California’s Medicaid program has borrowed $3.4 billion from the state’s normal fund — and can probably 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 had been wanted to make essential funds to well being care suppliers in Medi-Cal, the state’s model of Medicaid. In latest months, Gov. Gavin Newsom’s administration has warned of skyrocketing well being care prices, together with greater prescription drug costs and elevated enrollment by newly eligible seniors and immigrants with out authorized standing.
Finance spokesperson H.D. Palmer stated the mortgage will cowl Medi-Cal obligations by the tip of the month. He declined to specify the whole of this system’s potential shortfall. Nevertheless, a doc circulated by state Senate leaders warns that extra funding could also be wanted to cowl bills by June 30, the tip of the fiscal 12 months.
The fee overrun provides a brand new layer of problem for Democrats who management the legislature and are already grappling with congressional finances plans that might slash Medicaid funding, which accounts for 60% of Medi-Cal’s $174.6 billion finances. 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 crimson and blue states alike,” Gardon stated. “This isn’t distinctive to California.”
Well being officers final 12 months stated 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 objective of offering “common protection” for Californians. In latest testimony, nevertheless, 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 overall fund.
Republicans known as for recent 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 growth for immigrants.
“Well being care prices are influenced by many components together with pharmaceuticals, hospital prices, and extra,” stated Rachel Linn Gish, a spokesperson for Well being Entry California, a client well being advocacy group.
In response to a fall replace from the Division of Well being Care Providers, Medi-Cal spending grew on account of higher-than-expected enrollment of seniors, fewer Californians dropping 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 had 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 stated he’s dedicated to sustaining the state’s expansions of Medi-Cal companies.
“There are powerful decisions forward, and Meeting Democrats will carefully look at any proposal from the Governor,” he stated in an announcement. “However let’s be clear: We is not going to roll over and go away our immigrants behind.”
Senate leaders stated they had been wanting carefully on the state’s estimated prices and caseloads and would advocate price containment measures as a part of their finances proposal within the coming weeks.
Scott Graves, finances director on the California Price range & Coverage Heart, stated 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 had been delayed. Previous to that, Division of Finance officers stated, California took out an identical mortgage in 2018 for $830 million.
“The fact is all of those are simply estimates, particularly with a really sophisticated program like Medi-Cal,” Graves stated, noting that $3.4 billion is roughly 2% of the state’s general Medi-Cal finances. “It looks like we’re on the verge of creating a mountain out of a molehill.”
Mike Genest, who served as finance director underneath Republican Gov. Arnold Schwarzenegger, agreed that changes will be routine. However he stated 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 stated.
California Democrats proceed to characterize Trump and congressional Republicans as the most important menace, pointing to the Home finances plan to shrink Medicaid spending by as a lot as $880 billion. They are saying cuts of that magnitude would depart thousands and thousands of residents uninsured, lowering entry to preventive care and driving up costlier emergency room companies.
They cautioned that some short-term price will increase may very well be pushed by newly eligible residents in search of long-delayed care, which might stage off in coming years. Nevertheless, some acknowledge tough selections forward.
“We positively have to make sure that those that are our most weak — our youngsters, these with continual situations — proceed to have some type of protection,” stated Democratic Sen. Akilah Weber Pierson, a San Diego County doctor. “The query is, what’s going to that seem like? 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.]
