In California, an estimated 1.8 million residents, or about 5% of the population, are immigrants without legal permission to live in the country. They perform many jobs native residents would never do. The financial challenge facing Sacramento is that these immigrants also comprise nearly a quarter of the state general fund cost of health care via California’s program for low-income residents, Medi-Cal.
The state has made steady progress over the last nine years to provide Medi-Cal coverage to more and more of this population. In 2024, all these residents became eligible for Medi-Cal. This is a signature achievement for Gov. Gavin Newsom and legislative Democrats. But it may be short-lived.
An explosion in Medi-Cal costs is now testing this program to its limits as President Donald Trump and the Republican-led Congress have yet to make huge budget trims necessary to partially pay for an expected cut in taxes. Cuts to the federal Medicaid program (known as Medi-Cal in the state) are a near certainty. Here in Sacramento, where lawmakers are a couple months away from facing their budget deadline for the 2025-26 fiscal year, something is about to give.
“It’s impossible to know at this point just who could be impacted,” Kristof Stremikis, director of market analysis and insight for the California Health Care Foundation, told The Bee. “What is clear is that reducing revenue requires covering fewer people, reducing benefits or paying health care providers less.”
Sacramento’s Republican delegation has been seizing on this run-up in Medi-Cal costs and blaming it on the Democrats’ decision to cover the immigrants who lack legal permission. Analysts point to a number of factors.
High costs
But there is no getting around the disproportionate cost of covering these residents to the state. That is because the federal government, which provides more than 60% of the overall money for this program, does not cover immigrants in the country illegally. California has stepped in to pay these costs with its own money. In health-speak, these Californians have an “unsatisfactory immigration status.”
Medi-Cal is bleeding so much money that the Newsom administration has had to seek an immediate infusion of more than $3 billion simply to pay the bills for this fiscal year. Michelle Baass, director of the California Department of Health Services, recently told legislators that rising costs are due to “higher-than-anticipated enrollment (including the undocumented population) and increased pharmacy costs.” The total program is estimated to cost more than $188 billion to cover about 15 million Californians, about $42 billion coming from the state general fund.
The health coverage of immigrants lack legal status does not feel like a winning wedge issue for California’s Republican leadership. Polls have shown that more than 60% support this coverage, with that percentage rising over time.
Its popularity undoubtedly will not be lost on the governor, as he is on an uncharted political journey away from the “toxic” Democrat brand as he takes new positions, such as opposing transgender females in athletic competition. Newsom simply can’t run away from himself. He was the candidate for governor who promised universal health care for all Californians through a centralized, single-payer system. Health care is such a core value; no podcast from Marin County could hope to change that.
Too successful
Medi-Cal’s financial problem is due to its popularity, namely, more Californians signed up for it this year than expected.
“It’s very difficult to project what the caseload level is going to be,” said Jason Constantouros, a principal fiscal and policy analyst for the California Legislative Analyst’s Office, the Legislature’s nonpartisan think tank.
If there is a single population to “blame” for the run-up in Medi-Cal costs, it may be seniors. California has been particularly generous in allowing low-income seniors with considerable assets to still qualify for the program, Constantouros said. That’s yet another population that may be a target for cuts.
Eliminating Medi-Cal coverage for any Californian won’t make health care costs go away. It will shift scheduled medical visits in offices to emergency rooms, where hospitals by law must provide that care regardless of insurance. And one way or another, a lot of those costs get passed onto the same taxpaying consumers.
Undocumented immigrants don’t deserve a target on their backs this budget season any more than the rest of the state’s residents. Personally, I’d prefer that state dollars go to health care than to rebates for electric vehicles, as promised by the governor if Trump ends the federal program.
But this feels like the most unpredictable budget season facing Sacramento in a long time. The recent drop in the stock market, caused by Trump’s spiking of tariffs across the globe, only makes the revenue side of the ledger even bleaker in Sacramento. It’s going to test the fiscal values of Democrats and what they stand for most.
Tom Philp is a columnist for the Sacramento Bee. ©2025 The Sacramento Bee. Distributed by Tribune Content Agency.
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