State borrows $3.4B for health care

The administration acknowledged that more people are enrolled in the program than the state anticipated, and that the state is spending $2.7 billion more than it planned on coverage expansions for immigrants without legal status.  

Roughly 1.6 million immigrants without legal status are enrolled in Medi-Cal, according to state data. The program is a lifeline to people who traditionally have not had access to health insurance, and California is one of six states that offer coverage to immigrant adults regardless of whether they are in the country legally. 

Senate Minority Leader Brian Jones said Newsom has overpromised and under-delivered on health care at a time when all Californians are struggling to afford the cost of living in the state.

“Democrats and the governor are picking priorities, and they’re prioritizing people that have come into our country illegally over people who immigrated here legally, people that are citizens,” Jones said.

The state’s Medi-Cal expansion for undocumented immigrants costs about $8.5 billion from the state general fund annually, according to a recent budget hearing. 

“If we weren’t spending eight-and-a-half billion dollars on illegal immigrants, we wouldn’t need to borrow $3.4 billion to cover the difference,” Jones said.

H.D. Palmer, a spokesperson for the state’s finance department, acknowledged that the rise in spending is partially attributable to higher-than-projected costs associated with larger enrollment numbers for California’s undocumented population. In January, the Department of Health Care Services, which oversees Medi-Cal, estimated California is spending $2.7 billion beyond what it budgeted due to the cost of covering care and prescriptions for newly enrolled immigrants.

But immigrants aren’t the only population that is using Medi-Cal more than the state expected.

California’s Medi-Cal population in general ballooned during the COVID-19 pandemic when the federal government temporarily suspended income eligibility checks to keep people insured during the national emergency. Before the pandemic about 13 million people used Medi-Cal. That number peaked at 15.6 million in 2023 when eligibility checks resumed. Today 14.9 million people are enrolled, according to state data.

The Legislative Analyst’s Office has also noted a 40% growth over the last four years in the number of seniors enrolled in Medi-Cal. While seniors make up only about 10% of the program’s enrollees, they account for a large part of the program’s spending because benefits such as long-term care are among the most expensive. 

Medi-Cal spends about $15,000 a year per senior. That compares to the $8,000 a year the program spends on average on other enrollees. 

Newsom’s office said these issues are neither new nor unique to California. Medi-Cal is California’s version of Medicaid, the federal-state program that provides health coverage nationwide to low-income households.

“Rising Medicaid costs are a national challenge, affecting both red and blue states alike,” Elana Ross, a spokesperson for the governor’s office, said in an email.

Democrats pledge to protect immigrant health care

State Sen. Roger Niello, a long-time critic of the state’s closed-door budgeting process, which is typically hashed out between Democratic leaders and the governor, acknowledged that other factors like senior enrollment and high drug costs could be contributing to the high expenses. He said Republicans are worried about increasing spending on immigrant health care.

The Republican from Roseville criticized the lack of transparency from Newsom’s finance department.

“The completely opaque nature of the request, which says nothing about any of that, is entirely inappropriate,” Niello said.

Democratic lawmakers said they need more information about what exactly is behind the unexpected spending increases, but pushed back on the idea that the state would need to roll back coverage for its undocumented population.  

“Immigrant workers and families, who pay billions in taxes, deserve access to care, and I am proud to protect California’s progress expanding Medi-Cal,” Assembly Speaker Robert Rivas said in a statement. “There are tough choices ahead, and Assembly Democrats will closely examine any proposal from the governor. But let’s be clear: We will not roll over and leave our immigrants behind.”

Immigrants lacking permanent status contribute approximately $8.5 billion in state and local taxes a year, according to an analysis by the California Budget and Policy Center, a nonprofit research group. That’s about the same amount it’s costing the state to give them Medi-Cal.

State lawmakers first allowed undocumented children to enroll in Medi-Cal in 2016 under Gov. Jerry Brown. Since then Newsom has approved adding young adults up to age 25 in 2020 and older adults and seniors in 2022. Adults ages 26-49 were the final group added in 2024. Throughout those years, even some Republican lawmakers supported covering this population. 

“The Republicans need to take a better and keen-eyed look at the timeline associated with those expansions,” said Assemblymember Mia Bonta, an Oakland Democrat who leads the Health Committee. “For them to just try to play the blame game and put it all at the feet of California values to ensure that we have universal health coverage for all with this particular age group being included is just specious.”

Billions more in potential Medicaid cuts

Assemblymember Dawn Addis, who chairs a budget subcommittee on health, said she will be questioning Newsom officials closely about the spending increase in an upcoming hearing. 

“We really need to understand the details of what the Department of Finance is saying, what the executive is seeing, and how they’re calculating this information,” Addis, a Democrat from San Luis Obispo, said.

Addis emphasized that the biggest threat to Medi-Cal right now is coming from the federal government.

House Republicans recently voted to advance a proposal that could result in cuts of $880 billion to a group of programs, largely Medicaid, over the next 10 years. The California Budget and Policy Center has estimated that the proposals currently at play in Congress could translate into annual losses of $10 billion to $20 billion a year for the state.

“The reason why it’s so important for us to fight back against cuts at the federal level to Medicaid is because there is no easy or painless solution to fill that budget hole,” said Amanda McAllister-Wallner, interim executive director of Health Access California. 

Health Access California along with the California Immigrant Policy Center spearheaded the campaign nearly a decade ago to insure all immigrants in the state. 

McAllister-Wallner said it was unfair and unreasonable to pin the state budget shortfall on the immigrant expansions. Over the same time period, the state has added benefits, such as doula services and family therapy, and invested heavily in reforming the system through a multibillion-dollar initiative called CalAIM.

“Those changes that we’ve made in Medi-Cal made the program stronger (and) have made the state healthier,” McAllister-Wallner said. 

CalMatters reporter Alexei Koseff contributed to this story. CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.