The U.S. government is once again at a standstill, with a partial shutdown taking effect at midnight on October 1, 2025. The cause? A bitter dispute over healthcare funding for undocumented immigrants, pitting congressional Democrats and Republicans against each other in a high-stakes standoff that’s left federal workers, healthcare providers, and millions of Americans in limbo.
At the heart of the matter is the Working Families Tax Cut Act, a sweeping healthcare reform package signed into law by President Donald Trump on July 4, 2025. According to a memo circulated by the White House and first reported by Fox News Digital, the Act contains what the administration calls “the most important America First healthcare reforms ever enacted.” The memo alleges that Democrats are demanding the repeal of these reforms as a condition to reopen the government, a move the White House says would result in nearly $200 billion in federal spending on healthcare for illegal immigrants and other non-citizens over the next decade—almost enough to fund the entire Children’s Health Insurance Program over the same period.
“Democrats are demanding these reforms be repealed as a condition of keeping the government open for four weeks,” the White House memo reads, as cited by Fox News. “This would result in the federal government spending nearly $200 billion on healthcare for illegal immigrants and non-citizens over the next decade—all while repealing reforms that strengthen care for the most vulnerable Americans.”
The memo breaks down the costs associated with repealing specific provisions of the Working Families Tax Cut Act. Notably, it highlights the closure of the so-called “California loophole,” which previously allowed the sanctuary state to provide Medicaid benefits to undocumented immigrants. The White House claims that closing this loophole accounts for nearly 80% of the Act’s federal savings, and that repealing the provision would result in $34.6 billion in additional federal spending, mostly benefiting California.
Republicans have seized on these numbers to frame the debate as one of fiscal responsibility and prioritizing American citizens. Speaker of the House Mike Johnson, R-La., appeared on ABC’s “Good Morning America” to defend the GOP’s stance, pushing back against accusations that Republicans are using the shutdown to avoid funding Medicaid coverage for millions of Americans. “The Democrats said instead that they wanted to give healthcare to illegal aliens instead of keeping critical services provided for the American citizens,” Johnson asserted in the interview, according to ABC News.
But Democrats and their allies in the media are calling foul, insisting that the Republican narrative is misleading and that the real issue is the extension of expiring Obamacare tax credits, not a secret plan to fund healthcare for undocumented immigrants. Senate Minority Leader Chuck Schumer, D-N.Y., took to the Senate floor to refute the White House’s claims. “That is a damn lie,” Schumer declared, as reported by Fox News. “Not $1 of Medicare, Medicaid or [Obamacare] is allowed to go to undocumented immigrants, not a dollar. So why do they keep saying this? This seems to be their theme because they're afraid to talk about the real issue. It’s typical that the Republican response is to have a diversion, try to scare people emotionally.”
The technical details of the Working Families Tax Cut Act are central to the dispute. The law introduced six key provisions designed to restrict non-citizens’ access to federally funded healthcare. These include ending Medicaid funding for most non-citizens, halting the enhanced Federal Medical Assistance Percentage (FMAP) for emergency care for undocumented immigrants, ending Medicare funding for most non-citizens, and closing the California loophole. Another provision targets the so-called “special rule” that allowed some immigrants earning below the poverty line to receive Obamacare premium subsidies, a measure the White House claims subverted existing restrictions that prevent most immigrants from receiving Medicaid for five years.
Democrats have blocked three Republican attempts in the Senate to pass a short-term funding extension, which would have kept the government open until November 21 while lawmakers work on longer-term appropriations. Instead, Senate Democrats have pushed their own plan, blocked by Republicans, that would keep the government open until October 31 and repeal the healthcare section of President Trump’s signature legislation. Their proposal would also restore funding for public broadcasters NPR and PBS.
Johnson and other Republicans argue that rolling back the Working Families Tax Cut Act would not only open the door to increased healthcare spending for undocumented immigrants but also threaten the stability of Medicaid and other programs meant for American citizens. “It does actually, because what it does is it unwinds the changes that Republicans put into the big, beautiful bill—the signature legislation that we passed and signed into law on July 4. That has been very successful in shoring up Medicaid for the people who are actually to receive it,” Johnson said, according to ABC News. He added that the Congressional Budget Office had confirmed the law helped reduce premiums by removing ineligible recipients, including “illegal aliens and able-bodied young men who are not eligible to be there.”
ABC’s George Stephanopoulos, however, pushed back on these claims during his exchange with Johnson. “Here are the facts. The proposal does not provide healthcare for illegal immigrants. Illegal immigrants cannot buy health care under the Affordable Care Act. They cannot receive healthcare subsidies,” Stephanopoulos stated. He further emphasized that undocumented immigrants are ineligible for Medicare, Medicaid, and the Children’s Health Insurance Program, and that the Democratic bill does not change this eligibility.
Vice President JD Vance weighed in during an interview with Fox News Channel, asserting that Democratic lawmakers want to return to two Biden-era provisions—one that expanded emergency healthcare for undocumented immigrants and another that granted mass parole, making new parolees eligible for taxpayer-funded healthcare. “In the ‘one big, beautiful bill,’ President Trump and congressional Republicans turned off that money to healthcare funding for illegal aliens,” Vance said.
As the shutdown drags on, the rhetoric on both sides has grown sharper. Republicans accuse Democrats of putting “American Patients Last” by seeking to undo what they see as critical reforms. Democrats, meanwhile, argue that Republicans are using scare tactics and misinformation to distract from the real stakes—affordable healthcare for millions of law-abiding Americans.
With no clear path forward, federal workers brace for furloughs, and agencies prepare for program cuts and disruptions. The debate over who bears responsibility for the shutdown—and what it means for the future of U.S. healthcare policy—shows no sign of abating. The question now is whether lawmakers can find common ground before the consequences become even more severe for those caught in the crossfire.
