H.R. 1’s Non-Citizen Federal Funding Limits Collide with Medicaid Enrollment for SSI Recipients
H.R. 1 ends federal Medicaid funding for some lawfully present noncitizens, putting vulnerable SSI recipients at risk and leaving states with daunting implementation, funding and coverage choices.
Authors: Patti Boozang and Kinda Serafi
Editors: Amanda Eisenberg and Kaylee O’Connor
tl;dr
Section 71109 of H.R. 1 narrows the categories of noncitizens for whom states may claim federal matching funds for Medicaid and Children’s Health Insurance Program (CHIP), effective Oct. 1, 2026. The Centers for Medicare & Medicaid Services (CMS)’ new State Implementation Tool, released July 31, gives states a checklist for meeting that deadline.
In the 34 states, plus Washington, D.C., Supplemental Security Income (SSI) approval automatically triggers Medicaid coverage. After Oct. 1, those states will no longer receive federal matching funds for some of those beneficiaries, forcing them to either cover the cost with state only dollars or terminate Medicaid coverage.
The population caught in the potential coverage gap is small but especially vulnerable: elderly, blind and disabled immigrants — largely refugees, asylees and others admitted on humanitarian grounds — for whom Medicaid is often the only source of long-term services and supports.
States also face high hurdles in getting their systems ready by Oct. 1 to make accurate eligibility determinations and claims for federal funding. The financial and coverage risks are significant.
The 80 Million Impact
On Jul. 31, CMS released its State Implementation Tool for Section 71109 of H.R.1, a step-by-step checklist of the state policy, operational and systems work to implement the new limits on federal Medicaid funding for noncitizens that take effect Oct. 1. Embedded in the toolkit’s first implementation step is a narrow and largely overlooked interaction that sits at the intersection of two long-separate systems: the SSI program and Medicaid.
SSI is a federal, means-tested cash program for people who are aged (65 or older), blind or disabled and who have very little income and few resources. It is often described as a program of last resort, providing a modest monthly benefit — about $994 for an individual in 2026. In most states, SSI approval has also served as an automatic gateway to Medicaid enrollment.
SSI and Medicaid have always applied different immigration eligibility rules, but in practice the difference rarely mattered in the 34 states and the District of Columbia that operate under Section 1634 of the Social Security Act, in which the Social Security Administration (SSA) determination of SSI eligibility automatically confers Medicaid eligibility. There is no separate application and, importantly, no separate immigration determination for Medicaid purposes.
That’s about to change. H.R. 1 does not touch the immigration rules for SSI. Instead, Section 71109 narrows the categories of noncitizens for whom states may claim federal matching dollars for Medicaid and CHIP coverage. Beginning Oct. 1, full-scope, federally funded Medicaid and CHIP will no longer be available for refugees, asylees, people granted humanitarian parole, victims of trafficking and others who have long been eligible for federally funded Medicaid, with few exceptions, including for children under 21 and pregnant individuals covered under CHIPRA-214.
Who Falls into the Gap
To receive SSI, a noncitizen must be a “qualified” immigrant and meet strict income, resource, and disability or age criteria. Many are refugees and asylees in their first years in the country; others are elderly or disabled immigrants who have relied on the program for years. As of December 2023, roughly 325,000 SSI recipients were noncitizens, about half of them aged 65 or older, and nearly half blind or disabled.
For this group, Medicaid is often the only source of coverage for long-term services and supports, home- and community-based care, and disability-related services that are unavailable or unaffordable elsewhere. Federal policy has long recognized the connection between SSI and Medicaid: in many cases, losing SSI can also mean losing Medicaid, unless a specific protection applies. Here, however, the problem is different. These individuals keep their SSI, but the Medicaid coverage that has historically come with it is now at risk.
The toolkit makes clear that the reach of the federal financial participation (FFP) restriction is broad. Its glossary defines “full Medicaid and CHIP benefits” to include partial or limited benefits, family planning-only coverage and, notably, the Medicare Savings Program that helps pay Medicare premiums and cost sharing for low-income beneficiaries. Only emergency Medicaid for limited coverage of an emergency medical condition falls outside the definition. As a result, older noncitizen SSI recipients who are enrolled in Medicare but fall outside the new FFP-eligible categories could lose federal funding not only for their Medicaid benefits, but also for the Medicare Savings Program assistance that makes Medicare affordable.
