California Faces Medi-Cal Reckoning Amid Rising Costs and Expected Federal Cuts
As California approaches the November gubernatorial election, the state’s massive Medi-Cal program faces a severe financial reckoning after enrollment surged to cover 13.6 million residents—representing roughly one in three Californians—with spending ballooning from $50 billion a year to $222 billion since 2010, latimes.com reported.
Borrowing Billions to Sustain the Safety Net
In March 2025, California ran out of Medicaid funds to pay doctors and hospitals, forcing the state to borrow $3.4 billion to keep the program afloat. A spokesperson for Gov. Gavin Newsom insisted the move was nothing new, noting that the state had taken out internal, short-term loans on several prior occasions to sustain its healthcare program for poor and disabled people. However, the unprecedented maneuver came a few months later when Newsom and Democratic state lawmakers agreed to stretch the repayment of that debt—which had grown to $4.4 billion—over 10 years rather than paying it back later in the same year, latimes.com reported. Republican state lawmakers criticized the decision in a memo, accusing Democrats of trying to paper over a structural deficit and leaving future governors to clean up the mess.
Federal Spending Cuts Threaten California Medicaid Funding
Rising healthcare costs and aggressive state-led expansions are colliding with impending federal policy changes. Congressional Republicans’ One Big Beautiful Bill Act—which Newsom has dubbed President Trump’s Big Ugly Bill—is expected to slash federal Medicaid spending by more than $900 billion over the next decade. The federal legislation introduces strict work requirements and curbs the use of healthcare provider taxes that states have historically used to maximize federal funding. California spends more on Medicaid than New York and Texas combined, magnifying the state’s vulnerability to these federal rollbacks.
The state’s two gubernatorial candidates diverge sharply on how to handle the impending fiscal cliff. Republican Steve Hilton, a former Fox News commentator, aims to pare back Medi-Cal eligibility and end coverage for immigrants without legal status, describing that specific benefit as wildly unsustainable. Conversely, Democrat Xavier Becerra has pledged to protect Californians from massive federal cuts while hunting down and eliminating billions in administrative waste.
Meanwhile, the human toll of the tightening safety net is already manifesting on the ground. At Martin Luther King Jr. Community Hospital in Los Angeles, the facility treats five times the patients it was designed to handle, with 80% of patients either uninsured or enrolled in Medi-Cal. UC Berkeley Labor Center and UCLA Center for Health Policy Research estimates indicate that more than 2 million Californians under age 65 could lose health coverage over a four-year period due to the combined state and federal policy shifts, with at least 730,000 residents already disenrolled since June 2025.
Who Will Inherit the Multibillion-Dollar Deficit
With Newsom term-limited, neither gubernatorial contender has detailed comprehensive financial plans to bridge the tens of billions of dollars the state will likely need simply to maintain the status quo of its healthcare expansion. Jennifer Kent, who oversaw Medi-Cal under former Gov. Jerry Brown, warned that every expanded population and non-mandated benefit carries heavy fiscal consequences. As state agencies scramble to automate new federal work-requirement verifications before upcoming fee structures take effect, the next administration will decide whether to raise fresh tax revenue, enact deeper benefit cuts, or pursue a combination of both.