MediCal Restructure to Cost California $19-40 Billion a Year
Written by Chriss W. Street
The Trump Administration’s moves to end California’sentitlement to 15% of all federal spending on states, despite only having 10.5% of U.S. citizens, will cost the state between $19-40 billion per year.
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Gov. Gavin Newsom’s latest expansion of Medi-Cal(California’s Medicaid) to almost 15 million low-income residents, including illegal aliens, was expected to be paid for with $112.1 billion of California’s $134.9billion in federal Health and Human Services funding.
The standard funding allocation for Medicaid cost is structured for the federal government to pay 57%; states pay 23%; and counties pay 20%.
At a state cost of about $5,000 per participant, the State of California began paying to expand Medi-Cal eligibility to cover low-income children of illegal aliens in 2020, and adult illegal aliens under 26 in2020.
But the Biden administration as a “COVID-19 response”, implemented a Medicaid expansion that required the federal government to pay 90% of all costs and states pay 10% of all costs for the first 2 years of expansion.
California as the biggest beneficiary, expanded Medi-Cal to include all adult illegal aliens 50 and over in May 2022 and age 26-49 on January 1, 2024. The 26 to 49 age bracket was by far the largest in California (and nationally), comprising 75 percent of individuals in the country illegally.
California then made the federal government pay all of its 10% contribution requirement by taxing Medi-Cal Managed Care Organization (MCO) providers the equivalent of California’s required 10% contribution. Since the system was funded according to “cost,”California managed care providers passed through the tax as a reimbursed “cost,” and California used the MCO tax to pay for their entire 10% contribution requirement.
In the final days of the Biden administration on December 20, 2024, the U.S. Centers for Medicare & Medicaid Services (CMS) issued a waiver of illegalityfor California's MCO Tax scheme that included another $7.2 billion for Medi-Cal expansion funding through December 2026.
Gov. Newsom admitted last month that in spite of California being the only state to get a MCO Tax cost shifting waiver, the Medi-Cal expansion would still cost the state $9.5 billion for illegal immigrant health care. As a result, Newsom authorized $2.8 billion taxpayer-funded Medi-Cal bailout loan.
The governor upped the bailout to $6.2 billion at a press conference on March 18, 2025. Newsomjustified continuing taxpayer-funded healthcare for illegal immigrants because, “I believe in universal healthcare … it’s just a core principle.” He added that rolling back the Medi-Cal expansion is not on his “docket,” but with costs rising he might be open to future “changes.”
The Mountain Top Times is publishing a series of reports regarding Trump Administration initiatives to end adult illegal alien Medicaid funding and ban the CMS waiver that allows California’s MCO Tax to cost shift all its’ state Medicaid expansion costs back onto the federal government.
The Mountain Top Times estimates the cost to California from the Trump initiatives to terminate the MCO Tax waiver would be at least $19 billion, andmoving to a federal “per capita” Medicaid reimbursement formula that would pay Medi-Cal based on standard fee for citizens in every state would cost California at least another $20 billion.