It is worth underscoring that this change does not concern undocumented individuals, who are already ineligible for full, federally funded Medicaid coverage. It affects lawfully residing immigrants the federal government has determined are disabled or elderly, and poor enough to qualify for cash assistance.
The Challenges Facing Section 1634 States
Neither the CMS State Health Official (SHO) letter issued in April 2026 nor the implementation tool released July 31 alters the Section 1634 agreements that make SSI approval an automatic grant of Medicaid eligibility. Affected recipients in those states remain entitled to coverage; their states simply won’t be paid for it.
The toolkit directs every state to identify potentially affected Medicaid- and CHIP-enrolled individuals, including SSI recipients, and to redetermine their eligibility to verify satisfactory immigration status. Only after completing that work will a state know which of its SSI recipients fall outside the new FFP-eligible categories and therefore no longer generate federal match.
Then, a second question arises: what to do about coverage for the individuals identified. CMS has been explicit that states are not obligated to fund that coverage with 100% state dollars, though they may choose to. For 1634 states, that leaves a difficult decision, with one path creating new state financial exposure and the other terminating coverage for among their most vulnerable residents:
Absorb the full cost of continued Medicaid coverage for the population in the gap with state-only dollars; or,
Deny or terminate Medicaid coverage for SSI recipients who fall outside of the new FFP-eligible categories.
States must make and implement that decision while absorbing the far larger fiscal and operational demands of H.R. 1. And either path comes with implementation challenges and risks.
The implementation work spelled out in the toolkit is substantial. Step 1 of the implementation checklist directs states to identify every potentially affected beneficiary enrolled in full Medicaid or CHIP benefits, naming SSI recipients among the populations that must be reviewed, and redetermine their eligibility to verify satisfactory immigration status. In doing so, states must differentiate between those SSI recipients who are U.S. citizens/nationals, FFP-eligible noncitizens, and non-FFP-eligible noncitizens. Because many 1634 states have never made a separate immigration determination for these enrollees, most have neither the information on hand nor the systems and operational connections in place to obtain it. They will have to build the system and operational connections needed for implementation.
The federal government is still working on its part in implementation as well: beginning Oct. 1, the SSA’s State Data Exchange (SDX) file, the feed that tells 1634 states who has been approved for SSI, is expected to newly indicate whether a recipient falls within an FFP-eligible category. But the toolkit says only that more information on those changes is “forthcoming.” States are therefore left to build against a design they have not yet seen, on an already challenging timeline that leaves no room for system testing.
A state that cannot ensure its eligibility and claiming processes for SSI recipients are compliant by Oct. 1 must stop submitting FFP claims for potentially affected beneficiaries until it completes the necessary redeterminations or risk federal funding.
The Bottom Line
Section 71109 of H.R.1 puts Medicaid coverage at risk for a narrow but highly vulnerable group: lawfully present immigrants who are aged, blind or disabled, poor enough to qualify for SSI, and likely to rely on Medicaid for nursing facility care, home- and community-based services, disability-related supports and Medicare cost sharing. For 1634 states, the most immediate task should be to take their roster of SSI beneficiaries whose Medicaid eligibility is auto-determined and use every available federal data source to narrow the universe requiring individual follow-up: first exclude people already identifiable as U.S. citizens through state records or SSA data, then bump the remaining SSI population against the federal hub / Systematic Alien Verification for Entitlements (SAVE) verification process to identify those who are FFP-eligible noncitizens.
CMS’ implementation tool points in this direction, instructing states to review current records, use State Verification and Exchange System (SVES) where citizenship or immigration status is unknown, and attempt reverification through SAVE before requesting additional information from beneficiaries. Until SDX changes and automated eligibility-system logic are fully specified, tested and operational, states will need a disciplined interim process that may rely on more manual steps in the short term: use data matching wherever possible, rely on manual case review and SAVE reverification where necessary, and provide the required request for information and reasonable opportunity period when verification cannot be completed. SSA and CMS can help by releasing the SDX specification immediately, issuing model notices and clear operational guidance, and giving states a practical path to protect vulnerable residents while safeguarding an appropriately claimed federal match.
In the meantime, if they have not already done so, states may want to evaluate whether to take up the optional CHIPRA 214 coverage pathway in Medicaid and CHIP, given some noncitizens impacted by Section 71109 of H.R. 1 (potentially including SSI recipients) may still qualify under this alternate coverage pathway. Doing so could allow states to preserve federally matched coverage for affected children and pregnant individuals, rather than leaving states to finance coverage entirely with state dollars or allowing coverage to lapse.