California’s Next Governor Inherits a Medicaid Crisis and a Surge in Uninsured Residents

California’s healthcare safety net is under strain, and the next governor will inherit the problem. Federal Medicaid cuts, rising costs and years of state-led expansions have collided, and the state now faces what may be the steepest drop in insurance coverage in a generation.

A Safety Net That Started Buckling

In March 2025, California ran out of Medicaid funds to pay doctors and hospitals, so the state borrowed $3.4 billion to keep the program afloat. A spokesperson for Gov. Gavin Newsom insisted the move was nothing new, and the state had indeed taken out internal, short-term loans a handful of times over the years.

The unprecedented step came a few months later. Newsom and Democratic state lawmakers agreed to pay down the loan, which had grown to $4.4 billion, over 10 years instead of later in the year.

Rising healthcare costs systemwide share part of the blame. Several state-led expansions also made Medi-Cal, the state’s Medicaid program for the poor and disabled, one of the nation’s most generous. California spends more on Medicaid than New York and Texas combined.

Federal Cuts Force a Reckoning

Congressional Republicans’ One Big Beautiful Bill Act is expected to reduce federal Medicaid spending by more than $900 billion over 10 years. Newsom has dubbed the 2025 law President Donald Trump’s “Big Ugly Bill.” The law should leave millions more Americans without health insurance, mostly because of new work requirements, and it also curbs the provider taxes and other strategies states use to maximize federal funds.

California and dozens of other states now must weigh the limits of their generosity. Mark Ghaly, the former top Newsom health official, co-chairs the Future of Medi-Cal Commission, a 29-person panel charged with modernizing and sustaining the program for those who need it.

“We know we can’t afford to serve everybody we want to serve in the model that we have today,” said Mark Ghaly, the former top Newsom health official who now co-chairs the Future of Medi-Cal Commission, a 29-person panel with the goal of modernizing and sustaining California’s Medicaid program for those who need it. “What can we do differently? What can we do smarter?”

Some state lawmakers and consumer advocates see an opening for the next governor to overhaul a program plagued by long appointment wait times, low reimbursement rates for providers and volatile financing. State Sen. Caroline Menjivar, a Democrat, represents a Los Angeles-area district where roughly half of constituents rely on Medi-Cal.

“If we continue to just give millions and millions into the same system and expect something different – I’m sick and tired of that,” said Caroline Menjivar, a Democratic state senator representing a Los Angeles-area district where roughly half of constituents rely on Medi-Cal.

A Projected Surge in the Uninsured

Democrat Xavier Becerra leads the race against Republican Steve Hilton, a former Fox News commentator, and polling suggests he will win in November. Becerra served as a congressman and as U.S. secretary of Health and Human Services, and he often touts his work to pass, defend and expand the Affordable Care Act. If he wins, he will confront what may be the steepest decline in coverage in a generation.

A May analysis by the University of California-Berkeley Labor Center projects that the number of uninsured Californians under 65 will nearly double by 2030, from 2.4 million to 4.6 million. Recently enacted state and federal cuts to Medicaid and ACA marketplaces drive the increase. The rise could carry broad implications for hospital systems, insurers and the economy.

In February, Miranda Dietz, the labor center’s healthcare program director, told legislators the changes could cost California about 200,000 jobs, mostly in the healthcare industry. Hospital executives already report more unpaid medical bills. Experts warn that health plans will raise premiums further as they cover enrollees who are, on average, sicker and more expensive.

“It’s triage,” said Jessica Altman, executive director of Covered California, the nation’s largest state-run health insurance marketplace. “That’s what the next governor is walking into.”

Becerra’s Plan and Its Open Questions

California achieved one of the most dramatic drops in its uninsured population in the nation, largely thanks to its robust adoption of the ACA. Becerra would now wrestle with how uninsured Californians get care and who pays as the Trump administration shrinks a federal safety net he once oversaw. As California attorney general, he successfully defended many ACA provisions, including access to birth control.

Becerra said he would issue an executive order to keep those affected by federal cuts insured. He has not detailed how the state would backfill as much as $30 billion in federal funding.

The Immigrant Healthcare Divide

Immigrants make up more than a quarter of California’s population and a third of its labor force, and residents have generally said they benefit the state and its economy. Budget instability and cost concerns now spill into a debate over state-funded health coverage for low-income immigrants without legal status. Public support for the state’s generous safety net is starting to fray.

Over the past decade, lawmakers used state dollars to offer all low-income residents comprehensive Medi-Cal coverage regardless of immigration status. Enrollment surpassed initial projections, and so did the cost. California’s nonpartisan Legislative Analyst’s Office says covering immigrants without legal status costs roughly $10 billion a year, more than double the initial estimates.

Newsom, who championed the program, and lawmakers have approved major rollbacks of benefits for those residents. They say the state cannot afford ballooning costs amid massive federal cuts. The California Health and Human Services Agency projects that up to 3.4 million Medi-Cal enrollees could lose coverage and that the state could lose more than $30 billion a year in federal funding under the law.

Becerra has said it would be “foolish” to exclude the poorest immigrants from routine care and push them into expensive emergency rooms on the taxpayer’s dime.

Hilton, a conservative commentator backed by President Trump, has promised to eliminate their coverage. He has echoed national Republicans who skewer California’s expansions to bolster claims of fraud and abuse in Medicaid. Both candidates frame the choice as an economic one, and voters worried about inflation and the rising cost of living may feel less inclined to extend full coverage to people without legal status.

What Comes Next

Whoever wins in November takes office with a Medicaid program that borrowed billions to stay solvent, faces historic federal cuts and serves millions of residents who could lose coverage. The decisions on immigrant coverage, financing and care access will shape California’s healthcare system and its sprawling economy for years.