California Budget Crisis Forces Newsom to Scale Back Healthcare for Illegal Immigrants


California Budget Crisis Forces Newsom to Scale Back Healthcare for Illegal Immigrants

In a significant policy reversal, California Governor Gavin Newsom has proposed freezing enrollment of illegal immigrants in the state's Medi-Cal program beginning in 2026 and implementing a $100 monthly premium for those already enrolled starting in 2027. This decision comes as California faces a growing budget deficit that could reach $73 billion, with the state's ambitious healthcare expansion costing billions more than initially projected.

The Evolving Expansion of Healthcare for Illegal Immigrants

California has gradually expanded Medi-Cal coverage to illegal immigrants over the past decade through a series of legislative actions:

  • In 2015, Senate Bill 4 (SB 4) extended full-scope Medi-Cal coverage to illegal immigrant children under 19 years old
  • In 2019, Senate Bill 104 (SB 104) expanded coverage to young adults aged 19-25, at an initial projected cost of $98 million annually
  • In 2022, coverage was extended to adults aged 50 and above
  • On January 1, 2024, California became the first state to offer full Medi-Cal benefits to all income-eligible illegal immigrants regardless of age

The January 2024 expansion, which added approximately 700,000 illegal immigrants aged 26-49 to the program, has significantly contributed to the state's current budget crisis. According to state officials, the total cost of providing Medi-Cal to illegal immigrants has ballooned to approximately $8.5 billion annually from the state's general fund.

Budget Impact Exceeds Projections

The fiscal impact has far exceeded initial projections. Michelle Baass, Director of the California Department of Health Care Services, told legislators in March 2025 that several factors contributed to the higher-than-anticipated spending, including increased pharmacy costs and enrollment growth that surpassed projections.

"These changes were unprecedented, and all happened at once," Baass testified during a budget hearing, acknowledging that the state had only about one month of data regarding new policies before it had to make budget projections.

The administration now admits it is spending $2.7 billion more than planned on coverage expansions for immigrants without legal status. This has contributed to a $6.2 billion Medi-Cal shortfall that required the administration to borrow $3.4 billion from the state's general fund to cover unexpected cost increases.

Political Division Over Healthcare Priorities

The rising costs have intensified political divisions in Sacramento. Senate Minority Leader Brian Jones has been particularly vocal in his criticism: "If we weren't spending eight-and-a-half billion dollars on illegal immigrants, we wouldn't need to borrow $3.4 billion to cover the difference."

Jones has urged the governor to enact an 18-month freeze on Medi-Cal expansion for illegal immigrants aged 26-49, which he claims would save over $4 billion as the state struggles with its deficit.

Democrats have defended the expansion, with Assembly Speaker Robert Rivas stating, "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."

Democratic legislators point to a July 2024 study by the California Budget & Policy Center showing illegal immigrants contribute approximately $8.5 billion in state and local taxes annually, roughly equivalent to what the state spends on their healthcare.

Federal Constraints and New Legislation

Federal law prohibits states from using federal Medicaid funds to cover illegal immigrants except for emergency services. California has circumvented this restriction by using state funds through its Medi-Cal program.

However, this practice has drawn increased scrutiny from federal lawmakers. In January 2024, Republican Senators Bill Cassidy, Roger Wicker, and others introduced the "Protect Medicaid Act," which would prohibit federal taxpayer money from being spent to administer state Medicaid benefits to non-citizens.

Similarly, Representative Kevin Kiley introduced the "No Medicaid for Illegal Immigrants Act," which would prohibit states from using both federal and state Medicaid funds to provide services for illegal immigrants, with an exception for emergency services.

Newsom's Changing Position

Governor Newsom's recent proposal marks a striking reversal from his previous stance. In March, he had suggested to reporters he was not considering rolling back health benefits for illegal immigrants, repeatedly defending the expansion as a long-term cost-saving measure.

Now, his office estimates the changes will save the state $5.4 billion by 2028-2029. "The state must take difficult but necessary steps to ensure fiscal stability and preserve the long-term viability of Medi-Cal for all Californians," his office stated in the announcement.

The governor has attributed part of the budget shortfall to President Donald Trump's tariff policies, estimating they have cost the state $16 billion in tax revenues. California is also preparing for potential additional budget impacts if Republican lawmakers follow through with proposals to cut billions from Medicaid and penalize states that provide healthcare to illegal immigrants.

National Implications

California's experience has national implications as states consider how to balance healthcare access with fiscal sustainability. Eight states now offer some form of Medicaid or CHIP benefits to illegal immigrants, and the debate has intensified with the federal government reportedly spending over $16.2 billion on emergency healthcare in Medicaid for illegal immigrants.

