Understanding the OBBBA: Key Medicaid Policy Changes

The One Big Beautiful Bill Act (OBBBA) was signed into effect on July 4th, 2025 by President Trump as a part of a budget reconciliation process. One of the main focuses of the OBBBA was to set budgets in relations to health programs, homeland security, and defense. In its relation to healthcare, the bill calls for the following: 

• Community engagement requirements: Adults from 19-64 of age enrolled in Medicaid must complete and verify 80 hours of work per month.
• 6 month redeterminations: States must re-verify eligibility every 6 months compared to the traditional 12-month Medicaid renewal cycle.
• Address and residency verification: Enforces proactive trafficking of a beneficiary’s physical location to eliminate cross-state enrollment fraud.
• Expanded cost sharing: A required copayment of $35 for most covered non-emergency outpatient services for adults earning between the 100% and 138% of the federal poverty level. 

All new requirements are driven by a federal policy shift to cut government spending, increase individual accountability, and reduce the role of federal entitlement programs. 

History of Medicaid and CHIP 

Medicaid began as a part of the Social Security Act of 1965, giving states the option of receiving federal funding to provide health care coverage to children, their caregivers, and disabled Americans. This expanded into providing coverage for other groups such as low-income families and individuals over 65 years old. Currently, there are around 69.7 million individuals enrolled in Medicaid. 

The Children’s Health Insurance Program (CHIP) began as a part of the Balanced Budget Act of 1997, signed by President Clinton. CHIP aimed to eliminate the federal deficit at the time and balance the federal budget by 2002. To create the program, the 1997 budget act assigned roughly $24 billion over five years to provide health insurance coverage for uninsured children in working-class families who are not eligible for Medicaid but cannot afford private coverage. As of February 2026, around 7.2 million children rely on CHIP for health care coverage. Together, Medicaid and CHIP provide around 76.4 million individuals with health care coverage– around 22 percent of people living in the U.S. 

Immigrants on Medicaid and CHIP 

Around 9.5 million adult immigrants in the U.S. meet the income requirements to enroll in Medicaid, but 45 percent of them are not allowed to enroll in the program due to restrictive immigration-related eligibility requirements. Considering these statistics, expanding healthcare coverage to immigrants became a priority of the Biden-Harris Administration. In 2024, the administration finalized a rule allowing Deferred Action for Childhood (DACA) recipients to enroll in Affordable Care Act (ACA) Insurance Marketplace health care plans and, if eligible, receive financial assistance in paying for their Marketplace coverage. The administration estimated this policy could help approximately 100,000 previously uninsured DACA recipients in gaining health coverage.  

Before the signing of OBBBA, eligible immigrants were able to apply for Medicaid and CHIP. This included the following groups of people: asylees, refugees, Cuban and Haitian entrants, victims of trafficking and abuse, military connections, and Citizens of the Freely Associated States (COFA) Migrants. The COFA migrants are citizens of three Pacific Island nations which include the Federated States of Micronesia (FSM), the Republic of the Marshall Islands (RMI), and the Republic of Palau. However, OBBBA narrowed Medicaid and CHIP eligibility significantly, causing around 1.4 million lawfully-present immigrants to lose health coverage. Only two groups listed previously maintain eligibility for both programs: Cuban and Haitian entrants, and COFA migrants.

What are the Benefits of OBBBA’s Immigrant Health Coverage Restrictions? 

Supporters of the OBBBA argue restricting eligibility for certain immigrants will save the U.S. around $200 billion on health care in the next decade. Advocates contend these savings will ensure taxpayer-funded health care programs are directed towards U.S. citizens and immigrants whom federal law recognizes as eligible. The White House reports, “More than 1.4 million illegal immigrants…are currently on Medicaid, stealing taxpayer-funded health care benefits meant for American citizens.” According to President Trump and supporters of the OBBBA, these changes will allow Medicaid funding to prioritize vulnerable Americans, including low-income children, pregnant women, seniors, and people with disabilities. They argue that limiting eligibility for certain immigrants enables Medicaid to better fulfill its original purpose while reducing pressure on federal and state budgets. Supporters also contend prioritizing benefits for lawful residents and others who qualify under existing law will help maintain the program’s financial stability and ensure that resources remain available for future generations of eligible beneficiaries. From the perspective of OBBBA supporters, a projected $200 billion in savings through narrowing eligibility represents a more responsible use of taxpayer dollars. 

What are the Drawbacks of OBBBA for Immigrant Health Coverage?

Focusing on the Hispanic community, OBBBA would restrict Medicaid and CHIP eligibility for many lawful immigrants that fall into the categories of refugees, asylum, DACA recipients, and survivors of trafficking and domestic violence. The Congressional Hispanic Caucus Institute argues that because immigrant communities already experience high uninsured rates while also facing language barriers, documentation concerns, and difficulties navigating the healthcare system, these changes will only further limit their access to healthcare services. One of the changes made in the health care services under OBBBA include reporting qualified overtime pay and cash tips, which could also cause eligible immigrants to lose coverage due to administrative hurdles and not ineligibility. 

Additionally, critics argue that OBBBA’s health coverage restrictions will cause health disparities for immigrant populations as people stop applying for coverage and accessing healthcare services out of fear of jeopardizing their immigration status. This not only impacts the immigrants themselves, but also the children of immigrants who are citizens through birth-right citizenship. Opponents of the OBBBA argue that children who are eligible for Medicaid and CHIP might not apply to these services because they may fear causing harm to their loved ones due to their immigration status.

Critics also contend that restricting Medicaid and CHIP coverage for the immigrant community will only cause hospitals, community health centers, and clinics to take on the additional cost burden of care for which they are not being reimbursed. When patients are uninsured, the providers absorb the cost of treatment. Hospitals, nursing homes, and community centers may need to reduce services, lay off employees, or even close entirely due to the losses. Opponents of the OBBBA argue new restrictions could lead to longer wait times for care, fewer available providers, increasing difficulty in obtaining specialty care, and a greater reliance on emergency rooms for basic health needs. 

Conclusion

Overall, the OBBBA represents a huge shift in federal health care policy, specifically by narrowing Medicaid and CHIP eligibility. Supporters argue these changes will reduce government spending on immigrant groups and prioritize benefits for U.S.-born citizens and lawfully-present immigrants. On the other hand, critics state the restrictions will decrease health care access for immigrant communities and harm health care providers by increasing cost burdens of providing care. Ultimately, the OBBBA goes into effect until October 1st, 2026; until then, America and its health care system must wait and see. 

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