On February 19, President Trump issued an executive order (EO) titled “Ending Taxpayer Subsidization of Open Borders”. Among other things, that EO will place so-called “means-tested public benefits”, including but not limited to Medicaid and food stamps, under an oversight microscope “to ensure that taxpayer-funded benefits exclude any ineligible alien who entered the United States illegally or is otherwise unlawfully present in the United States”. Prepare to be shocked by what’s found.
Welfare Reform
As part of a series of reform packages (including immigration reforms), Congress in 1996 passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), legislation intended to reduce welfare use, including aliens’ access to means-tested public benefits.
The heart of PRWORA is section 400(a)(1), which describes “self-sufficiency” as a “basic principle of United States immigration law since this country’s earliest immigration statutes”. Paragraph (2) therein, however, is key to the Trump EO. It states:
It continues to be the immigration policy of the United States that— (A) aliens within the Nation’s borders not depend on public resources to meet their needs, but rather rely on their own capabilities and the resources of their families, their sponsors, and private organizations, and (B) the availability of public benefits not constitute an incentive for immigration to the United States.
As Prof. George Borjas noted in a report he prepared for the Center in March 2002, “The limitations on immigrant welfare use included in PRWORA are but the latest in a long line of restrictions, dating back to Colonial days, designed to reduce the costs that immigration imposes on resident taxpayers.”
PRWORA critically divided aliens into two categories: “qualified aliens” (including lawful permanent residents (“LPRs” or “green card holders”), refugees, and other “protected” immigration statuses); and non-qualified aliens.
Those qualified immigrants were then divided into two more subcategories: those subject to a five-year bar on receipt of public benefits, and those who aren’t. LPRs, for example, usually have to wait until they have five years of residence to become eligible, with exceptions for those with a military connection; minors; the elderly, blind, and disabled; and those who have worked for 40 quarters here.
In addition, section 431(b)(4) of PRWORA provides that “an alien who is paroled into the United States under section 212(d)(5)” of the Immigration and Nationality Act (INA) “for a period of at least 1 year” is also a qualified alien, but they are also subject to that five-year bar.
Qualified immigrants are eligible to receive federal means-tested public benefits, including food aid under the Supplemental Nutrition Assistance Program (SNAP) and health assistance under Medicaid, while not qualified immigrants aren’t.
Included in the non-qualified category are aliens on temporary protected status (TPS), beneficiaries of the President Obama’s Deferred Action for Childhood Arrivals (DACA), nonimmigrants, and those here illegally.
Exceptions
Those restrictions are not all-encompassing, however.
For example, Cuban and Haitian nationals designated “Cuban/Haitian entrants”, or who have been paroled into the United States, or are in removal proceedings or have pending asylum applications but aren’t under final removal orders, remain eligible as qualified aliens under a special PRWORA section 403(d) carve-out that references section 501(e) of the Refugee Education Assistance Act of 1980.
In addition, according to HealthCare.gov: “States have the option to remove the 5-year waiting period and cover lawfully residing children and/or pregnant people in Medicaid or [the Children's Health Insurance Program, “CHIP”], rather than only those who are ‘qualified non-citizens.’”
As of January, 37 states and the District of Columbia have taken up that option for children, and 31 states and D.C. have opted in for pregnant women.
Moreover, as HealthCare.gov explains: “Medicaid provides payment for treatment of an emergency medical condition for people who meet all Medicaid eligibility criteria in the state (such as income and state residency) but don’t have an eligible immigration status.”
State Exceptions
Those alien Medicaid rules are important because, according to a January report from KFF (formerly the Kaiser Family Foundation), half of “likely undocumented immigrant adults” and 18 percent of lawfully present aliens are uninsured, compared to 6 percent of naturalized U.S. citizens and 8 percent of native-born ones. Aliens without insurance, logically, are more likely to rely on assistance for health care.
Fortunately for (some of) them, KFF elsewhere reports that, “As of January 2025, seven states (California, Colorado, Illinois, Minnesota, New York, Oregon, Washington) plus D.C. have also expanded fully state-funded coverage to some income-eligible adults regardless of immigration status.”
Note that in October 2022, at the height of the last migrant surge, Biden CBP Commissioner Chris Magnus complained that a program implemented by Texas Gov. Greg Abbott (R) to bus migrants released at the border out of his state was a “pull factor” that exacerbated illegal immigration.
If a free bus ride from Laredo to New York City is a magnet for illegal immigration, what impact does the prospect of free health care in San Francisco have on the decisions of foreign nationals who are thinking about coming here illegally?
California
In any event, California was a pioneer in state-funded medical coverage for non-qualified illegal aliens.
The Golden State started out by giving access to state Medi-Cal benefits to low-income aliens regardless of immigration status aged 26 and younger in January 2020, a perk then extended to such aliens aged 50 and older in May 2022 before Sacramento decided to cover all needy adult aliens, regardless of age or status, in January 2024.
California can spend its citizens’ tax dollars as their representatives see fit, but problems arose when the state sought federal reimbursement for non-emergency treatment for non-qualified aliens, those with “unsatisfactory immigration status” (UIS) in California lingo.
The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) looked into the costs California was charging the federal government for Medicaid, and in May 2024 issued a report finding the state “improperly claimed $52.7 million in federal Medicaid reimbursement” for UIS aliens.
OIG’s analysis is jargon-heavy, but here’s the gist: California was applying a “proxy percentage” to “capitation payments”— fixed amounts the state paid per member per month to managed care plans regardless of whether members received medical treatment or not — it was making on behalf of UIS aliens.
That proxy percentage was intended to “approximate the cost of providing nonemergency services to” UIS aliens “to ensure that the State agency does not claim Federal reimbursement for these unallowable costs”.
OIG concluded that the state’s proxy percentage was 8.49 percentage points lower than it should have been (representing non-emergency services for non-qualified aliens), resulting in the $52.7 million in improper federal Medicaid reimbursement payments.
Keep in mind that OIG only examined payments over a nine-month period between October 2018 and the end of June 2019, even though the office commenced its investigation in 2020 and didn’t issue its findings until May 2024.
In August 2024, Sen. Chuck Grassley (R-Iowa), asked the administrator of HHS’s Centers for Medicare and Medicaid Services (CMS) whether California had paid any of the money back and whether CMS had initiated any reviews of the state’s payments outside the OIG audit period.
It’s unclear whether Grassley has received a response, but regardless the entire investigation suggests there may be a whole lot more federal money out there that went to improper reimbursements yet to be clawed back — which helps explain why Trump issued his EO.
How Big Is Medicaid?
Medicaid is a massive federal entitlement program, costing taxpayers $880 billion per year. All told, that program and CHIP cover more than 79 million people in the United States.
For comparison purposes, that’s $23 billion more than state and local taxpayers spend annually on all the nation’s kindergarten through grade 12 public schools, with those two federal medical programs covering more than 21 percent of the U.S. population. Medicaid alone accounts for 19 percent of all U.S. health spending, and 61 percent of all U.S. long-term care.
If the foregoing analysis seems arcane and confusing, keep in mind I simplified Medicaid and PRWORA and left parts out of the calculus.
There are countless state and federal websites offering means-tested public benefits to potential beneficiaries; an army of government employees implementing those programs; and a massive federal bureaucracy overseeing the whole thing and processing reimbursements. American taxpayers foot the cost for all of it.
Under Supreme Court precedent, Trump can’t curb public school costs for alien children here illegally, but he does have the power to save potentially tens of billions of taxpayer dollars spent on federal benefits for those here in violation of law. On February 19, he issued an executive order to begin that process.