SACRAMENTO — Days after telling lawmakers that he took out a $3.4-billion loan to pay for Medi-Cal costs through March, Gov. Gavin Newsom’s office said Monday that he’s asking the state Legislature to approve another $2.8 billion in extra funding for the healthcare program for low-income Californians through the end of the current fiscal year.
The funding decisions suggest Medi-Cal spending is running as much as $6.2 billion above state estimates from last summer at a time when California is experiencing higher than expected costs for expanding coverage to undocumented immigrants, greater enrollment and rising pharmacy expenses for the program.
The governor’s office declined to provide information about how much of the new Medi-Cal price tag can be attributed to unforeseen expenses of providing state-sponsored healthcare coverage to the undocumented immigrant community. In February, the Newsom administration said the cost of expanding coverage to all income-eligible immigrants, regardless of residency status, had ballooned to $9.5 billion in state and federal funding, which was more than $3 billion over June estimates.
The rising costs have drawn criticism from Republicans and added pressure on Democrats to consider scaling back the program as the state anticipates cuts to federal funding and other economic headwinds that could force difficult conversations during budget negotiations this year.
“With tough fiscal choices ahead, Gov. Newsom, jointly with Pro Tem Mike McGuire (D-Healdsburg) and Speaker Robert Rivas (D-Hollister), will evaluate proposals to rein in long-term spending — including in Medi-Cal — while working to protect the core health and social services Californians rely on,” said Izzy Gardon, a spokesperson for the governor.
In order to pay for President Trump’s $4.5 trillion in tax cuts, Republicans in Washington are considering sweeping cuts to Medicaid, the federal government’s health insurance for low-income residents.
Medi-Cal, the state program that provides healthcare coverage to roughly 15 million low-income Californians and half of the children in the state, largely relies on federal Medicaid funding. Nearly two-thirds of all federal dollars received by the state, or more than $100 billion, fund Medi-Cal.
The scale of the funding reduction to Medicaid is still unknown and it’s impossible to project the severity of the cuts for California with any certainty. Republicans in the House have suggested cutting $880 billion across the federal government, a significant portion of which would have to come from Medicaid, but have also shared their desire to avoid reducing funding for the healthcare program.
The Newsom administration is also anticipating economic blowback from Trump’s tariffs that could impact state revenues and watching for stock market volatility that could affect tax collections that fund state programs.
Despite a history of clear cost overruns, the governor’s office has pushed back on criticism from Republicans that California’s expansion of healthcare coverage to low-income immigrants regardless of residency status, which went into full effect in 2024, is the only reason Medi-Cal spending is over budget.
Program costs have more than doubled from $79.5 billion in 2014-15 to an estimate of $188.1 billion in Newsom’s January budget proposal for 2025-26.
Newsom’s office attributed the price spike this year to higher-than-expected enrollment, an aging population and rising healthcare costs across the nation.
The governor’s office said Newsom anticipates that lawmakers will vote on his request for $2.8 billion in additional Medi-Cal funding in April in order to keep the program solvent through the fiscal year that ends in June.
“We took these steps because it is important to maintain our commitment to our providers and plans to make timely payments for the remainder of the current year to ensure Californians and those on Medi-Cal get the services in the current year,” said Michelle Baass, director of the California Department of Health Care Services, during an Assembly budget hearing on Monday.
Newsom’s office said the money will come from state tax revenue in the general fund. Tax collection through February was $4.6 billion above projections made in the governor’s January budget proposal, according to new data released Monday by the Department of Finance.
Lawmakers will also have to pay back the $3.4-billion loan at some point in the budget process.
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