Red States Help Foot Bill for CA’s Illegal Immigrant Care

Clear Facts

• California has become the first state to provide medical care to illegal immigrants, costing taxpayers nearly $8 billion.
• The funding for California’s program comes partly from federal dollars, affecting taxpayers nationwide, including those in states like Texas and North Carolina.
• Governor Gavin Newsom’s approach involves controversial financial maneuvers that some argue exploit Medicaid funding rules.

In 2024, California made headlines as Governor Gavin Newsom proudly announced the state would be the first to offer medical care to illegal immigrants residing within its borders. This ambitious initiative, however, comes with a hefty price tag of almost $8 billion, a burden not solely shouldered by Californians, but by taxpayers nationwide.

The funding mechanism for this program involves Medi-Cal, California’s Medicaid safety net program. The federal government matches the state’s funding, meaning taxpayers from all over the country, including those in states like Texas and North Carolina, are indirectly financing California’s decision. This raises the question: Do residents of other states want to fund healthcare for California’s 700,000 illegal immigrants? Unfortunately, they have no choice in the matter.

The federal-state funding formula, known as the Federal Medical Assistance Percentage (FMAP), incentivizes states to increase their spending. By spending more state dollars, they receive more federal dollars from taxpayers across the nation. Richer states like California receive one federal dollar for every state dollar spent, while poorer states can receive up to three federal dollars for every dollar they budget.

Governor Newsom’s budget estimate for insuring illegal immigrants was initially pegged at $6.5 billion but has since ballooned to $9.5 billion, with expectations for further increases. Reports indicate that Newsom is now seeking an additional $3.4 billion loan to cover these rising costs.

Despite federal laws and Centers for Medicare and Medicaid Services (CMS) rules prohibiting illegal immigrants from enrolling in Medicaid, Newsom has found ways to bypass these regulations. Experts have highlighted a “money laundering scheme” employed by Newsom. California imposes a tax on insurers, raising Medi-Cal’s “costs,” which in turn forces Washington to contribute more taxpayer dollars to the state.

These experts also point to another scheme where Medi-Cal pays for long-term care insurance for wealthy donors. Newsom canceled the asset test that would disqualify rich individuals from qualifying for such insurance, using “laundered” Medi-Cal funds to cover additional insurance premiums.

California is not alone in this approach. Oregon has also approved the enrollment of illegal immigrants in its state Medicaid program. The current Medicaid financing scheme encourages states to over-budget their programs, leading to increased taxpayer contributions from Washington.

A potential solution to this issue is to change the matching formula, allowing states to negotiate with Washington for a fixed amount that adjusts only for inflation and legal population changes. This would be a victory for federalism, taxpayers, and honest state governments, restoring the federalist concept outlined in the Constitution.

By implementing non-restrictive block grants for Medicaid, the financial problems could be resolved, fraud loopholes closed, and the incentive to overspend eliminated. This approach would also restore Medicaid to its original design, allowing states to operate their programs as they see fit without federal interference. If California or Oregon wish to provide services to illegal immigrants, their residents would have to approve the expenditure, as it would be their state dollars at stake.

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