California OKs $2.8B to close Medicaid funding gap after expanding immigrant coverage

California also is bracing for major budget hits should Republicans in Congress follow through with a plan to slash billions of dollars in Medicaid and potentially jeopardize coverage for millions of people. California provides free health care to more than a third of its 39 million people.

Did expanding coverage to adult immigrants cause the gap?

Partly. California first extended health care benefits to low-income children without legal status in 2015 and later added the benefits for young adults and people over the age of 50. The program was expanded again last year to cover adults ages 26 to 49.

The cost of the recent expansion to cover all low-income adults is $2.7 billion more than the state budgeted because California underestimated the number of people who would sign up for services. California officials said they only had a month of data last year when the state had to produce projections for the budget.

The state hasn't said how many people have enrolled through the expansion. Last year, the state projected that about 700,000 state residents who are living in the U.S. illegally would gain full health coverage to access preventive care and other treatment.

Other factors that are putting pressures on state budgets across the country also played a role in California, state officials said. Those included $540 million in rising pharmacy costs and $1.1 billion from other issues, such as a larger enrollment by older people.

In Illinois, which also expanded coverage in recent years to more low-income residents regardless of immigration status, Democratic Gov. JB Pritzker is proposing a $330 million cut to coverage for immigrants ages 42 to 64, citing rising costs.

What is California doing about the shortfall?

Newsom's administration told lawmakers in March that it took out a $3.44 billion loan, the maximum allowed under state law, from the general fund to make payments for March. The additional $2.8 billion in state funding will also unlock matching federal money to cover costs already committed through June.

State officials this month said the situation is "unsustainable" and told lawmakers the state is finding ways to cut costs next year.

The state has proposed ending pandemic-era protections that have prevented it from disenrolling people from Medicaid. Newsom's administration is also bracing for "significant variability" after President Donald Trump's immigration crackdown.

Will California roll back coverage for immigrants without legal status?

Newsom previously told reporters that rolling back the coverage expansion "is not on my docket."

Other Democratic leaders, including Speaker Robert Rivas and Senate President Pro Tempore Mike McGuire, also vowed to safeguard benefits for immigrants but acknowledged "tough choices ahead."

The budget hole has reignited criticism from Republican lawmakers about the expansion, with some calling for an audit of the state's Medicaid, also known as Medi-Cal.

"Democrats' bad accounting has brought Medi-Cal to the breaking point, making it harder for patients to get in to see a doctor," Assembly Republican Leader James Gallagher said in a statement. "We owe it to Californians — and to the vulnerable people who depend on this program — to make sure Medi-Cal is meeting their needs."

Newsom defended the expansion in one of his podcast episodes, adding that making preventive care accessible to all low-income people helps save the state money in the long run.

How will Congress' plan to cut Medicaid funding affect California?

The $6.2 billion budget gap is "solvable," state lawmakers said. But Congress' threats of a Medicaid funding cut could add further strain.

California would have to cut coverage, limit enrollment or raise taxes to help cover the costs if Congress follows through.

State officials said they're certain it would upend coverage for millions of people in the state.

Even with the largest state budget in the country at roughly $322 billion, California doesn't have the capacity to backfill services funded by the federal government, officials said.

More than half the state's Medicaid funding comes from the federal government. For the next fiscal year, that's roughly $112.1 billion. Federal funding doesn't cover costs related to preventive care for immigrants without legal status.