California must borrow $3.44B to cover Medicaid shortfall
The unexpected budget shortfall arises as Congress considers significant reductions to the program.
TroibNews 
SACRAMENTO, California — In order to address a $3.44 billion budget gap in the state's Medicaid program, California will need to borrow funds, as communicated by officials from the Newsom administration to lawmakers in a letter obtained by PMG.
This budget pressure is expected to intensify the scrutiny on the state’s coverage of undocumented immigrants, which has exceeded initial budget estimates.
The state initially projected a cost of approximately $3 billion annually to insure this demographic. However, one year after the program's full implementation, expenses are proving to be higher than expected.
Gov. Gavin Newsom's latest budget proposal suggests that the state will allocate $8.4 billion to cover undocumented immigrants in Medi-Cal for the 2024-2025 fiscal year, with an estimated $7.4 billion needed in 2025-2026.
This financial strain may necessitate difficult decisions, such as capping enrollment or restricting benefits.
In a joint statement, Senate Leader Mike McGuire, Majority Leader Lena Gonzalez, and Budget Chair Scott Wiener affirmed their commitment to collaborating with both the Assembly and Newsom's office on “responsible and long-term solutions.”
"Here in the Golden State, we remain steadfast in our commitment to ensuring millions of Californians have the healthcare coverage they need to thrive," they stated. "That access to healthcare is being threatened by skyrocketing healthcare costs across the nation, and even more by the dangerous cuts threatened by President Trump and Congressional Republicans that will impact the lives of tens of millions across this country.”
California has provided Medi-Cal coverage to undocumented children since 2016, and under Newsom’s administration, the program has gradually expanded to include young adults in 2020, older adults in 2022, and all ages in 2024.
The initiative has faced criticism from conservative factions, especially as Congress contemplates substantial cuts to Medicaid. State Republicans, including Assemblymember Carl DeMaio and Senate Minority Leader Brian Jones, have targeted the projected $8.4 billion expenditure as significantly surpassing initial estimates. These critiques even reached Elon Musk’s posts on X.
In a post on X, Jones called for a comprehensive hearing.
"Typical of the secretive Newsom Administration, they just quietly dropped a damning notification that they are taking a $3.44 BILLION loan to fund free healthcare for illegal immigrants," he remarked. "The loan is being taken from tax dollars meant for healthcare providers."
Several factors have contributed to the rising Medi-Cal costs in recent years. The state estimates that spending on the program will reach around $42 billion in 2025-26, marking a $4.5 billion increase from the previous budget.
Pharmacy expenses are climbing across the board, beginning to burden the Medi-Cal budget for both citizens and immigrants. In January, Newsom’s budget proposed an additional $1.3 billion in state funds for pharmacy costs for 2024-25, along with another $1.2 billion for 2025-26 to cover the increased Medi-Cal pharmacy expenses. High-cost medications, particularly those for obesity and diabetes, have had a significant impact on the budget.
Additionally, there has been an uptick in the number of seniors enrolled in the program compared to previous years. According to the Legislative Analyst's Office, there are now 225,000 more seniors in Medi-Cal than before the pandemic, representing an increase of roughly 40 percent.
This rise can be attributed to both eligibility expansions — including for undocumented seniors — and a decrease in the number of individuals removed from Medi-Cal during pandemic-related protections. Although seniors account for only about 10 percent of the program’s participants, they often incur some of the highest expenses. The LAO estimates that seniors cost Medi-Cal an average of around $15,000 annually, whereas costs for the rest of the population average about $8,000.
Rohan Mehta for TROIB News
This budget pressure is expected to intensify the scrutiny on the state’s coverage of undocumented immigrants, which has exceeded initial budget estimates.
The state initially projected a cost of approximately $3 billion annually to insure this demographic. However, one year after the program's full implementation, expenses are proving to be higher than expected.
Gov. Gavin Newsom's latest budget proposal suggests that the state will allocate $8.4 billion to cover undocumented immigrants in Medi-Cal for the 2024-2025 fiscal year, with an estimated $7.4 billion needed in 2025-2026.
This financial strain may necessitate difficult decisions, such as capping enrollment or restricting benefits.
In a joint statement, Senate Leader Mike McGuire, Majority Leader Lena Gonzalez, and Budget Chair Scott Wiener affirmed their commitment to collaborating with both the Assembly and Newsom's office on “responsible and long-term solutions.”
"Here in the Golden State, we remain steadfast in our commitment to ensuring millions of Californians have the healthcare coverage they need to thrive," they stated. "That access to healthcare is being threatened by skyrocketing healthcare costs across the nation, and even more by the dangerous cuts threatened by President Trump and Congressional Republicans that will impact the lives of tens of millions across this country.”
California has provided Medi-Cal coverage to undocumented children since 2016, and under Newsom’s administration, the program has gradually expanded to include young adults in 2020, older adults in 2022, and all ages in 2024.
The initiative has faced criticism from conservative factions, especially as Congress contemplates substantial cuts to Medicaid. State Republicans, including Assemblymember Carl DeMaio and Senate Minority Leader Brian Jones, have targeted the projected $8.4 billion expenditure as significantly surpassing initial estimates. These critiques even reached Elon Musk’s posts on X.
In a post on X, Jones called for a comprehensive hearing.
"Typical of the secretive Newsom Administration, they just quietly dropped a damning notification that they are taking a $3.44 BILLION loan to fund free healthcare for illegal immigrants," he remarked. "The loan is being taken from tax dollars meant for healthcare providers."
Several factors have contributed to the rising Medi-Cal costs in recent years. The state estimates that spending on the program will reach around $42 billion in 2025-26, marking a $4.5 billion increase from the previous budget.
Pharmacy expenses are climbing across the board, beginning to burden the Medi-Cal budget for both citizens and immigrants. In January, Newsom’s budget proposed an additional $1.3 billion in state funds for pharmacy costs for 2024-25, along with another $1.2 billion for 2025-26 to cover the increased Medi-Cal pharmacy expenses. High-cost medications, particularly those for obesity and diabetes, have had a significant impact on the budget.
Additionally, there has been an uptick in the number of seniors enrolled in the program compared to previous years. According to the Legislative Analyst's Office, there are now 225,000 more seniors in Medi-Cal than before the pandemic, representing an increase of roughly 40 percent.
This rise can be attributed to both eligibility expansions — including for undocumented seniors — and a decrease in the number of individuals removed from Medi-Cal during pandemic-related protections. Although seniors account for only about 10 percent of the program’s participants, they often incur some of the highest expenses. The LAO estimates that seniors cost Medi-Cal an average of around $15,000 annually, whereas costs for the rest of the population average about $8,000.
Rohan Mehta for TROIB News
