Immigration stakes in the government shutdown

H.R. 1 closed loopholes that allowed inadmissible aliens to receive healthcare benefits, despite it being illegal to do so. Senate Democrats want to reopen them.

The federal government shutdown at 12:01 a.m. on Wednesday, October 1st, after the Continuing Resolution (CR) offered by the Republican majority failed to get 60 votes in the United States Senate. Democratic Senators John Fetterman (PA) and Catherine Cortez-Masto (NV) joined the majority of Republicans in voting for to keep the government open, as did Independent Senator Angus King (ME). Republican Rand Paul (KY) joined the other Democrats in voting against the measure.

The House-passed spending bill was “clean” — meaning it only provided funds for the government to continue operating. While a majority of Senators voted YEA, the bill cannot pass the Senate’s 60-vote threshold without Democratic votes. The minority party is attempting to use its leverage to demand changes, including the repeal of the entire healthcare title of H.R. 1 (commonly known as the “One Big Beautiful Bill”).

This standoff and shutdown has several immigration implications.

Taxpayer Funded Healthcare Benefits for Illegal Immigrants

There are many issues with repealing the healthcare portion of the One Big Beautiful Bill that NumbersUSA takes no position on, but the most talked about issue relates to taxpayer funded benefits going to specific groups of aliens – especially, but not exclusively, people who are not in the country legally. Specifically, we’re looking at proposals that would:

• Allow States to continue to use backdoor ways to use their Medicaid funds for illegal aliens
• Allow certain inadmissible aliens – including those mass paroled into the country by the Biden Administration – to benefit from ACA subsidies and qualify for government health plans in the future
• Permit refugees and asylees to regain access to taxpayer-funded Medicare in 2027

Some states “backdoor” benefits

Some states create their own programs that use loopholes to use Medicaid money for inadmissible aliens. California recently acknowledged the high cost of state programs designed to provide healthcare benefits to illegal immigrants.

See similar cases of states offering taxpayer-funded healthcare to illegal immigrants in Illinois and Massachusetts.

The One Big Beautiful Bill addressed the state loopholes, according to the Economic Policy Innovation Center, who wrote on July 3, 2025:

“Section 71117, which tightens the “uniform and broad-based” standard for provider taxes, restricts the loophole that has allowed states to launder federal dollars through their Medicaid programs. The new statutory guardrail acts as a backstop to a new Centers for Medicare & Medicaid Services rule on “Preserving Medicaid Funding for Vulnerable Populations–Closing a Health Care-Related Tax Loophole.” This rule abolishes the waiver process California and others have been exploiting. The statute and the rule work together, cutting off the loophole that has pushed the federal share of Medicaid far beyond Congressional intent.”

See also: “The California Loophole” from the Paragon Health Institute:

“The Biden administration approved a scheme in California, which we wrote about with the Economic Policy Innovation Center in the spring, that resulted in California obtaining $19 billion in federal funds without any state contribution. Shortly after receiving that influx of federal money, California expanded Medicaid to unauthorized immigrants–effectively using increased federal money to circumvent the statutory prohibition on federal reimbursement for noneligible immigrants.

“OBBB section 71117 tightened the rules around these money laundering schemes–making California’s scheme unlawful.”

Affordable Care Act and Medicare

Under the healthcare portion of the One Big Beautiful Bill (OBBB):

• Medicaid/CHIP eligibility is limited to green card holders, certain Cuban/Haitian entrants, and migrants from Compact of Free Association (COFA) nations. Refugees, asylees, and others with temporary or humanitarian status will lose federal benefits, effective October 1, 2026.
• ACA subsidies will, as of January 1, 2027, no longer be available to most lawfully present immigrants, including DACA recipients and those with Temporary Protected Status (TPS).
• Medicare: Beginning January 1, 2027, eligibility will also be restricted, causing refugees, asylees, and others to lose coverage.

DACA and Temporary Protected Status programs exist primarily for people who are in the country illegally to be shielded from deportation and granted work permits. The Biden Administration extended eligibility to DACA recipients in 2024 and also mass paroled millions of inadmissible aliens into the country.

Parsing Truth from Partisan Talking Points

From former Rep. Joe Wilson infamously interrupting President Obama’s State of the Union Address (back when such interruptions were shocking) with “you lie!” to Minority Leader Chuck Schumer’s calling Republican ads about Democrats shutting down the government to give free healthcare to illegal aliens “a total, absolute, effing lie,” this debate has long been fraught with accusations of dishonesty. The truth is that illegal aliens often receive taxpayer-funded benefits even though technically they aren’t usually eligible to receive them.

Schumer and most in the legacy media are emphasizing that federal law already prohibits federally subsidized healthcare coverage. That’s true. Federal law also prohibits employers from hiring unauthorized workers, but illegal hiring continues throughout the United States because Congress passed a trust-but-don’t-verify system. The same problem is at work when it comes to healthcare benefits.

These are known loopholes and the fight to sweep them under the rug is just as contentious as the fight to close them.

Finally, some of the arguments are a matter of semantics, such as whether or not one considers the millions of inadmissible aliens mass paroled into the country by the Biden Administration as legal or illegal.

As this shutdown fight drags on, however, the nuances of the debate are likely to break through. Rep. Ro Khanna (D-CA), for instance, recently acknowledged that illegal aliens will receive free healthcare from the provisions that Democrats want to revive, even as he downplayed their significance:

“The amount of money that actually is going towards people who are undocumented is such a small portion of the Medicaid cuts or the Affordable Care Act, if at all.”

E-Verify Shut Down

The free online system for employers to verify that their new hires are legally authorized to work in the United States shut down along with much of the government at midnight on October 1st. Employers are still required to complete the paper I-9 forms. Government shutdowns should not stand in the way of employers trying to comply with the law, and that is why we need a permanent and mandatory system in place.

Border Patrol will work without pay

Like other essential services, the Border Patrol will continue to work without pay during the shutdown. The same goes for other immigration officials, such as Immigration and Customs Enforcement agents who are working hard in the interior to enforce our laws. If history is any indication, they will receive backpay once the shutdown ends, but until then, they will have to carefully budget to meet their and their family’s needs.