Gov. Newsom Signs Bill Closing Remainder Of The $6.2 Billion Medi-Cal Budget Deficit

Governor Gavin Newsom signed new legislation on Monday that pays off a $2.8 billion budgetary shortfall for Medi-Cal, California’s Medicare program, allowing it to run through the end of the fiscal year at the end of June.

While the supplemental budget bill, which was approved by the legislature late last week, now keeps Medi-Cal alive for a few months longer, it is not out of the woods yet. Medi-Cal faced a $6.2 billion deficit going into March, which was solved by a $3.4 billion loan from the general fund last month by Newsom and Monday’s budgetary bill. However, come next fiscal year, a new, likely higher figure for Medi-Cal is expected, meaning that the state could have to face a similar situation next year.

As the Globe has previously reported, the main reason for Medi-Cal’s massive budget hole is because of the state opting to include all illegal immigrants under Medi-Cal. While Medi-Cal was expanded to cover undocumented children in 2015 and undocumented seniors 50 and older in 2022, the program being expanded to cover all illegal immigrants last year ballooned the cost of Medi-Cal for all illegal immigrants under the program to $9.5 billion. The state received more than the intended number of recipients, causing a $6.2 billion deficit to open up. How much more? $2.7 billion more than the state budgeted for illegal immigrants signing on.

As the state noted on Monday, other factors did help cause the Medi-Cal deficit. Rising pharmacy costs amounted to $540 million of the deficit, with a larger number of older Californians signing on brought on another $1.1 billion. The approval of Prop 35 last year also eliminated $1 billion in funding thanks to the strict rules over using the managed care organization tax that it put into place. However, the overwhelming lion’s share of the costs fell to the illegal immigrant expansion.

Medi-Cal deficit

Last month, Democratic lawmakers in Sacramento turned down the notion that illegal immigrants should just be cut out of Medi-Cal, calling them “vulnerable Californian communities”. Instead they called out the federal government for their own mismanagement – despite California’s mismanagement cause a $6.2 billion deficit.

“While some have sought to politicize this loan request, and they see it as an opening to attack the most vulnerable Californian communities, we should all be clear about what the greatest threat to California’s ability to provide health care really is,” said Assemblywoman Dawn Addis (D-Morro Bay) in a committee hearing on the supplemental bill last month when asked about removing illegal immigrants from Medi-Cal. “It is our own federal government that appears fixated on rectifying years of its own mismanagement on the backs of those with the least economic means who are seniors, people with disabilities and others in our community.”

Newsom added earlier this month that he wouldn’t remove them from Medi-Cal either.

“Rolling back the coverage expansion is not on my docket,” explained Newsom in a recent podcast.

Republicans in the Assembly and Senate rallied against the Medi-Cal expansions, with some calling for at least some roll backs, while others called for a full audit of Medi-Cal to highlight bad accounting practices

For the 2025-2026 budget, Newsom has said that he wants an additional $4.4 billion in state Medi-Cal funding, despite the state sill being billions of dollars in the red on the state budget. That $4.4 billion constitutes an 11.4% increase. While the state has contended that most of that funding is to go towards new Prop 35 obligations, the massive number of illegal immigrants in the system is likely the main catalyst for the $4.4 billion ask. While the Medi-Cal hole is solved for now, everything from July on is still up in the air.

The governor’s office did not respond to our request for a comment, but we will update the article when they do.