The health reform legislation that passed this year is designed to expand coverage and access to care. The Congressional Budget Office estimates that 32 million individuals will gain coverage by 2019.

But not everyone will benefit from efforts to make health care affordable. Undocumented immigrants are explicitly excluded from many provisions in the legislation.

Some would argue that states and taxpayers should not reimburse health care costs to undocumented immigrants, and that they should not be eligible for benefits through any public program. Yet regardless of undocumented immigrants’ legal status, states will need to find ways to reimburse medical providers for their uncompensated care due to providers’ legal and ethical requirements to treat patients. The Emergency Medical Treatment and Labor Act (EMTALA), enacted in 1986, requires that hospitals provide care to anyone needing emergency care, regardless of citizenship or ability to pay. Section IX of the American Medical Association Principal of Medical Ethics states, “A physician shall support access to medical care for all people.”

The health reform legislation expands public programs such as Medicaid, but upholds federal law that undocumented immigrants are not eligible for Medicaid benefits financed by the federal government. This group is prohibited from accessing state-run health benefit exchanges, which will allow individuals and small business to purchase insurance at more affordable prices. Undocumented immigrants also are excluded from temporary high-risk pools that are now required to provide coverage to uninsured individuals with pre-existing medical conditions.

In addition to these explicit exclusions, undocumented immigrants may not benefit from the legislation’s efforts to expand employer-sponsored health care. Under health reform, employers with 50 or more employees that fail to provide coverage for their employees will be fined. However, federal law prohibits employers from hiring individuals unauthorized to work in the U.S. It is unclear whether employers with undocumented workers will be fined for failure to provide coverage, particularly if these individuals are working “off the books.”

Funding that some states used to finance health care for undocumented immigrants is also being cut. The health reform legislation stipulates that federal Medicaid disproportionate share hospital (DSH) payments will gradually be eliminated. DSH funds are intended to reimburse uncompensated care costs in hospitals serving low-income populations, but they also are used to subsidize underpayments to physicians. Many states may also use this financial mechanism to reimburse uncompensated care for undocumented immigrants, although there are no national estimates of the proportion of Medicaid DSH payments that finance care for this group. In addition, Section 1011 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 distributed federal funds to reimburse uncompensated emergency health services to undocumented immigrants. However, funds have not been allocated since 2008.

How Will States Respond?

For the reasons above, health reform likely will reduce access to care among undocumented immigrants. It is unclear how states will respond. Outcomes might include uncompensated care costs resulting in financial losses for practitioners, hospitals and community health centers that continue to serve this population; increased state or local funding to cover these individuals; or cutbacks in services and coverage for undocumented immigrants. The likelihood of these outcomes depends on several factors that vary across states, including their undocumented immigrant population, the size of their federal Medicaid DSH allotments, their policies toward undocumented immigrants and overall state wealth:

• Undocumented immigrants are not evenly distributed across the country: according to the United States Bureau of Citizenship and Immigration Services, three-quarters of the total population reside in eight states. California alone is home to almost a third of all undocumented immigrants.
• States receive disparate federal Medicaid DSH allocations per capita. In 2007, New Hampshire and New Jersey received $1,550 and $1,030 per uninsured person, and $2,800 and $1,870 per person living in poverty, respectively. In contrast, South Dakota and Wyoming received $15 and $2 per uninsured person, and $17 and $2 per person living in poverty, respectively. This variation is due to complex factors ranging from how states report the number of DSH-eligible hospitals to provisions in the allocation formula that have maintained many of the initial funding allocations. States with large allocations may experience more pronounced shortfalls in DSH funds once funding is eliminated.
• States are inconsistent in their legal treatment of undocumented immigrants. States such as Arizona — with its recent anti-immigration law — may have less public support for local programs to reimburse hospitals and community centers for uncompensated care to undocumented immigrants.
• States have unequal tax bases. In 2007, Mississippi and West Virginia had $35,100 and $37,600 total taxable resources per capita, respectively. In contrast, Delaware and the District of Columbia had $81,000 and $92,300 total taxable resources per capita, respectively. This means that less wealthy states have fewer local resources to provide services, such as health care and health insurance, for the uninsured.

Contrary to some concerns, undocumented immigrants are not primarily responsible for the rise in the uninsured population or inappropriate emergency department use. Although nearly half of both undocumented and legal immigrants lack health insurance (compared to 15 percent of U.S. citizens), the majority of uninsured (78 percent) are citizens. Further, immigrants have fewer emergency department visits per capita: immigrant adults and children are 35 percent and 27 percent less likely than non-immigrants to visit an emergency department, respectively.

Although the federal law will increase access to care for millions of Americans, undocumented immigrants are an inevitable source of failure. How can states prepare to reimburse uncompensated care for undocumented immigrants? The first step is to better understand the scope of the problem, which includes estimating the volume of and types of care received by undocumented immigrants and the financial impact of uncompensated care to local clinics and medical providers. Then it is critical to understand how states currently fund care for undocumented immigrants, particularly through current funding streams such as Medicaid DSH and federally qualified community health centers. Finally, it is important to evaluate the effects of differential Medicaid DSH allocations, local tax bases, and local immigration policies on access to care across states. Only then can we identify the states that are responding well to this challenge.