California Medicaid Expenditures Provide Abundant Opportunities for GOP Critique

March 19, 2025 TruthUSA

Federal Medicaid reductions should not put essential health care for low-income Californians at risk.

Opinion

Republicans in Congress are on the lookout for budget cuts in line with their new fiscal strategy, making California’s Medi-Cal program a prime target. It is clear that federal funding for the state’s version of Medicaid can be reduced without compromising vital health care services for impoverished Californians.

California’s Department of Health Care Services has a substantial budget of $193 billion for 2025-26, with an anticipated $119 billion from federal funds. The state is expected to claim over one-sixth of the total federal funds allocated for Medicaid (according to a Congressional Budget Office estimate of $656 billion in national program expenditures for 2025), despite representing only 12 percent of the national population.

Several anomalies in California’s health care funding should catch federal scrutiny.

Proactive Measures to Include Undocumented Immigrants

California is among a select few states that have extended their Medicaid programs to undocumented immigrants. Unlike New York and Illinois, which restrict these benefits to specific age groups, California (along with Oregon) provides coverage to all individuals, regardless of age or immigration status.

Currently, Medi-Cal has an estimated 1.6 million illegal immigrant beneficiaries, constituting over 10 percent of total program enrollment, as reported by CalMatters. Recently, state financial officials estimated that such benefits would cost California’s general fund $8.5 billion, significantly surpassing previous estimates.

While state expenditures typically fall outside of federal jurisdiction, California and other states are allowed to charge the federal Medicaid program for a portion of emergency and maternity care provided to undocumented immigrants.

Given that most Medi-Cal recipients are enrolled in managed care plans, California generally does not bill the federal government for each instance of emergency or maternity care. Rather, it invoices federal Medicaid for a fraction of the capitation payments (i.e., insurance premiums) made to its managed care providers. Nevertheless, in 2024, the state was found to have overcharged the federal government by $52.7 million for capitation payments on behalf of noncitizens and was instructed to reimburse the amount.

High Emergency Room Utilization by the Homeless

California has a notably high population of homeless individuals, many of whom struggle with substance abuse issues. Some frequent emergency room visits are due to overdose-related incidents.

A study identified a significant cohort of “frequent” ER users in San Francisco, recording 4–17 visits per year, alongside a group of “super-frequent” users with 18 or more annual visits. Both demographics are disproportionately represented among the homeless population.

Even if homeless individuals are not enrolled in Medi-Cal when they seek emergency care, California permits them to register for the program up to three months after receiving medical treatment, provided they meet eligibility standards at the time of the service.

According to the latest state data, homeless Medi-Cal recipients accounted for 419,000 emergency room visits in the 2021–2022 fiscal year.

Expanded Benefits for Seniors

Medicaid typically covers nursing home care or alternatives for eligible low-income seniors. To evaluate whether a senior qualifies for Medicaid benefits, states generally apply both income and asset assessments.

While a senior might not have the income to cover nursing home expenses, it has been presumed that they would liquidate assets before relying on assistance from the government. However, in 2024, California abolished its asset test, allowing wealthier seniors requiring skilled nursing care to pass on their wealth to heirs instead of using it to pay for high nursing home costs.

Not surprisingly, the number of seniors enrolling in Medi-Cal has surged. The state’s Legislative Analyst reports that 165,000 seniors have joined Medi-Cal as a result of the eligibility broadening. With each beneficiary averaging over $15,000 per year, this expansion is imposing an annual cost of nearly $2.5 billion, shared between the state and federal governments.

Reliance on Provider Taxation

Similar to most states, California levies taxes on medical providers to fund Medicaid services and garner federal matching funds. However, the state employs particularly aggressive tactics in its approach to provider taxation.

One notably assertive practice involves taxing government-affiliated Medi-Cal managed care providers like L.A. Care Health Plan, which enrolls 2.3 million beneficiaries. Typically, government entities are exempt from such taxes, but California actively targets them to maximize federal funding.

While the Biden-era Department of Health and Human Services (HHS) expressed concerns regarding the state’s provider tax strategy, it still permitted California to augment the tax to address a budget shortfall in 2024. Recently, California voters approved Proposition 35, which institutionalizes the Medi-Cal Managed Care Provider tax.

Supplemental Payments for Ambulance Services

California negotiated a unique agreement with HHS to provide local fire departments additional compensation for emergency ambulance services offered to Medi-Cal beneficiaries. This supplemental fee, set at $1,050 per trip, is in addition to the base fare of $118 paid to all ambulance providers, both private and public.

As Ryan Ellis, president of the Center for a Free Economy and a senior tax advisor at the Family Business Coalition, recently pointed out in a Washington Times opinion piece, these substantial supplemental fees assist California fire departments in affording salaries for uniformed staff, which can exceed $200,000 annually, along with generous retirement benefits.

Misallocation of Funds Beyond Health Care

California leads in a Biden-era initiative to expand Medicaid to cover so-called “social determinants of health,” which are non-medical factors that impact health outcomes.

Federal waivers permit Medi-Cal to fund up to six months of rent for beneficiaries experiencing homelessness, at risk of homelessness, or transitioning from institutional care, and to finance the costs of sports gear, arts and music lessons, and therapeutic summer camps for children enrolled in Medi-Cal. Moreover, the state has initiated a Medi-Cal extension for “justice-involved individuals” offering services for prisoners up to 90 days prior to their release.

Conclusion

California has demonstrated a variety of approaches to secure increased federal Medicaid funding, benefiting undocumented immigrants, medical and non-medical service providers, firefighters, and even affluent seniors’ heirs.

The issues highlighted above are likely only a portion of the strategies utilized by California officials and bureaucrats. Due to the limited availability of detailed Medi-Cal expenditure data, even on the state’s fiscal transparency platform, it is challenging for outside researchers to pinpoint the numerous anomalies present in this expansive program.

A dedicated effort through a state-level Department of Government Efficiency could help clarify more of the complexities and extraneous spending related to Medi-Cal. Yet, even with the existing evidence, it is reasonable to assert that cuts to federal Medicaid funding need not threaten essential health care for low-income individuals residing in California.

The views expressed in this article represent the opinions of the author and do not necessarily reflect the positions of The Epoch Times.

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Proactive Measures to Include Undocumented Immigrants

High Emergency Room Utilization by the Homeless

Expanded Benefits for Seniors

Reliance on Provider Taxation

Supplemental Payments for Ambulance Services

Misallocation of Funds Beyond Health Care

Conclusion

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