California is currently grappling with a substantial $6.2 billion budget deficit in its Medicaid program, jeopardizing healthcare coverage for some of the 15 million residents who rely on the service, including immigrants. Democratic Governor Gavin Newsom and the state’s lawmakers are now faced with the challenge of reassessing future coverage plans.
A year ago, California ambitiously expanded its Medicaid program to provide free healthcare to all low-income adults, irrespective of their immigration status. However, the costs have exceeded initial projections significantly. California is also on high alert regarding potential Republican moves in Congress that aim to reduce Medicaid funding, which could threaten coverage for countless residents. The state currently offers free healthcare to over a third of its 39 million citizens.
The expansion of Medicaid coverage to immigrant adults is a partial contributor to the funding gap. Since 2015, California has progressively extended benefits to various groups, including low-income children without legal status, young adults, and those over 50. The latest expansion covers adults between 26 to 49 years. This effort has resulted in a $2.7 billion shortfall due to underestimated service enrollments, as the state only had a limited timeline to create budget projections last year.
While the number of enrollees under the recent expansion hasn’t been disclosed, last year’s estimates predicted approximately 700,000 undocumented immigrants in California would receive comprehensive healthcare. Additionally, factors such as a $540 million surge in pharmacy costs and a $1.1 billion increase due to various reasons, like higher enrollment among older residents, have strained the budget further. In Illinois, rising costs have led to proposed cuts in coverage for immigrant residents.
To address the financial shortfall, Newsom’s administration recently procured a $3.44 billion loan—the maximum permissible under state law—from the general fund for immediate payments. The Department of Health Care Services has communicated the need for an additional $2.8 billion through June, pending legislative approval in April.
Amidst these challenges, California is considering ending pandemic-era policies that prevented the disenrollment of Medicaid recipients. However, in the face of political pressure, Newsom has reaffirmed his commitment to maintaining coverage expansion.
Newsom, along with Democratic leadership, remains adamant about safeguarding benefits for immigrants despite financial constraints. This stance, however, has faced criticism from Republican lawmakers, who question the fiscal handling by state Democrats.
Furthermore, the state’s budget dilemma could escalate if Congress moves forward with plans to cut Medicaid funding. Any reductions could force California to either curtail coverage or seek alternative funding solutions, such as tax increases. The threat of federal funding cuts remains a significant concern, as over half of California’s Medicaid finances depend on federal allocations, amounting to approximately $112.1 billion for the next fiscal year. However, these federal funds do not encompass costs for preventive care for undocumented immigrants.
