immigrants and the U.S. government.

Despite being lawfully present in the United States, many immigrants who have not yet adjusted to meet the new lawful permanent resident status will lose eligibility for federally funded Medicaid under the OBBBA, including certain Violence Against Women Act (VAWA) applicants, temporary humanitarian parolees, refugees, asylees, and victims of trafficking.

As a result, the Congressional Budget Office (CBO) estimates that about 10 million citizens will become uninsured by 2034, with the largest spike occurring in the near future. For families relying on Medicaid to afford basic health care, this policy provision and the resulting loss of coverage could create a significant financial hurdle that may limit their access to essential health services.

Despite the predicted negative consequences, the Trump administration has viewed these changes as necessary to offset the cost of extending tax cuts, provide tax relief to individuals and businesses, and redirect federal spending toward political priorities such as border security and national defense.

This fiscal trade-off reflects the bill’s broader goal of shifting government expenditures and investments away from social welfare programs and toward other budget priorities, while providing greater flexibility in how the government allocates spending across other projects. However, the relationship is not so black-and-white as it raises several red flags and tensions for targeted groups, inviting the question of how this monetary redistribution might impact Medicaid-reliant individuals.

About half of immigrants say they have had problems paying for essentials like housing, food, and health care in the past 12 months, and believe making a living has become increasingly difficult in recent years. Now, without a reliable source of medical coverage, immigrant families seeking to rebuild their lives in a new country are faced with an additional barrier they must overcome. In an effort to mitigate this, various efforts focused on recouping the loss of coverage for the affected individuals are emerging. 

For instance, some state governments are taking direct action to provide alternative services to replace those lost from OBBBA. New Mexico, for example, established a state-funded health coverage program for immigrants who lost Medicaid eligibility. Beginning Oct. 1, 2026, affected individuals can receive information about enrolling in replacement coverage through BeWell New Mexico, the state’s health insurance marketplace created under the Affordable Care Act (ACA).

Additionally, the Refugee Medical Assistance (RMA), a federal program that provides temporary health coverage to eligible refugees, asylees, and other humanitarian populations who cannot access Medicaid, has expanded its services. Citing increased available funding, lower-than-expected refugee arrivals, and the law’s restrictions, the RMA increased the eligibility period to 12 months rather than the initially announced eight months. This change allows immigrant families additional time under the protections of RMA, helping them maintain access to essential medical services while managing the new regulations of the OBBBA.

Rooted in an attempt to stimulate the economy in the short term and redirect federal spending elsewhere, the Trump administration completely revamped the Medicaid process for specific groups of legal immigrants, creating significant challenges for affected groups. Certain VAWA applicants, temporary humanitarian parolees, refugees, asylees, and victims of trafficking are left in a tough spot, forced to independently fill in the gaps and make up for their loss of coverage.

This pressure poses a serious risk for the well-being of immigrant families, as living without adequate medical assistance is not practical and can lead to delayed treatment and greater financial burdens. States such as New Mexico are pioneering efforts to help those impacted, and while it is certainly a step in the right direction, immigrants are not confined to one part of the country, and other states have yet to follow suit. Ultimately, the growing debate surrounding the pros and cons of the OBBBA reflects a shift in federal priority, raising serious concerns for the future of vulnerable populations and their access to health care.