State Takes $3.4 Billion from General Fund for Medi-Cal

SACRAMENTO — Last week, the California Department of Finance (DOF) announced that the Medi-Cal Medicaid health insurance program would borrow $3.44 billion from the State’s general fund due to a budget shortfall. The loan was outlined in a letter sent to the Chairs of the Senate and Assembly Budget and Appropriations Committees. An additional Supplemental Appropriations Request for $2.8 billion is in the works, bringing the total requested to $6.24 billion, which will then be matched by federal funds through the Medicaid program.

The infusion comes after the cost of extending coverage to illegal immigrants starting in 2024 drastically exceeded the initial estimate of $2.7 billion annually. Posting the DOF’s letter to social media, Senate Minority Leader Brian Jones (R-San Diego) wrote, “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. The loan is being taken from tax dollars meant for healthcare providers. The program is out of control.”

Jones followed up by saying that California has spent $8.5 billion on free healthcare for illegal immigrants this year, of which over 1.6 million are enrolled. DOF Program Budget Manager Guadalupe Manriquez says 9.5 billion total funds have been spent to cover undocumented individuals, 8.4 billion of which comes from the general fund.

Democrats remain supportive of the State’s push to insure illegal immigrants while recognizing budget challenges. In a statement, Assembly Speaker Robert Rivas (D-Hollister) said, “Immigrant workers and families, who pay billions in taxes, deserve access to care, and I am proud to protect California’s progress expanding Medi-Cal. There are tough choices ahead, and Assembly Democrats will closely examine any proposal from the Governor. But let’s be clear: We will not roll over and leave our immigrants behind.”

On Monday, the Assembly Subcommittee No. 1 on Health held an informational hearing to explore Medi-Cal costs further. Chair Dawn Addis introduced the Medi-Cal item by saying that “while some have sought to politicize this loan request,” potential cuts to Medicaid by the federal government are the biggest threat to the program. She also noted that healthcare costs are rising across the board nationally and that the Medi-Cal program still has strong support within the State.

Michelle Baass, Director of the California Department of Health Care Services (DHCS), confirmed that the expansion of coverage to people with “unsatisfactory immigration status” did contribute significantly to the budget shortfall but clarified that other factors were involved. She pointed to other states that have experienced similar budget overruns, such as Pennsylvania and Indiana, but could not provide specifics of the situations in those states.

Baass argued that the primary reason for the shortfall was an underestimation of costs caused by several new coverage-expanding rules taking effect at the beginning of 2024 in combination with unknowns in the healthcare landscape after COVID-19. She says that her office only had one month of real data to determine estimates for the budget last year and that, ultimately, more people enrolled and remained enrolled than expected. The program covers roughly 15 million Californians and nearly 30% of Sierra County’s population.

The Medi-Cal budget shortfall also raises questions about Governor Newsom’s budget for the next fiscal year, which has been presented as roughly “balanced” based on expenditure estimates by the DOF. Whether the budget is truly balanced will depend on the Department’s ability to accurately forecast spending for new legislation.