California’s $6 Billion Band-Aid: The Cost of Covering Illegal Immigrants
The Medi-Cal Budget Crisis
Last week it was announced that Governor Gavin Newsom is seeking a $3.44 billion loan from California’s general fund, as well as an immediate additional $2.8 billion in funding, to cover over-budget expenses incurred by our state’s Medi-Cal program.[1] Why is the program over budget and underfunded? There are a few factors that have gone into it, but the main reason comes down to the fact that the state expanded Medi-Cal to include coverage for illegal immigrants, and they underestimated how many of these participants would sign up to the program.[2]
Let’s compare the numbers. In 2020, the Legislative Analyst’s Office estimated 1.15 million undocumented immigrants would enroll in Medi-Cal. Today it is estimated that there are 2.74 million undocumented immigrants in California, and those estimates are conservative and actually admit that the number is most likely much higher. While it’s fair to assume that not every illegal immigrant will enroll in Medi-Cal, it’s estimated that there are at least 700,000 more enrolled than were anticipated, and I think that it’s fair to say it’s most likely higher than that as well. Then, in terms of cost, it was also estimated that expanding the program to illegal immigrants would cost the state $3 billion; now, the actual number has ballooned to $9.5 billion for 2024.[3]
Can you even believe that? Let me repeat: our state expanded healthcare on the basis that it would cost an additional $3 billion. Now, that alone is ridiculous, but that’s not the worst part. Because then, the actual cost exceeded the budgeted cost by 300%! I can’t even fathom that.
Let me just pause here for a minute, because when it comes to amounts like 9 billion dollars, that’s really hard to grasp. I really can’t grasp 1 billion dollars, it’s just so far outside of the amount of money I will ever interact with in life. But we do need to try. We need to really contemplate the fact that this money, these billions of dollars, are the collections of the tax dollars of millions of Californians across the state. It’s March, so it’s tax season right now, so you’re probably freshly familiar with the amount of taxes you paid this year and how much you either overpaid or you owe. You know firsthand that every pay period, a percentage of your income is paid directly to the state. That money doesn’t just vanish. That money is used by our government to pay for services – both on a local and state level. This means that if you pay $10,000 per year in state taxes, that $10,000 goes toward funding specific policy priorities outlined in the annual budget. Your money, YOUR money, no matter how big or small of a percentage is taken from you by the state, your money will be used to fund the line items in the budget. So, even large line items that use billions of dollars are just being funded by millions of small contributions made by faithful taxpayers.
When we consider this as the reality, it becomes completely unacceptable that the government would overblow a budget by 300%, for any reason. There is no reason that could be given that makes that gross mismanagement acceptable. Let’s make it even more practical. Let’s say you want to do a kitchen remodel. You want to upgrade your countertops, paint the cabinets, bring in brand new appliances, and so on. So, you go out and find a contractor, you bring him in to inspect your kitchen and to explain the vision to him and ask for a quote. He tells you the whole job will cost $5,000, so you decide to hire him because that is within your budget, and you believe it’s a reasonable amount. Now, say that he smashes up your kitchen, he paints the cabinets the wrong color, he buys the wrong appliances, he just completely goes against the vision that he clearly said he would make happen. But the worst part is, he says the total cost actually came out to $15,000, not the $5,000 originally promised. Would that be acceptable to you? Would you pay for that? Or would you demand to know what happened, where your money went, and end up in court against the guy to get your money back? I would guess it would NOT be acceptable to you, and you would want answers.
This is precisely what the California government has done with our tax dollars. They’ve smashed up our metaphorical kitchen and spent 3 times the money we agreed upon, and they must be answerable for their actions.
The Band-Aid Fix
Now, of course Gavin Newsom and his administration are not going to give an answer for how they have mismanaged the Medi-Cal budget, because it would incriminate them, or at the very least prove them as incompetent and ineffective leaders. So, the alternative is that now Newsom has turned to begging for more of our money to fill in the gaps. He specifically has requested a loan from the general fund, which has already been approved.
