California OKs $2.8B to close Medicaid funding gap after expanding
immigrant coverage
[April 15, 2025]
By TRÂN NGUYỄN
SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom signed
legislation Monday to close a $2.8 billion budget gap in the state's
Medicaid services and ensure coverage through June for 15 million
people, including immigrants, who receive health care via the program.
The legislation is part of the state's solution to solve the $6.2
billion hole in the state's Medicaid budget. It comes a year after
California launched an ambitious coverage expansion to provide free
health care to all low-income adults regardless of their immigration
status. The expansion is costing far more than the state projected and
could force the Democratic governor and Democratic lawmakers to
reevaluate future coverage for millions of people.
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.
Here’s what to know about California’s Medicaid gap:
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.
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California Gov. Gavin Newsom discusses his revised 2024-25 state
budget during a news conference in Sacramento, Calif., Friday, May
10, 2024. (AP Photo/Rich Pedroncelli, File)
 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.
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