CMS increases oversight on states’ use of Medicaid funds for undocumented immigrants

Key Takeaways

On May 27, the Centers for Medicare & Medicaid Services (CMS) announced it is increasing federal oversight of state Medicaid programs to ensure compliance with federal law regarding the use of Medicaid funds for undocumented immigrants.

This action aligns with President Trump’s Executive Order, "Ending Taxpayer Subsidization of Open Borders," and reflects a broader federal effort to enforce long-standing rules ensuring that federal funds are not being misused on services for undocumented immigrants. Under current law, federal funds may only be used to cover emergency medical services for noncitizens who meet all Medicaid eligibility requirements except immigration status. All other services, such as routine or ongoing care, are not eligible for Medicaid coverage.

CMS’s enhanced oversight will include:

• Focused evaluations of state Medicaid spending reports (CMS-64 forms),
• In-depth reviews of financial management systems,
• Reviews of eligibility rules and policies to identify loopholes and strengthen compliance.

States found to be improperly claiming federal Medicaid funds for services not permitted under law will be subject to recoupment of federal funding.

Read the Letter to States

Why this matters

Counties are at the frontline of delivering and administering Medicaid services. If states are found to be noncompliant, they may be required to return federal funds—disrupting local healthcare financing and administrative systems and dramatically increasing the state and local share of Medicaid financing. Additionally, CMS is urging states to immediately assess and update eligibility systems, internal controls and cost allocation policies, which may require county-level coordination for counties that are responsible for managing Medicaid eligibility, enrollment and renewals.

Counties should work closely with their state Medicaid agencies to understand how this federal oversight initiative may impact local operations, and to ensure compliance with federal funding rules.