California’s Medicaid program has borrowed $3.4 billion from the state’s basic fund — and can possible want much more — to cowl ballooning well being bills for 15 million residents with low incomes and disabilities.
The state Division of Finance disclosed the mortgage to lawmakers in a letter late Wednesday, noting funds have been wanted to make essential funds to well being care suppliers in Medi-Cal, the state’s model of Medicaid. In current months, Gov. Gavin Newsom’s administration has warned of skyrocketing well being care prices, together with greater prescription drug costs and elevated enrollment by newly eligible seniors and immigrants with out authorized standing.
Finance spokesperson H.D. Palmer mentioned the mortgage will cowl Medi-Cal obligations by the tip of the month. He declined to specify the entire of this system’s potential shortfall. Nonetheless, a doc circulated by state Senate leaders warns that further funding could also be wanted to cowl bills by June 30, the tip of the fiscal yr.
The price overrun provides a brand new layer of issue for Democrats who management the legislature and are already grappling with congressional finances plans that would slash Medicaid funding, which accounts for 60% of Medi-Cal’s $174.6 billion finances. President Donald Trump and Republican lawmakers have additionally criticized California Democrats for masking residents no matter their immigration standing.
Newsom spokesperson Izzy Gardon downplayed the mortgage. “Rising Medicaid prices are a nationwide problem, affecting each crimson and blue states alike,” Gardon mentioned. “This isn’t distinctive to California.”
Well being officers final yr mentioned the state would spend roughly $6.4 billion within the 2024-25 fiscal yr to cowl immigrants with out authorized standing, which the Democratic governor has hailed as a key step towards his aim of offering “common protection” for Californians. In current testimony, nevertheless, finance employees informed legislators that well being advantages prolonged to all income-eligible immigrants with out authorized standing are projected to price roughly $9.5 billion, of which $8.4 billion will come from the overall fund.
Republicans known as for recent scrutiny of the state’s choice to cowl residents with out authorized standing. “This program is uncontrolled,” Senate Minority Chief Brian Jones posted on the social platform X. “We’re demanding a full listening to and a full price evaluation so the general public is aware of precisely the place their tax {dollars} are going.”
Affected person advocates objected to Republicans singling out the enlargement for immigrants.
“Well being care prices are influenced by many elements together with pharmaceuticals, hospital prices, and extra,” mentioned Rachel Linn Gish, a spokesperson for Well being Entry California, a client well being advocacy group.
In line with a fall replace from the Division of Well being Care Companies, Medi-Cal spending grew resulting from higher-than-expected enrollment of seniors, fewer Californians shedding Medi-Cal protection than anticipated, and elevated pharmaceutical spending, in addition to increasing protection of immigrants. For example, the state is spending $1.1 billion extra on residents who have been anticipated to lose protection after the covid-19 pandemic, and a further $2.7 billion greater than anticipated to cowl unauthorized residents.
Meeting Speaker Robert Rivas mentioned he’s dedicated to sustaining the state’s expansions of Medi-Cal providers.
“There are robust selections forward, and Meeting Democrats will intently study any proposal from the Governor,” he mentioned in an announcement. “However let’s be clear: We won’t roll over and depart our immigrants behind.”
Senate leaders mentioned they have been trying intently on the state’s estimated prices and caseloads and would advocate price containment measures as a part of their finances proposal within the coming weeks.
Scott Graves, finances director on the California Price range & Coverage Middle, mentioned it’s commonplace for the state authorities to make changes when spending doesn’t line up with projections.
Final yr, as an example, the state borrowed $1.75 billion in opposition to its basic fund when revenues from a state supplier tax have been delayed. Previous to that, Division of Finance officers mentioned, California took out the same mortgage in 2018 for $830 million.
“The fact is all of those are simply estimates, particularly with a really sophisticated program like Medi-Cal,” Graves mentioned, noting that $3.4 billion is roughly 2% of the state’s total Medi-Cal finances. “It looks as if we’re on the verge of constructing a mountain out of a molehill.”
Mike Genest, who served as finance director underneath Republican Gov. Arnold Schwarzenegger, agreed that changes might be routine. However he mentioned the magnitude of Medi-Cal’s present overrun was not.
“For this to occur in the midst of the yr — we’re solely in March — I imply, that’s fairly astounding,” Genest mentioned.
California Democrats proceed to characterize Trump and congressional Republicans as the most important risk, pointing to the Home finances plan to shrink Medicaid spending by as a lot as $880 billion. They are saying cuts of that magnitude would depart tens of millions of residents uninsured, lowering entry to preventive care and driving up costlier emergency room providers.
They cautioned that some short-term price will increase might be pushed by newly eligible residents in search of long-delayed care, which might degree off in coming years. Nonetheless, some acknowledge troublesome choices forward.
“We positively have to make sure that those that are our most susceptible — our youngsters, these with power situations — proceed to have some form of protection,” mentioned Democratic Sen. Akilah Weber Pierson, a San Diego County doctor. “The query is, what’s going to that seem like? To be fairly sincere with you, at this level, I don’t know.”
This text was produced by KFF Well being Information, which publishes California Healthline, an editorially unbiased service of the California Well being Care Basis.
KFF Well being Information is a nationwide newsroom that produces in-depth journalism about well being points and is likely one of the core working packages at KFF—an unbiased supply of well being coverage analysis, polling, and journalism. Study extra about KFF.
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