A quiet shift in Medicaid spending has allowed California to use federal funds — drawn from all taxpayers — to support healthcare coverage for illegal immigrants. Under Gov. Gavin Newsom, the Medi-Cal program has expanded to include roughly 1.6 million undocumented individuals, despite clear federal prohibitions.
California’s strategy rests on a loophole involving provider taxes. By placing additional taxes on Medicaid insurers and inflating the cost of health services, the state qualifies for larger matching payments from the federal government. These higher payments are then sent back to California, giving the state more money to spend on services Washington never agreed to fund.
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
Health policy researchers say this cycle results in billions of dollars being redirected from the national budget. According to a joint study by EPIC and the Paragon Health Institute, California may receive more than $19 billion in federal funds between 2023 and 2026 without contributing real matching funds of its own.
Medi-Cal now has more than 15 million enrollees. State officials estimate over 10% are illegal immigrants. The California Department of Health Care Services has stated that immigration status is not a factor in eligibility.
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
Newsom’s budget documents show the cost of providing services to that group alone has risen to $9.5 billion. To cover it, the administration has already requested billions in loans — first $3.4 billion, then another $2.8 billion — in a matter of weeks.
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
The Trump administration’s proposed budget would seek to reduce the federal deficit by cutting spending tied to fraud and abuse. Lawmakers are exploring whether changes to the Medicaid matching structure could help stop California and other states from using the loophole.
California Republicans are pressing Newsom for answers. They argue legal residents are facing delays and denials while those in the country illegally are receiving full coverage. Former Gov. Jerry Brown previously rejected similar expansions due to concerns about cost.
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
In Oregon, officials have followed a similar path, using state Medicaid dollars to fund coverage for illegal immigrants, though not at California’s scale.