How does that work? What does it mean to take a loan from a fund and where does the money come from? This is an allowed practice under Section 16531.1 of the Government Code, which was enacted over 25 years ago.[4] The Department of Finance approved Newsom’s request for the $3.44 billion loan, and what this means is that the money will be shifted out of the general fund and into the Medical Providers Interim Payment Fund to pay the excess expenses and keep the Medi-Cal program running. The state budget for the next year will need to be amended to then pay off the loan.[5]
The only options available to the administration to make up the difference are to either raise more revenue – which would be done through increasing taxes, to eliminate the eligibility additions to the Medi-Cal program that led to this budget shortfall in the first place, or to cut funds to other services in the budget from other departments.[6] That’s it, those are the only options, because ultimately the issue is that the state government is – to no one’s surprise – spending more money than it has, so it either has to make more money or cut more programs, which both hurt Californians.
Which brings us to the impacts of this budget shortfall on our state. The most obvious result is that more money spent in one place means less money spent in another. This is a point I’ve made before, but it’s worth repeating. $9 billion spent on healthcare for illegal immigrants, means $9 billion not spent on funding fire departments, police departments, parks, transportation – you know, things that actually improve your life and that you care about. This budget shortfall also means that the government will just look to raise the budget in the future and increase their revenues to keep up with the rising costs – which means higher taxes for you or less tax breaks – rather than working to shrink the budget and lower your taxes, putting your own income back in your bank account while stewarding your taxpayer dollars wisely. And then, using General Fund loans for recurring costs like Medi-Cal raises concerns about long-term sustainability of our state budget. It may signal structural imbalances in Medi-Cal funding that could require permanent solutions, such as federal aid adjustments or policy changes. So, to summarize, while this loan ensures that Medi-Cal services keep running, it limits budgetary flexibility and highlights the need for better fiscal planning on part of our government leaders to avoid the adverse effects on other state-funded programs and services, and ultimately on the taxpayer. In other words, this loan is a band aid fix that won’t stop the bleeding underneath, and it’s ridiculous to put it mildly.
Should California Pay for Illegal Immigrants’ Healthcare?!
If the $3 billion loan requested by our Governor is a band aid fix, then what is the actual root cause of the Medi-Cal shortfall? Well, as I mentioned earlier, the reason for the drastic increase in the Medi-Cal costs is mostly due to the high number of enrollees into the program that came as a result of the program’s expansion to include coverage for illegal immigrants. This expansion went into effect on January 1st of 2024, and it made California the first state to fully fund comprehensive healthcare for illegal immigrants.[7] Over 700,000 illegal immigrants ages 26 to 49 became eligible for Medi-Cal as a result, flooding the system and driving up costs. This was just the final step in a program expansion that has been unfolding since 2015, when then-governor Jerry Brown first signed a law making the children of illegal immigrants eligible for Medi-Cal. It isn’t a surprise that it has continued under the Newsom regime, given he campaigned on the promise that he would establish universal healthcare in California back in 2019.[8]
To actually address the root cause of the issue would mean that our government leaders need to seriously consider rolling back the expansion of the program that has resulted in 3 times the budgeted cost. But they won’t do that, because they believe fundamentally that it is California’s responsibility to provide free healthcare to illegal immigrants in the state, regardless of how much it costs the taxpayer or rips money away from other, more valuable programs. So, the real question is: should California pay for illegal immigrants’ healthcare?
You already know that my answer to that question is unequivocally, absolutely NO, but I would love to spend the rest of our time today addressing arguments for why proponents of the policy believe we should and then giving you my response and reasons for why I believe that position is untenable and downright wrong.
