California faces Medicaid overhaul as federal cuts and soaring costs strain Medi-Cal

In March 2025 California tapped $3.4 billion in short-term borrowing to avoid a shutdown of its Medicaid program, later extending repayment to ten years as costs surged. The state’s aggressive expansions have turned Medi-Cal into a broad safety net covering about one-third of Californians, but a federal bill projected to slash Medicaid spending by more than $900 billion threatens that generosity. Lawmakers and advocates see the fiscal squeeze as a chance for the incoming governor to reshape the system, which suffers from long wait times, low provider payments and volatile financing.

Republican candidate Steve Hilton wants to narrow eligibility and end benefits for undocumented immigrants, while Democrat Xavier Becerra vows to shield Californians from federal cuts and trim administrative waste. Hospitals such as Martin Luther King Jr. Community Hospital are already overwhelmed, and estimates suggest millions could lose coverage in the coming years.