The White House says California uses a 'loophole' to give undocumented immigrants Medicaid. Experts disagree

"One of the key sticking points in the government shutdown is the White House's claim that a "California loophole" gives Medicaid coverage to undocumented immigrants, at the expense of taxpayers. The Trump administration says this so-called loophole is being used by a number of Democrat-leaning states. Healthcare analysts in California say that this argument is nonsense because it hinges on policies that have nothing to do with state financing of healthcare coverage for undocumented people."

""California utilized an egregious loophole - since employed by several other states - to draw down federal matching funds used to provide Medicaid benefits for illegal immigrants," the White House said in a policy memo released Wednesday as a budget stalemate forced a shutdown of the U.S. government. The administration said that the Working Families Tax Cut Act, which goes into effect in October 2026, closes the loophole by prohibiting the use of taxpayer money to provide healthcare coverage to undocumented immigrants and other noncitizens."

A federal government shutdown involves a dispute over whether states use federal Medicaid funds to cover undocumented immigrants. The White House asserts a "California loophole" allows some states to draw federal matching funds for such coverage and cites a policy memo making that claim. The administration says the Working Families Tax Cut Act, effective October 2026, will close the loophole by banning taxpayer-funded healthcare for undocumented immigrants and other noncitizens. State spokespersons and California healthcare analysts dispute the administration's assertion, saying the argument misunderstands or misapplies relevant policies and state financing mechanisms.

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