Let’s start with the arguments in favor of providing free healthcare to illegal immigrants:
First, proponents argue moral obligation. This argument says that healthcare is considered a basic human right and therefore should be provided regardless of immigration status.[9] But, I would disagree with this premise entirely. A human right is something that is inherent and inalienable to all human beings, simply by virtue of their being human. They are not given by the government but belong to people at birth and are merely recognized by the government. For example, every person has a right to life. Why? Because that is literally part of being human. To be human, you are alive, and it is your human right to not be deprived of life. The government recognizes this inalienable right and works to protect it. It’s not something the government gives to people, they don’t give life, but they pass laws to uphold the dignity and sanctity of life – such as making it illegal to murder someone.
Healthcare, however, is a commodity, not a right. It is a service that is provided to people based on their needs. Healthcare isn’t something just intrinsic to people that the government protects, it is a service provided by doctors and other healthcare professionals, with no necessary intervention of the government. No one is entitled to free healthcare, in the same way that no one is entitled to buying a house. I might really want to buy a house, but if I can’t afford it, or if there are no houses in my area to buy, then my human rights haven’t been violated, it is simply a good or service that I myself am unable to purchase.
Is healthcare important? Definitely. But just because it is important doesn’t mean it’s the government’s job to provide it or that you are required to have access to it. Individuals, not the government, should be responsible for their own health, and the free market should be allowed to adjust based on basic laws of supply and demand. Unlike rights such as free speech, religious freedom, and due process, our very Constitution does not guarantee healthcare. Requiring government-funded healthcare will work to limit individual freedom by reducing choices in doctors, treatments, and insurance plans, and, as we have already seen happen, by imposing taxes and regulations to fund the system.
It really comes down to the question of if our government, both in our country and in our state, is going to become a welfare state, providing free healthcare, education, and other social services to our citizens. But while that sounds great, it comes at a cost – a financial cost which results in extremely high taxes, and a cost in quality as governmental regulation and bureaucracy stifles innovation and efficiency. So, no, I do not believe our government bears the moral obligation to provide free healthcare for everyone, illegal immigrants included; at the end of the day, you bear the responsibility for your own health and the health of your family, and that goes for citizens as well as illegal immigrants.
So then, what about the argument for the general public health benefits, like that providing healthcare to all residents, including undocumented immigrants, helps control the spread of diseases and improves overall community health?[10] I would say that again, everyone is responsible for themselves, but then beyond that, the obligation of the government to attend to public health matters extends as far as the citizens under their care. Illegal immigration is just that: illegal, which means that the first and foremost issue is to stop the illegal activities, not to spend billions of dollars improving their health conditions. The money spent on undocumented immigrants’ healthcare could be better allocated to benefit U.S. citizens and legal residents, such as by improving healthcare access for low-income Americans, funding mental health services, or addressing rural healthcare shortages.
Then there is the argument that many undocumented immigrants pay taxes and contribute to the economy, which entitles them to basic services.[11] First of all, illegal immigrants often avoid paying federal taxes, but are more likely to pay state or local taxes, so it isn’t true that they all just pay all of their required taxes – but even if they do pay state taxes, the amount they pay in is far lower than the cost of the services that they use, thus shifting the economic burden to citizens. In California, the Institute on Taxation and Economic Policy estimated that illegal immigrants paid around $8.5 billion in state and local taxes in 2022.[12] But we saw that the costs of providing free healthcare to illegal immigrants over the course of one year already overtook this amount, with costs totaling over $9 billion. If just one program already costs more than the revenue brought in by the demographic using the service, can you imagine how much higher the total cost implications are from all social services across the board? So that argument is just blatantly untrue.
Plus, people who are here legally on temporary visas or even on green cards are not allowed to use many of the social welfare benefits that they pay into through taxes. For example, green card holders are not eligible for Medicaid until five years after the point of getting their green card.[13] So, my husband is not eligible for government-funded healthcare even though he spent years and thousands of dollars to come here via the legal process, and even though he pays his taxes. Why in the world are we then arguing that illegal immigrants should be eligible if other immigrants who didn’t break the law are not eligible? That doesn’t make any sense.
At the end of the day, if you are not here through the legal means and processes, it doesn’t really matter how much you contribute to the economy or if you pay taxes. You have broken the law and are therefore not allowed to be here. If you really want to contribute to society, then you should respect the laws that order society and go through the legal process to contribute to society in the way that is required under the law.