As Governor Newsom opens budget negotiations with lawmakers ahead of the June deadline, it remains unclear how the Democratic-controlled Legislature will respond to his plan to freeze Medi-Cal enrollment for illegal immigrants. What is clear is that California's budget challenges are forcing difficult recalibrations of even its most ambitious progressive policies.

Sources:

  1. California Legislature. (2015). "Senate Bill 4 (Lara): Medi-Cal: eligibility." Legislative Information. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB4

  2. California Legislature. (2019). "Senate Bill 104: Committee on Budget and Fiscal Review." Legislative Information. https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB104

  3. Nguyễn, T. (2025, May). "Gov. Newsom proposes pausing expansion of health care to low-income immigrants without legal status." NBC San Diego. https://www.nbcsandiego.com/news/local/gov-newsom-proposes-pausing-expansion-of-health-care-to-low-income-immigrants-without-legal-status/3581922/

  4. California Department of Health Care Services. (2025, March). "Medi-Cal Budget Update." Legislative Budget Hearing Testimony. https://www.dhcs.ca.gov

  5. California State Senate Republican Caucus. (2025, March). "Leader Jones Urges Governor to Save over $4 Billion by Freezing Undocumented Immigrant Medi-Cal Expansion." https://sr40.senate.ca.gov/content/leader-jones-urges-governor-save-over-4-billion-freezing-undocumented-immigrant-medi-cal

  6. California Budget & Policy Center. (2024, July). "New Study: Undocumented Immigrants Contribute $8.5 Billion in California Taxes a Year." https://calbudgetcenter.org/news/new-study-undocumented-immigrants-contribute-8-5-billion-in-california-taxes-a-year/

  7. U.S. Senate. (2024, January). "Protect Medicaid Act." Congressional Record. https://www.cassidy.senate.gov/newsroom/press-releases/icymi-cassidy-introduces-bill-to-stop-federal-tax-dollars-from-going-to-health-care-for-illegal-immigrants/

  8. U.S. House of Representatives. (2025, February). "No Medicaid for Illegal Immigrants Act." Congressional Record. https://kiley.house.gov/posts/representative-kiley-introduces-the-no-medicaid-for-illegal-immigrants-act

  9. Centers for Medicare & Medicaid Services. (2024). "Federal Medicaid Guidelines Prohibiting Coverage of Illegal Immigrants." Department of Health and Human Services. https://www.cms.gov

  10. California Legislative Analyst's Office. (2025, May). "Budget Analysis: Medi-Cal Expansion Costs." https://lao.ca.gov

    California governor, Gavin Newsom, proposes pausing expansion of health care to low-income immigrants – NBC 7 San Diego

 

Sidebar: California Magnet: Healthcare Benefits for Immigrants in Adjacent States and Mexico

Neighboring U.S. States

Nevada

Nevada provides limited healthcare options for illegal immigrants compared to California. The state offers emergency Medicaid services as required by federal law, but has not expanded its Medicaid program to cover the undocumented population. Pregnant women regardless of immigration status can receive prenatal care through the Nevada Check Up program, and children may receive vaccines through public health initiatives. However, comprehensive coverage similar to California's Medi-Cal is not available to illegal immigrants in Nevada.

Oregon

Oregon has implemented more generous policies than most states but remains less expansive than California. Through the Cover All Kids program, Oregon provides full health coverage to all children under 19 regardless of immigration status. In 2022, the state launched "Cover All People," which extends Oregon Health Plan (OHP) benefits to adults aged 19-26 and those 55 and older who would qualify for Medicaid except for their immigration status. Unlike California, Oregon has not yet extended coverage to all age groups of undocumented immigrants.

Arizona

Arizona maintains one of the strictest approaches to immigrant healthcare in the region. The state offers only federally-mandated emergency medical services to undocumented immigrants. In 2021, Arizona enacted legislation explicitly prohibiting state or local funds from being used to provide non-emergency healthcare to individuals who cannot verify lawful presence. The state does maintain the Emergency Services Program (ESP) for qualifying low-income immigrants needing emergency care.

Mexico's Healthcare System for Immigrants and Returning Citizens

INSABI (Instituto de Salud para el Bienestar)

Mexico's Institute of Health for Wellbeing (INSABI), which replaced the previous Seguro Popular program in 2020, provides basic healthcare services to all individuals in Mexico regardless of citizenship or immigration status. This program offers free healthcare services at public facilities for those without social security coverage, including returning Mexican nationals and foreign migrants. Services include preventive care, treatment for common illnesses, and management of certain chronic conditions.

IMSS (Instituto Mexicano del Seguro Social)

For documented immigrants working legally in Mexico, the Mexican Social Security Institute (IMSS) provides comprehensive healthcare coverage through employer contributions. This system covers medical, surgical, pharmaceutical, and hospital care for enrolled workers and their families.

