California has a $6.2 billion Medicaid funding gap partly due to expanding immigrant coverage

Associated Press

19-03-2025

SACRAMENTO, Calif. (AP) — California faces a $6.2 billion budget gap in the state's Medicaid services, which could force Democratic Gov. Gavin Newsom and Democratic lawmakers to reevaluate future coverage for some of the 15 million people who receive health care through the program, including immigrants.
The shortfall 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. That's costing far more than the state projected.
California also is bracing for major budget hits if 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 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 last week told lawmakers it took out a $3.44 billion loan, the maximum allowed under state law, from the general fund to make payments for this month.
The Department of Health Care Services, which oversees the state's Medicaid program, this week said it will need an additional $2.8 billion to cover costs already committed through June. That money will need to be approved by the Legislature in April.
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 told reporters this week 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.
'Californians should not be forced to shoulder the burden of radical Democrats' reckless financial mismanagement,' state Sen. Brian Jones said in a social media post this week.
Newsom recently 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,' lawmakers said this week. 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.