Lastly, there is the argument that states with more expansive coverage policies for illegal immigrants show lower uninsurance rates and better health outcomes for immigrant populations.[14] Sure, of course if you provide healthcare for free then more of the population will be insured and will probably have better outcomes. But that isn’t actually an argument for why we should provide it or why we should strive toward those outcomes. The question returns to: why should our government be spending taxpayer money on improving health outcomes for a population it does not represent?
Those are my responses to common arguments for providing free healthcare for illegal immigrants, but there is more to be said about why the government absolutely should NOT provide free healthcare to illegal immigrants that need to be included.[15]
The first reason is that that federal immigration law, which regulates who can lawfully live and work in the U.S., may preempt state actions that provide public benefits to undocumented immigrants. Under the Supremacy Clause in the Constitution, federal law takes precedence over conflicting state laws. For example, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 restricts access to federal public benefits, including Medicaid, for undocumented immigrants.[16] Even though California funds its expanded Medi-Cal program with state money, opponents argue that the state’s actions could undermine federal immigration policies by incentivizing illegal immigration, therefore making it unconstitutional to do so based on the fact that federal law preempts state law.
Then there is the reality of the fiscal burden that it places on taxpayers who are forced to bear the cost of healthcare for individuals who are not legally present in the country. The healthcare system is already burdened and in need of reform, so expanding it to include people who are not even legal residents or citizens here continues to add to that burden, which as we looked at earlier in terms of cost, will pass on to legal residents in the form of taxes.
These reasons don’t even mention the fact that expanding the program seriously risks incentivizing illegal immigration. Free healthcare could potentially encourage more illegal immigration, because people know that they won’t be restricted in coming here illegally from obtaining healthcare – and not just obtaining it but getting it for free from the government. This is common sense. If someone knows they can come to California specifically and get comprehensive healthcare for free, cheaper and better than what they have access to in their home country, then why would they go through the arduous process of coming here legally?
But really, all these arguments boil down to the main point, which is that paying for healthcare for illegal immigrants is completely unfair to citizens and is yet again another example of the government placing the needs of others above the wellbeing of its own citizens.
The primary job of a country’s government is to protect and defend its citizens. This means it is unfair for taxpayers to subsidize healthcare for those who are not lawfully present, especially when many citizens or legal residents in California struggle to afford healthcare themselves. A nation has the right to control its borders and also the right to determine who can access public services. Prioritizing citizens is essential for maintaining our national sovereignty and upholding federal immigration law. It’s completely absurd that the California government is choosing to priorities people who have broken the law over those who have followed it, and it has real-life consequences. We looked at the consequences that come in the form of higher taxes or cuts to other services, but there are also other realities to budget shortfalls, like mass layoffs. The Guardian reported just last week that the city of Los Angeles is facing the layoffs of thousands of employees in the face of a $1 billion budget deficit.[17] If a $1 billion shortfall is resulting in the layoffs of thousands of employees in one city, what will a deficit of multiple billions of dollars across the state result in?
This is what happens when government prioritizes criminals over law-abiding residents, and it’s wrong. The real answer to this issue is for California to shut down all free programs to people who have broken the law to be here, and to redirect those funds back to the people who live here legally and who trust their government to steward their money wisely. California’s own constitution includes provisions meant to ensure fiscal responsibility and transparency in state budgeting. But they haven’t done that. Using billions of state dollars to fund healthcare for undocumented immigrants, especially during budget deficits, has severely violated principles of fiscal accountability and prudent use of taxpayer funds. This is downright wrong.
Action Items
What can you do about it? As always, please find and contact your representatives about this issue. You need to voice to them that you do not approve of this as a legal resident of the state and a taxpayer. You can use my resources article to learn how to do just that. We can’t be complacent on this issue, and we can’t overlook such gross mismanagement. It’s time to get active, make our voices heard, and, once again, demand change.
