California Governor Gavin Newsom has approved a $2.8 billion emergency loan to stabilize the state’s Medicaid program, Medi-Cal, as the program faces a staggering $6.2 billion shortfall—an urgent fiscal challenge fueled in large part by the recent expansion of coverage to all low-income Californians, including undocumented immigrants.

A Financial Lifeline for Medi-Cal

The $2.8 billion infusion, signed into law on Monday, is designed to keep Medi-Cal solvent through June, ensuring continued healthcare access for roughly 15 million Californians, including an estimated 1.6 million undocumented residents now eligible for full benefits. This move follows a separate $3.4 billion loan request last month, underscoring the scale and urgency of the budget crisis.

State officials say the expansion of Medi-Cal to undocumented immigrants—part of Newsom’s push for universal healthcare—has cost $2.7 billion more than anticipated this year, with total program costs ballooning from an expected $6.4 billion to $9.5 billion. The state’s Department of Health Care Services attributes the shortfall not only to the expanded eligibility but also to higher-than-expected enrollment and rising pharmaceutical expenses.

Political and Policy Fallout

The financial rescue has ignited fierce debate in Sacramento. Republican lawmakers argue that the inclusion of undocumented immigrants has rendered the program unsustainable, calling for a halt to new enrollments and a reevaluation of the state’s priorities. “We must halt new enrollments for undocumented immigrants and control this unsustainable program before it completely fails,” said Senate Minority Leader Brian Jones, who also criticized growing wait times and what he described as declining access for legal residents.

Democratic leaders and immigrant advocates, however, defend the expansion as a moral and public health imperative. “We will not roll over and leave our immigrants behind,” said Assembly Democrats, while immigrant rights groups argue that scapegoating undocumented residents ignores their contributions and the broader factors driving healthcare costs.

Broader Implications and Next Steps

The Medi-Cal crisis comes as California, the nation’s most populous state, grapples with broader budget pressures and as federal lawmakers in Washington debate sweeping Medicaid cuts that could further strain state resources. Newsom’s administration has pledged to work with legislative leaders to “evaluate proposals to rein in long-term spending—including in Medi-Cal—while working to protect the core health and social services Californians rely on”.

For now, the $2.8 billion loan buys time, but the underlying fiscal and policy questions remain unresolved. As the state heads into budget negotiations, the future of Medi-Cal—and the scope of California’s commitment to healthcare for all residents, regardless of immigration status—hangs in the balance.