Gov. Gavin Newsom has turned California’s state-run Medicaid program into a national burden, drawing on federal funds matched by red-state taxpayers to help pay for medical services for illegal immigrants. While federal law prohibits illegal immigrants from receiving Medicaid, California’s workaround has funneled billions into Medi-Cal with Washington’s help.

At the core of the scheme is a provider tax maneuver that lets California increase charges on insurers, driving up Medi-Cal expenses. These inflated costs then qualify for federal reimbursement through Medicaid’s cost-sharing structure. The federal government matches up to 60% of Medicaid spending, which means more California spending results in more federal money.

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

The result? Red states like Texas, Florida and Ohio are on the hook for a program they had no say in. California’s Medi-Cal now covers an estimated 1.6 million illegal immigrants, out of a total 15 million participants. And the state’s health department openly states that immigration status does not affect 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

California’s Department of Health Care Services initially predicted illegal immigrant coverage would cost $6 billion. That estimate has since risen to $9.5 billion, and lawmakers have already requested $6.2 billion in additional funding through two separate loans.

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

According to the Economic Policy Innovation Center, this arrangement has allowed California to pull in more than $19 billion in federal funds from 2023 to 2026 with zero matching dollars coming from the state. The study called the tactic one of the most blatant examples of Medicaid abuse to date.

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

The Trump administration is preparing a budget that includes massive spending cuts, and Republican lawmakers are targeting the loophole. Closing it completely could return hundreds of billions to the treasury. Even reducing the practice could save significant amounts while limiting the power of states like California to abuse the system.

Newsom’s office defended the spending increases and claimed similar problems exist in states like Colorado and Indiana. But critics say it’s a crisis of California’s own making — one that other states are now being forced to pay for.

Meanwhile, Oregon has followed a similar path, expanding Medicaid eligibility to include illegal immigrants despite federal prohibitions.