References:
[1] Bluth, Rachel. “Newsom’s Office Seeks Another $2.8B to Plug Medicaid Gap.” Politico, March 17, 2025. https://www.politico.com/news/2025/03/17/newsoms-office-seeks-another-2-8b-to-plug-medicaid-gap-00234663.
[2] Ibarra, Ana B. “California’S Medi-Cal Shortfall Hits $6.2 Billion With ‘Unprecedented’ Cost Increases.” CalMatters, March 19, 2025. https://calmatters.org/health/2025/03/medi-cal-shortfall-worsens/.
[3] Winfree, Paul, and Brian Blase. “California’s Insurance-Tax Shuffle: How Federal Money Ends up Paying for Medicaid for Illegal Immigrants.” Paragon Health Institute, March 12, 2025. https://paragoninstitute.org/medicaid/californias-insurance-tax-shuffle-how-federal-money-ends-up-paying-for-medicaid-for-illegal-immigrants/.
[4] California Legislative Information, “California Code, GOV 16531.1.,” July 10, 2023, https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=16531.1.&lawCode=GOV.
[5] Sisney, Jason. “Jan. 10 Budget Noted Medi-Cal Cost Growth.” #CABudget Info (blog), March 13, 2025. https://jasonsisney.substack.com/p/jan-10-budget-noted-medi-cal-cost.
[6] California Budget & Policy Center, Scott Graves, and Nishi Nair. “Federal Funds Drive One-Third of California’s State Budget - California Budget and Policy Center.” California Budget and Policy Center, February 10, 2025. https://calbudgetcenter.org/resources/federal-funds-drive-one-third-of-californias-state-budget/.
[7] Hwang, Kristen. “California Expands Health Insurance to All Eligible Undocumented Adults,” CalMatters, January 19, 2024, https://calmatters.org/health/2023/12/undocumented-health-insurance-new-california-laws-2024/.
[8] Ibid.
[9] Anderson, Ron J. “Why We Should Care for the Undocumented.” The AMA Journal of Ethic 10, no. 4 (April 1, 2008): 245–48. https://doi.org/10.1001/virtualmentor.2008.10.4.oped1-0804.
[10] Ibid.
[11] Luevano, Jon. “Cons of Giving Illegal Immigrants Healthcare.” YIP Institute, June 21, 2021. https://yipinstitute.org/article/cons-of-giving-illegal-immigrants-healthcare.
[12] Torres, Mauricio. “New Study: Undocumented Immigrants Contribute $8.5 Billion in California Taxes a Year.” California Budget and Policy Center, March 3, 2025. https://calbudgetcenter.org/news/new-study-undocumented-immigrants-contribute-8-5-billion-in-california-taxes-a-year/.
[13] National Immigration Forum. “Fact Sheet: Immigrants and Public Benefits - National Immigration Forum,” January 9, 2024. https://immigrationforum.org/article/fact-sheet-immigrants-and-public-benefits/.
[14] KFF. “Key Facts on Health Coverage of Immigrants | KFF,” March 18, 2025. https://www.kff.org/racial-equity-and-health-policy/fact-sheet/key-facts-on-health-coverage-of-immigrants/.
[15] Conover, “Why Federal Taxpayers Should Not Fund Health Care for Unauthorized Immigrants.”
[16] Office of the Assistant Secretary for Planning and Evaluation. “Summary of Immigrant Eligibility Restrictions Under Current Law.” ASPE, February 24, 2009. https://aspe.hhs.gov/reports/summary-immigrant-eligibility-restrictions-under-current-law.
[17] Beckett, Lois. “Los Angeles’s Projected $1bn Budget Shortfall Will Lead to Layoffs, Officials Say.” The Guardian, March 20, 2025. https://www.theguardian.com/us-news/2025/mar/20/los-angeles-budget-cuts-karen-bass#:~:text=Next%20year's%20nearly%20%241bn,of%20layoffs%2C%20but%20thousands.%E2%80%9D.
