According to a report by the California Legislative Analyst’s Office (LAO), the cost of providing healthcare benefits to undocumented immigrants in California is expected to be twice the initial estimate.
The report released in October by LAO indicates that expanding eligibility for undocumented immigrants in the Medi-Cal program is projected to cost the state’s general fund an estimated $10 billion annually, which is more than double the initial estimate and would account for approximately a quarter of the Medi-Cal funding.
Approximately 1.7 million beneficiaries of Medi-Cal are undocumented immigrants, representing around 11% of all beneficiaries.
The projected additional expenditure is estimated to be three times the budget allocated for the California Highway Patrol ($3.3 billion) and more than double the budget for CalFire ($4.5 billion).
LAO stated in the report that California’s estimated $10 billion expenditure for providing healthcare benefits to low-income undocumented immigrants is due to “higher-than-expected beneficiary numbers and service utilization.”
Overall, for the current budget period (July 2025 to June 2026), Medi-Cal is projected to spend $197 billion, with slightly over half of the expenses covered by the federal government.
Medi-Cal is California’s name for the jointly funded Medicaid program, providing healthcare coverage for low-income individuals. Adults with incomes below 138% of the Federal Poverty Level qualify for the program, while the threshold for children is total family income not exceeding 266% of the poverty level. The program covers services such as doctor visits, hospital stays, and mental health treatments.
Unlike Medicare, which is federal health insurance for individuals aged 65 and older, funding for Medi-Cal comes from a combination of state, federal contributions, and other local taxes and funds.
The LAO report indicates that the cost of providing free “comprehensive coverage” medical services to undocumented immigrants is entirely borne by California’s general fund because these beneficiaries do not qualify for federal assistance.
However, the Centers for Medicare and Medicaid Services (CMS) earlier this year issued a notice highlighting that some states have been using tax loopholes to “increase federal payments to states and free up state funds for non-Medicaid purposes.”
States are allowed to tax stakeholders and count that revenue towards their Medicaid cost allocations. However, some states reportedly impose high taxes on Medicaid-related businesses, leading to increased federal matching funds. The state government then reallocates the federal funds to those healthcare providers subjected to the high taxes.
CMS noted that some states are exploiting these tax loopholes to obtain funds from federal taxpayers and use state funds to provide new benefits to undocumented immigrants.
In September, CMS issued new guidelines to address these loopholes in state Medicaid programs.
As per the final budget summary for the 2025-2026 fiscal year, in a bid to address the state government’s $11.8 billion deficit, adjustments will be made to Medi-Cal for undocumented immigrants starting in 2026.
Beginning in January 2026, Medi-Cal will halt new enrollments for undocumented immigrants aged 19 and above; from July 2027, undocumented immigrants aged 19 to 59 who do not meet the immigration requirements must pay a monthly premium of $30 to continue receiving comprehensive healthcare coverage.
The LAO report suggests that this policy is expected to exacerbate the disenrollment effect for undocumented immigrants, as some beneficiaries may be unable or unwilling to pay the premiums, resulting in loss of coverage and being permanently barred from rejoining.
The report also points out that the federal government’s “Build Back Better Act” has “significantly altered federal Medicaid eligibility and financial policies,” leading to California losing billions of federal dollars.
In 2015, California passed the SB75 legislation, extending Medi-Cal benefits to undocumented children under the age of 19 for the first time.
In 2019, under Governor Newsom’s leadership, the SB104 bill was passed to expand coverage to young adults aged 19 to 25, regardless of immigration status. A law that became effective in 2021 extended coverage to adults aged 50 and above. Starting in January 2024, the final expansion plan allows all income-eligible undocumented immigrants, including those aged 26 to 49, to qualify for Medi-Cal benefits.
One of California’s largest expenditure items is healthcare and public services, including Medi-Cal, with the Health Department budget amounting to $202.7 billion.