(IMAGN) California Gov. Gavin Newsom spoke at Shasta College in Redding on Monday, Dec. 16, 2024. Newsom, 57, is among a generation of Democratic politicians under 60 who are seen as the future of the party.
Sacramento, California – California will need to borrow $3.44 billion to address a budget deficit in its Medicaid program, Medi-Cal, according to a letter from the Newsom administration to state lawmakers. This maximum borrowing capacity will only cover expenses through the end of the current month, placing significant pressure on the state’s healthcare budget.
The shortfall has brought renewed scrutiny to the state’s program to provide Medi-Cal coverage to undocumented immigrants, which has exceeded initial cost projections. Originally estimated to cost around $3 billion annually, the program is now projected to cost $8.4 billion in 2024-2025 and $7.4 billion in 2025-2026, according to Governor Gavin Newsom’s budget proposal.
This budget strain could force difficult decisions, such as capping enrollment or limiting benefits. However, state legislative leaders, including Assembly Speaker Robert Rivas, have expressed a commitment to maintaining coverage for all, regardless of immigration status.
“There are tough choices ahead, and Assembly Democrats will closely examine any proposal from the Governor,” Rivas said in a statement. “But let’s be clear: We will not roll over and leave our immigrants behind.”
Senate leaders echoed this sentiment, emphasizing their dedication to ensuring healthcare access for millions of Californians.
The program, which began with coverage for undocumented children in 2016 and expanded to all ages by 2024, has faced criticism from conservative lawmakers. State Republicans, including Assemblymember Carl DeMaio and Senate Minority Leader Brian Jones, have criticized the increased costs, with Jones demanding a full hearing on the matter.
“Typical of the secretive Newsom Administration, they just quietly dropped a damning notification that they are taking a $3.44 BILLION loan to fund free healthcare for illegal immigrants,” Jones wrote on X. “The loan is being taken from tax dollars meant for healthcare providers.”
However, the increased costs are not solely attributable to the coverage of undocumented immigrants. Rising Medicaid costs are a nationwide issue, with California anticipating spending around $42 billion on Medi-Cal in 2025-26, a $4.5 billion increase from the previous budget.
Several factors have contributed to the budget shortfall:
- Increased Pharmacy Costs: Rising pharmacy costs, particularly for high-cost drugs like those for obesity and diabetes, have placed a significant burden on the Medi-Cal budget. Newsom’s budget included an additional $1.3 billion for pharmacy costs in 2024-25 and $1.2 billion in 2025-26.
- Increased Senior Enrollment: There are approximately 225,000 more seniors enrolled in Medi-Cal than before the pandemic, a roughly 40% increase. While seniors comprise about 10% of the program’s population, they account for a disproportionately high share of costs, averaging around $15,000 per year per person, compared to $8,000 for other enrollees, according to the Legislative Analyst’s Office.
- General Healthcare Inflation: Medical costs in general have risen.
The state will now need to navigate these financial challenges while maintaining its commitment to providing healthcare to its residents.
