California Borrows $3.4 Billion for Medicaid Overrun as Congress Eyes Steep Cuts

California’s Medicaid program has borrowed $3.4 billion from the state’s normal fund — and can doubtless 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 important funds to well being care suppliers in Medi-Cal, the state’s model of Medicaid. In latest months, Gov. Gavin Newsom’s administration has warned of skyrocketing well being care prices, together with larger 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 via the top of the month. He declined to specify the full of this system’s potential shortfall. Nevertheless, a doc circulated by state Senate leaders warns that further funding could also be wanted to cowl bills via June 30, the top of the fiscal yr.

The price overrun provides a brand new layer of problem 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 purple 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 objective of offering “common protection” for Californians. In latest testimony, nevertheless, finance workers instructed legislators that well being advantages prolonged to all income-eligible immigrants with out authorized standing are projected to value roughly $9.5 billion, of which $8.4 billion will come from the overall fund.

Republicans known as for contemporary scrutiny of the state’s determination 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 value 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 growth for immigrants.

“Well being care prices are influenced by many components together with pharmaceuticals, hospital prices, and extra,” mentioned Rachel Linn Gish, a spokesperson for Well being Entry California, a shopper well being advocacy group.

In accordance with a fall replace from the Division of Well being Care Companies, Medi-Cal spending grew on account of 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 an extra $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 companies.

“There are powerful decisions forward, and Meeting Democrats will intently study any proposal from the Governor,” he mentioned in an announcement. “However let’s be clear: We is not going to roll over and go away our immigrants behind.”

Senate leaders mentioned they have been trying intently on the state’s estimated prices and caseloads and would suggest value containment measures as a part of their finances proposal within the coming weeks.

Scott Graves, finances director on the California Price range & Coverage Heart, 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 towards its normal fund when revenues from a state supplier tax have been delayed. Previous to that, Division of Finance officers mentioned, California took out an identical mortgage in 2018 for $830 million.

“The truth is all of those are simply estimates, particularly with a really difficult program like Medi-Cal,” Graves mentioned, noting that $3.4 billion is roughly 2% of the state’s total Medi-Cal finances. “It looks like 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 may 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 largest 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 companies.

They cautioned that some short-term value will increase could possibly be pushed by newly eligible residents searching for long-delayed care, which may degree off in coming years. Nevertheless, some acknowledge tough choices forward.

“We undoubtedly have to make sure that those that are our most weak — our youngsters, these with continual circumstances — proceed to have some kind 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 trustworthy 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.