California’s Medicaid program has borrowed $3.4 billion from the state’s basic 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 crucial 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 stated the mortgage will cowl Medi-Cal obligations by the top of the month. He declined to specify the full 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 by June 30, the top 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 would 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 current testimony, nevertheless, finance workers informed 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 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 growth for immigrants.
“Well being care prices are influenced by many components together with prescribed drugs, 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 as a result of 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. For example, the state is spending $1.1 billion extra on residents who had been anticipated to lose protection after the covid-19 pandemic, and an extra $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 selections forward, and Meeting Democrats will intently 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 depart our immigrants behind.”
Senate leaders stated they had been wanting intently on the state’s estimated prices and caseloads and would suggest price containment measures as a part of their finances proposal within the coming weeks.
Scott Graves, finances director on the California Funds & Coverage Heart, stated it’s common for the state authorities to make changes when spending doesn’t line up with projections.
Final 12 months, as an illustration, the state borrowed $1.75 billion in opposition to its basic fund when revenues from a state supplier tax had been delayed. Previous to that, Division of Finance officers stated, California took out the same mortgage in 2018 for $830 million.
“The truth is all of those are simply estimates, particularly with a really difficult 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 below Republican Gov. Arnold Schwarzenegger, agreed that changes could 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 largest 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 hundreds of thousands of residents uninsured, decreasing entry to preventive care and driving up costlier emergency room companies.
They cautioned that some short-term price will increase could possibly be pushed by newly eligible residents searching for long-delayed care, which may stage off in coming years. Nevertheless, some acknowledge troublesome choices forward.
“We undoubtedly have to make sure that those that are our most weak — our children, these with continual situations — proceed to have some form 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 impartial 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.]