This paper examines the causal health effects of a welfare reform that reduced benefits for low-income retirees with a migration background. The reform created a permanent negative income shock, determined by the number of adult co-residents. Using detailed administrative data and a difference-in-differences design, we analyze the impact of this reform on medication use for stress- and lifestyle-related conditions over a seven-year post-reform period. The welfare cut reduced average personal income by 13 percent. In the longer term, the reform increased medication use for lifestyle-related conditions by 1.8–2.4 percentage points, while we find no significant effects on stress-related conditions. Additional analysis suggests an increase in mortality of 8.1 percent. Our results provide insights into the health disparities between low- and high-income populations.