For the government, Baroness Northover said people who receive free treatment include asylum seekers, and the measure would be extended to failed asylum seekers.
But health spokeswoman Baroness Northover insisted Healthwatch would have "clout" and a "seat at the top table" in representing the interests of patients and the public.
But Baroness Northover, replying for the government, resisted calls to make public campaigning for early diagnosis one of the health secretary's duties outlined in the bill.
Responding for the government, Baroness Northover agreed on the need to reduce offending rates among young adults, and that "more intensive engagement" may have a role to play.
Lady Northover said ministers had listened to concerns about a possible conflict of interest between Healthwatch and the CQC and were prepared to accept amendments aimed at tackling this.