Grassley Presses for Answers on States’ Use of Taxpayer Dollars to Fund Health Care for Illegal Immigrants, Asks HHS to Launch Nationwide Investigation

Grassley Presses for Answers on States' Use of Taxpayer Dollars to Fund Health Care for Illegal Immigrants, Asks HHS to Launch Nationwide Investigation

Letter follows Biden administration's refusal to fully answer Grassley's 2024 inquiry

WASHINGTON - Sen. Chuck Grassley (R-Iowa), a senior member and former chairman of the Senate Finance Committee, is urging federal health officials to investigate schemes by states to provide taxpayer-funded Medicaid coverage to illegal immigrants.

In two letters to the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Acting Inspector General, Grassley outlines how California and other states use provider taxes as an indirect mechanism to fund Medicaid coverage for illegal immigrants, which is an abuse of the federal Medicaid matching funds process.

"[A]ccording to reports, Connecticut, Maine, Massachusetts, New Jersey, Rhode Island, Utah, and Vermont provide Medicaid coverage to income-eligible illegal immigrant children, while California, Colorado, District of Columbia, Illinois, New York, Oregon, and Washington provide coverage to all income-eligible illegal immigrants. All of those states have some kind of provider tax in place," Grassley wrote to CMS Administrator Mehmet Oz and HHS Acting Inspector General Juliet Hodgkins.

Federal law prohibits states from using federal Medicaid funds to cover illegal immigrants, but provider taxes offer states a strategy to use federal dollars to cross-subsidize their immigrant Medicaid programs. Provider taxes, like the one in California can bring in billions of federal dollars for the federally matched portion of the state's Medicaid program and frees up other state funds to pay for the illegal immigrant Medicaid program.

Last year, Grassley wrote to CMS and California Governor Gavin Newsom demanding answers after an HHS Office of Inspector General (HHS OIG) report found California used an outdated calculation method to determine federal reimbursement amounts and ultimately received $52.7 million in inappropriate federal payments, which CMS confirmed the state paid back.

In his letters this week, Grassley called on the officials to take action to determine the scope of the problem.

"[T]he HHS OIG has identified impermissible state provider tax programs in the past. Thus, I am requesting that the HHS OIG investigate whether any states are indirectly using federal funds through provider taxes, including but not limited to California's Managed Care Organization (MCO) tax, to pay for Medicaid coverage for illegal immigrants," Grassley continued in his letter to the HHS OIG.

Grassley is also requesting a full response to his August 2024 letter to the Biden CMS Administrator, as well information regarding what states have instituted a new provider tax in Fiscal Year 2025. He is asking CMS to detail the steps it has taken to ensure states do not use federal dollars to subsidize Medicaid coverage for illegal immigrants.

In remarks on the Senate floor, Grassley highlighted the commonsense Medicaid reforms included in the 2025 tax bill.

The full text of the letter to CMS can be found HERE, and Grassley's letter to HHS can be found HERE.

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