Healthcare for Deportees and Return Migrants

Mexico has established specialized programs for citizens returning from the United States, including those deported. The Somos Mexicanos program helps returning nationals access health services and provides guidance on integrating into the Mexican healthcare system. Additionally, the Ventanillas de Salud (Health Windows) program in Mexican consulates across the U.S. provides health information and screenings to Mexican nationals before they return.

Comparative Analysis

California's comprehensive Medi-Cal coverage for illegal immigrants exceeds what's offered in any adjacent U.S. state or in Mexico. While Oregon has moved toward greater inclusion, its program remains limited to specific age groups. Mexico offers universal access to basic services but with significantly less comprehensive coverage than California's Medi-Cal program.

The disparity in healthcare benefits creates what policy analysts describe as a "magnet effect," with California's generous benefits potentially attracting immigrants from both neighboring states and Mexico. This dynamic contributes to California's higher-than-expected enrollment numbers and budget pressures, as immigrants may strategically relocate to access better healthcare options.

However, studies on migration patterns suggest that healthcare benefits alone rarely drive migration decisions, with factors such as employment opportunities, family reunification, and safety from violence typically playing more significant roles in immigration choices.

Sources for Healthcare Benefits for Immigrants in Adjacent States and Mexico

  1. Kaiser Family Foundation. (2024, January 15). "Key Facts on Health Coverage of Immigrants." Kaiser Family Foundation. https://www.kff.org/racial-equity-and-health-policy/fact-sheet/key-facts-on-health-coverage-of-immigrants/

  2. National Conference of State Legislatures. (2024, March 1). "Immigrant Access to Health Care." NCSL. https://www.ncsl.org/health/immigrant-access-to-health-care

  3. Oregon Health Authority. (2023, July 1). "Cover All People." Oregon.gov. https://www.oregon.gov/oha/hsd/ohp/pages/cover-all-people.aspx

  4. Arizona State Legislature. (2021, April 15). "Senate Bill 1377: Healthcare Services; Illegal Immigrants." Azleg.gov. https://www.azleg.gov/legtext/55leg/1r/bills/sb1377p.htm

  5. Secretaría de Salud Mexico. (2024, February). "Instituto de Salud para el Bienestar (INSABI)." Gob.mx. https://www.gob.mx/insabi

  6. Instituto Mexicano del Seguro Social. (2023, December). "Derechohabientes Extranjeros." IMSS. http://www.imss.gob.mx/tramites/imss02008

  7. California Legislative Analyst's Office. (2025, February). "Medi-Cal Eligibility for Undocumented Immigrants: Costs and Implementation." LAO.gov. https://lao.ca.gov/Publications/Report/4648

  8. Commonwealth Fund. (2024, February 8). "States Expand Access to Coverage for Immigrant Populations." Commonwealth Fund. https://www.commonwealthfund.org/blog/2024/states-expand-access-affordable-private-coverage-immigrant-populations

  9. Nevada Department of Health and Human Services. (2024, January). "Nevada Check Up Eligibility." DHHS.nv.gov. https://dhhs.nv.gov/Programs/CHA/MH/Nevada_Check_Up_Eligibility/

  10. Secretaría de Relaciones Exteriores. (2023, October). "Programa Somos Mexicanos: Guía para Repatriados." Gob.mx. https://www.gob.mx/sre/acciones-y-programas/programa-somos-mexicanos

  11. Center on Budget and Policy Priorities. (2024, February 1). "States Are Providing Affordable Health Coverage to People Barred From Certain Health Programs Due to Immigration Status." CBPP.org. https://www.cbpp.org/research/immigration/states-are-providing-affordable-health-coverage-to-people-barred-from-certain

  12. Migration Policy Institute. (2024, April). "Health Care Access for Immigrants: Policies and Implications." Migrationpolicy.org. https://www.migrationpolicy.org/research/immigrant-health-care-access-policies

  13. UCLA Center for Health Policy Research. (2023, November). "Health of California Immigrants." Healthpolicy.ucla.edu. https://healthpolicy.ucla.edu/publications/search/pages/detail.aspx?PubID=2352

  14. United States-Mexico Border Health Commission. (2023, August). "Binational Health Initiatives and Healthcare Access." HHS.gov. https://www.hhs.gov/about/agencies/oga/about-oga/what-we-do/border-health-commission/index.html

  15. Fundación BBVA. (2024, January). "El Sistema de Salud Mexicano: Acceso para Migrantes." BBVA Research. https://www.bbvaresearch.com/publicaciones/mexico-sistema-salud-y-migrantes/

 


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