SACRAMENTO, Calif. (AP) — California faces a significant budget gap of $6.2 billion in its Medicaid services, prompting Democratic Governor Gavin Newsom and fellow Democratic lawmakers to reassess future coverage for some of the 15 million individuals who rely on the program for health care, including undocumented immigrants.
This shortfall emerges just a year after California implemented an ambitious expansion of coverage, which aimed to provide free health care to all low-income adults irrespective of their immigration status. However, the cost of this extension has exceeded state projections by a considerable margin.
In addition to the budget deficit, California is preparing for potential funding cuts if congressional Republicans proceed with plans to substantially reduce Medicaid funding, risking coverage for millions of Californians. Currently, over a third of California's 39 million residents receive free health care through the state's program.
Did the expansion of coverage for undocumented adults cause the budget gap?
Partially. California first introduced health care benefits for low-income undocumented children in 2015 and subsequently expanded this to include benefits for young adults and individuals over the age of 50. The most recent expansion extended coverage to adults aged 26 to 49, which has led to costs $2.7 billion higher than budgeted due to an underestimated enrollment. State officials acknowledged that they had access to only a month of data when making budget projections.
While the state has not disclosed the precise number of enrollees resulting from this expansion, earlier estimates suggested that around 700,000 residents living illegally in the U.S. would gain access to comprehensive health services, including preventive care.
Other factors affecting California's budget include $540 million in increasing pharmacy costs and $1.1 billion due to a rise in enrollment among older individuals. States like Illinois, which also expanded coverage to low-income residents without regard to immigration status, are experiencing similar financial pressures, with Illinois Governor J.B. Pritzker proposing a $330 million cut to coverage for immigrants aged 42 to 64.
What actions is California taking regarding the shortfall?
Newsom's administration recently informed lawmakers of a $3.44 billion loan taken from the general fund, the maximum permitted by state law, to help manage payments due this month. The Department of Health Care Services, responsible for the Medicaid program, indicated that $2.8 billion would still be needed to cover committed costs through June, which will require legislative approval in April.
Additionally, the state has suggested ending pandemic-era protections that currently prevent the disenrollment of individuals from Medicaid. The administration is also preparing for "significant variability" due to potential changes stemming from enhanced immigration enforcement measures under the previous administration.
Will California roll back coverage for undocumented immigrants?
Governor Newsom confirmed that reversing the coverage expansion “is not on my docket.” Key Democratic leaders, including Assembly Speaker Robert Rivas and Senate President Pro Tempore Mike McGuire, have also pledged to protect benefits for immigrants while acknowledging the difficult choices that lie ahead. The budget crisis has reopened discussions and criticisms from Republican lawmakers regarding the expansion's feasibility. State Senator Brian Jones voiced concerns, stating that the financial mismanagement of the expansion should not be a burden on Californians.
How would cuts to Medicaid funding by Congress affect California?
While lawmakers believe the $6.2 billion deficit is “solvable,” Congress' potential decision to cut Medicaid funding could exacerbate the situation. If these funding cuts proceed, California might have to reduce coverage, limit enrollment, or raise taxes to manage the financial burden. State officials express confidence that such cuts would greatly disrupt coverage for millions of residents.
Even with California possessing the largest state budget in the nation, approximately $322 billion for the upcoming fiscal year, officials assert that the state lacks the capacity to compensate for service funding typically provided by the federal government. More than half of the state's Medicaid funding, equivalent to $112.1 billion for the next fiscal year, is sourced from federal contributions, which do not cover costs related to preventive care for undocumented immigrants.
