California has a $6.2 billion budget gap for Medicaid services, which could force Democratic Gov. Gavin Newsom and Democratic lawmakers to reconsider 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 that included free health care for all low-income adults, regardless of immigration status. That’s costing far more than the state expected.
California is also bracing for significant budget cuts if Republicans in Congress go ahead with a plan to cut billions of dollars from Medicaid, potentially jeopardizing coverage for millions of people. California provides free health care to more than one-third of its 39 million residents.
Here’s what you should know about the California Medicaid gap:
Did expanding coverage to adult immigrants cause the gap?
Partly. In 2015, California extended health care benefits to low-income children without legal status, and later expanded to include young adults and people over the age of 50. The program was expanded again last year to include adults aged 26 to 49.
California underestimated the number of people who would sign up for services, so the recent expansion to cover all low-income adults cost $2.7 billion more than the state budgeted for. California officials stated that they only had a month of data last year when the state was required to produce budget projections.
The state has not disclosed how many people have enrolled in the expansion. Last year, the state projected that approximately 700,000 state residents living in the United States illegally would gain full health coverage, allowing them to access preventive care and other treatments.
Other factors putting pressure on state budgets across the country played a role in California, according to state officials. These included $540 million in rising pharmacy costs and $1.1 billion in other issues, such as increased enrollment among older people.
In Illinois, Democratic Gov. JB Pritzker is proposing a $330 million cut to coverage for immigrants aged 42 to 64, citing rising costs.
What is California doing to address the shortfall?
Last week, Newsom’s administration informed lawmakers that it took out a $3.44 billion loan from the general fund, the maximum allowed by state law, to make payments this month.
The Department of Health Care Services, which oversees the state’s Medicaid program, announced this week that it will need an additional $2.8 billion to cover costs already committed through June. That money must be approved by the Legislature in April.
The state has proposed repealing pandemic-era safeguards that prevented it from disenrolling people from Medicaid. Newsom’s administration is also preparing for “significant variability” in the aftermath of President Donald Trump’s immigration crackdown.
Will California end coverage for undocumented immigrants?
Newsom told reporters this week that reversing the coverage expansion “is not on my agenda.”
Other Democratic leaders, including Speaker Robert Rivas and Senate President Pro Tempore Mike McGuire, vowed to protect immigrants’ benefits while acknowledging “tough choices ahead.”
The budget hole has reignited Republican lawmakers’ concerns about the expansion.
“Californians should not be forced to bear the burden of radical Democrats’ reckless financial mismanagement,” state Sen. Brian Jones said on social media this week.
Newsom recently defended the expansion in a podcast episode, claiming that making preventive care available to all low-income people saves the state money in the long run.
How will Congress’s plan to reduce Medicaid funding affect California?
The $6.2 billion budget deficit is “solvable,” lawmakers said this week. However, Congress’ threats to cut Medicaid funding could put additional strain on the program.
If Congress goes ahead with the plan, California will have to reduce coverage, limit enrollment, or raise taxes to help cover costs.
State officials said they were confident it would disrupt coverage for millions of people in the state.
Even with the country’s largest state budget of approximately $322 billion, officials said California lacks the capacity to backfill federally funded services.
More than half of the state’s Medicaid funding comes from the federal government. This amounts to approximately $112.1 billion for the upcoming fiscal year. Federal funding does not cover the costs of preventive care for immigrants without legal status.
