California’s Medicaid program has borrowed $3.4 billion from the state’s normal fund — and can seemingly want much more — to cowl ballooning well being bills for 15 million residents with low incomes and disabilities.
The state Division of Finance disclosed the mortgage to lawmakers in a letter late Wednesday, noting funds have been wanted to make essential funds to well being care suppliers in Medi-Cal, the state’s model of Medicaid. In current months, Gov. Gavin Newsom’s administration has warned of skyrocketing well being care prices, together with increased prescription drug costs and elevated enrollment by newly eligible seniors and immigrants with out authorized standing.
Finance spokesperson H.D. Palmer mentioned the mortgage will cowl Medi-Cal obligations via the top of the month. He declined to specify the entire of this system’s potential shortfall. Nevertheless, a doc circulated by state Senate leaders warns that further funding could also be wanted to cowl bills via June 30, the top of the fiscal 12 months.
The associated fee overrun provides a brand new layer of issue for Democrats who management the legislature and are already grappling with congressional funds plans that would slash Medicaid funding, which accounts for 60% of Medi-Cal’s $174.6 billion funds. President Donald Trump and Republican lawmakers have additionally criticized California Democrats for overlaying residents no matter their immigration standing.
Newsom spokesperson Izzy Gardon downplayed the mortgage. “Rising Medicaid prices are a nationwide problem, affecting each pink and blue states alike,” Gardon mentioned. “This isn’t distinctive to California.”
Well being officers final 12 months mentioned the state would spend roughly $6.4 billion within the 2024-25 fiscal 12 months to cowl immigrants with out authorized standing, which the Democratic governor has hailed as a key step towards his purpose of offering “common protection” for Californians. In current testimony, nonetheless, finance workers advised legislators that well being advantages prolonged to all income-eligible immigrants with out authorized standing are projected to price roughly $9.5 billion, of which $8.4 billion will come from the final fund.
Republicans referred to as for contemporary scrutiny of the state’s determination to cowl residents with out authorized standing. “This program is uncontrolled,” Senate Minority Chief Brian Jones posted on the social platform X. “We’re demanding a full listening to and a full price evaluation so the general public is aware of precisely the place their tax {dollars} are going.”
Affected person advocates objected to Republicans singling out the enlargement for immigrants.
“Well being care prices are influenced by many components together with prescribed drugs, hospital prices, and extra,” mentioned Rachel Linn Gish, a spokesperson for Well being Entry California, a shopper well being advocacy group.
Based on a fall replace from the Division of Well being Care Companies, Medi-Cal spending grew resulting from higher-than-expected enrollment of seniors, fewer Californians shedding Medi-Cal protection than anticipated, and elevated pharmaceutical spending, in addition to increasing protection of immigrants. As an example, the state is spending $1.1 billion extra on residents who have been anticipated to lose protection after the covid-19 pandemic, and a further $2.7 billion greater than anticipated to cowl unauthorized residents.
Meeting Speaker Robert Rivas mentioned he’s dedicated to sustaining the state’s expansions of Medi-Cal providers.
“There are robust decisions forward, and Meeting Democrats will carefully study any proposal from the Governor,” he mentioned in an announcement. “However let’s be clear: We won’t roll over and go away our immigrants behind.”
Senate leaders mentioned they have been wanting carefully on the state’s estimated prices and caseloads and would suggest price containment measures as a part of their funds proposal within the coming weeks.
Scott Graves, funds director on the California Funds & Coverage Heart, mentioned it’s commonplace for the state authorities to make changes when spending doesn’t line up with projections.
Final 12 months, as an example, the state borrowed $1.75 billion towards its normal fund when revenues from a state supplier tax have been delayed. Previous to that, Division of Finance officers mentioned, California took out the same mortgage in 2018 for $830 million.
“The truth is all of those are simply estimates, particularly with a really sophisticated program like Medi-Cal,” Graves mentioned, noting that $3.4 billion is roughly 2% of the state’s total Medi-Cal funds. “It looks as if we’re on the verge of constructing a mountain out of a molehill.”
Mike Genest, who served as finance director beneath Republican Gov. Arnold Schwarzenegger, agreed that changes could be routine. However he mentioned the magnitude of Medi-Cal’s present overrun was not.
“For this to occur in the midst of the 12 months — we’re solely in March — I imply, that’s fairly astounding,” Genest mentioned.
California Democrats proceed to characterize Trump and congressional Republicans as the most important menace, pointing to the Home funds plan to shrink Medicaid spending by as a lot as $880 billion. They are saying cuts of that magnitude would go away tens of millions of residents uninsured, lowering entry to preventive care and driving up costlier emergency room providers.
They cautioned that some short-term price will increase might be pushed by newly eligible residents searching for long-delayed care, which might degree off in coming years. Nevertheless, some acknowledge tough choices forward.
“We undoubtedly have to make sure that those that are our most weak — our youngsters, these with power situations — proceed to have some type of protection,” mentioned Democratic Sen. Akilah Weber Pierson, a San Diego County doctor. “The query is, what is going to that appear to be? To be fairly sincere with you, at this level, I don’t know.”
This text was produced by KFF Well being Information, which publishes California Healthline, an editorially unbiased service of the California Well being Care Basis.
[Clarification: This article was revised at 5 p.m. ET on March 13, 2025, to clarify projected costs of extending Medi-Cal benefits to immigrants without legal status.]
