Washington, D.C. — A new federal directive is putting nursing homes on a ticking clock. The Centers for Medicare & Medicaid Services has issued guidance that will end federal Medicaid funding for thousands of lawfully present immigrants, effective October 1 — and facilities have until then to figure out how it changes who they can treat and how they get paid.
The guidance stems from the Working Families Tax Cut legislation passed in 2025, which restricts when federal dollars can be used to cover noncitizens in Medicaid and CHIP. CMS says the new rules don’t change immigration status definitions — they change the money. Under the updated policy, states can only claim federal matching funds for coverage provided to U.S. citizens and nationals, lawful permanent residents, certain Cuban and Haitian entrants, and migrants residing in the country under Compacts of Free Association.
Who gets cut: refugees, asylees, parolees, and survivors of trafficking who don’t fall into those newly defined categories — even though they’re in the country legally.
What This Means on the Ground
For skilled nursing facilities, the ripple effects run in two directions.
First, on the resident side: nursing homes that serve Medicaid-funded patients from the affected populations could see coverage disruptions for those individuals. States have the option — but not the obligation — to backfill coverage using state funds alone. Facilities in states that choose not to absorb that cost could find themselves holding unpaid bills or facing difficult decisions about admissions.
Second, on the workforce side: the long-term care industry depends heavily on immigrant workers, particularly certified nursing assistants and home health aides. While this specific guidance targets resident coverage rather than worker status, the broader immigration climate it reflects has already created staffing anxiety across the sector. Industry reports have documented a growing reluctance among immigrant caregivers to take on new positions.
This comes as nursing homes are already navigating research showing that up to 8.3 million Medicaid enrollees nationally could lose coverage under proposed work requirements — a separate but parallel threat that compounds the financial uncertainty operators are trying to plan around.
A Hard Deadline and a Long To-Do List
States now face a significant administrative lift before October 1. CMS’s guidance requires them to conduct eligibility redeterminations for affected populations, revise application systems, update verification processes, amend contracts with insurance plans, and file updated state plan amendments — all while managing ongoing Medicaid operations.
States that don’t comply risk being unable to claim federal reimbursement for individuals who are no longer federally eligible under the new rules. CMS said it will provide technical assistance, but the operational burden falls on the states — and ultimately filters down to the providers serving these patients.
Emergency Medicaid will continue to cover acute care regardless of immigration status, and existing options to cover lawfully residing children and pregnant women are unchanged. But the message is clear: the federal safety net is narrowing, and nursing homes operating in communities with large immigrant populations — whether as patients or employees — are going to feel it.
The agency described the move as necessary to enforce federal law and protect taxpayer-funded programs. Critics say it’s another pressure point in a system that’s already strained.
