California’s growing Medicaid budget is drawing national attention — not just for the price tag but for where the money is coming from. Under Gov. Gavin Newsom, the state has added over 1.6 million illegal immigrants to its Medi-Cal health insurance program, with much of the cost being reimbursed by taxpayers outside California.
Newsom’s administration has leaned on the federal match system that splits Medicaid costs between states and Washington. The more a state spends, the more money it receives. California, by raising its own Medi-Cal spending, has unlocked billions in federal reimbursements — funds that come from taxpayers in all 50 states.
Gavin Newsom is literally bankrupting Medicaid in California. The annual cost of benefits for illegal immigrants has tripled to $9.5 billion, forcing Newsom to take out an emergency loan to cover this month's payments.
This is one of the biggest scandals in state history. pic.twitter.com/EqdcPQpK7s
— Kevin Kiley (@KevinKileyCA) March 25, 2025
The latest figures show the cost of covering illegal immigrants jumped to $9.5 billion, far above the $6.5 billion previously projected. To keep the program running, the Newsom administration recently requested $6.2 billion in loans. That includes a $3.4 billion request, followed shortly by another $2.8 billion.
So, business as usual? @GavinNewsom was caught trying to make U.S. taxpayers fund free California healthcare for Illegals.
As a result, California taxpayers must pay feds $53M over 'improperly' claimed reimbursements for noncitizens.
Nice Newscum! https://t.co/yxlJlGRHO4 https://t.co/IiFuTHu5cy
— Tony Seruga (@TonySeruga) March 25, 2025
According to research from the Economic Policy Innovation Center and the Paragon Health Institute, California’s methods for obtaining those funds amount to a financial shell game.
By taxing insurers and inflating the state’s Medi-Cal costs, California qualifies for more federal money. Insurers are then reimbursed through higher state-approved rates, effectively neutralizing their tax burden while leaving federal taxpayers holding the bill.
Rep. Roy on @MariaBartiromo on Medicaid reform: "It's really critical that people understand how Medicaid has been scammed by the Democrats, particularly in California, to give money to able-bodied and to give money to illegal aliens rather than the people for whom it was… pic.twitter.com/vDdsZFV3rE
— Rep. Chip Roy Press Office (@RepChipRoy) March 14, 2025
Federal law prohibits illegal immigrants from enrolling in Medicaid. But California has sidestepped that requirement by operating Medi-Cal as if immigration status doesn’t apply. While the state claims to fund the program itself, documents show the cost is being passed back to Washington through creative financial maneuvers.
New: Gov. Newsom’s Dept. of Finance notified CALeg it needs a $3.44 billion loan for Medi-Cal.
Letter doesn’t say it, but state leaders expanded Medi-Cal last year to provide health insurance to undocumented people.
The administration underestimated how much that would cost. pic.twitter.com/EoKEGsh5VC
— Ashley Zavala (@ZavalaA) March 13, 2025
Republican lawmakers have criticized the tactic and are reviewing options to limit how states can exploit the federal matching system. Analysts say tightening the loophole could save hundreds of billions and limit California’s ability to draw excess federal funds for programs that violate federal law.
Newsom has acknowledged the cost of illegal immigrant enrollment is contributing to budget problems but argued that other states face similar issues. Oregon has also extended state Medicaid benefits to illegal immigrants.
