The federal government will shut down early Wednesday, in large part because of a debate between Republicans and Democrats over enhanced Obamacare subsidies and whether some immigrants should get those financial benefits.

Republicans claim Democrats want to give health care to "illegal immigrants."

Democrats, in turn, say that's a lie.

Democrats say they are only trying to restore health care coverage options that were available to immigrants having "lawful presence" in the United States before those options were eliminated by President Donald Trump's so-called "One Big Beautiful" tax bill this year.

"They want to have illegal aliens come into our country and get massive healthcare at the cost to everybody else, and we don't have it," Trump told reporters on Tuesday.

"And that's ... the number one reason that they want to strike is to get illegal immigrants' healthcare," Trump said.

House Speaker Mike Johnson, R-La., told CNBC's "Squawk Box" on Tuesday, "They want to restore taxpayer-funded benefits, American taxpayer-funded benefits, to illegal aliens."

"We're not doing that," Johnson added.

Democrats say that Republicans are using rhetoric about immigrants to distract from the fact that millions of Americans could see much higher health insurance premiums next year if action isn't taken soon.

At the root of the dispute are enhanced premium tax credits available for Affordable Care Act health plans, and who is eligible for them.

Those often-generous subsidies, which millions of Americans have relied on since 2021, were implemented during the Covid-19 pandemic.

The tax credits lower the cost of health-insurance premiums paid by individuals and families who buy health plans on Obamacare exchanges, and expand the pool of eligible recipients.

"The enhanced tax credits both increased the amount of financial assistance already eligible ACA Marketplace enrollees received as well as made middle-income enrollees with income above 400% of federal poverty guidelines newly eligible for premium tax credits," researchers at the health policy research group KFF noted in a paper published Tuesday.

The vast majority of people who have received those enhanced credits are American citizens, with ACA plan enrollment doubling from 11 million to more than 24 million since the boosted tax credits took efft.

But before Trump's tax bill became law, a fraction of the recipients were immigrants legally present in the U.S.

Republican lawmakers in early September pointed to a Congressional Budget Office analysis, which they said showed that "1.2 million illegal immigrants or non-citizens ... who will no longer receive Obamacare subsidies" as a result of Trump's bill.

The credits are due to expire at the end of 2025.

Democrats are insisting that any short-term resolution to keep the federal government open at least another seven weeks include an extension of the subsidies. They do not want to wait to negotiate their extension until after the stopgap funding resolution is passed.

House Minority Leader Hakeem Jeffries, D-N.Y., during a "Squawk Box" interview, said, "Federal law prohibits the use of taxpayer dollars to provide medical coverage to undocumented individuals."

"That's the law, and there is nothing in anything that we have proposed that is trying to change that law," he said.

But Democrats do want to restore tax credits for "lawfully present" immigrants.

Those immigrants include people with temporary protected status due to their claim of being refugees or receiving asylum from persecution and other threats in their home countries.

Some Republicans, in addition to objecting to restoring tax credits for immigrants with legal presence, also argue that extending the premiums for all Americans would be too costly for the federal government.

"It'll cost hundreds of billions of dollars. Can't afford it," Rep. Andy Harris, R-Md., told NBC News in July.

"That was a Covid-era policy. Newsflash to America: Covid is over."

Extending the subsidies for a decade would cost an estimated $350 billion, according to the nonpartisan Congressional Budget Office.

If the credits disappear at the end of this year, the cost of health insurance for enrollees would more than double on average, according to KFF.

For instance, a family of four making $130,000 could see their monthly insurance premiums nearly double to $1,716 from $921, according to a calculator by KFF.

Those price hikes would cause more than four million Americans to lose their insurance by 2034, according to an analysis by the Congressional Budget Office earlier this year.