California isn’t backing down on healthcare for immigrants, despite Trump threats

SACRAMENTO — One of the many traits that set California apart from other states is the way undocumented immigrants are woven into our communities.

Their economic impact is obvious, and the Golden State would be hard-pressed to keep our status as a world-competing financial power without their labor.

But most Californians know, and are OK with the reality, that at least some of our neighbors, our kids’ classmates, our co-workers, are without legal documents, or in blended-status families.

Gov. Gavin Newsom took a stand Wednesday for those undocumented Californians that seems to have gone largely unnoticed, but which probably will be a big fight in Congress and courts. In his bad news-filled budget presentation, Newsom committed to keeping state-funded health insurance for undocumented residents (with cuts, deep ones, which I’ll get to). Although some are disappointed by his rollbacks, many of which will hit citizens and noncitizens alike, standing by California’s expansion to cover all low income people is a statement of values.

“We’ve provided more support than any state in American history, and we’ll continue to provide more support than any state in American history,” he said.

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Sticking with that promise is going to be tough, and likely costly.

This decision comes as Congress considers a Trump-led budget bill that would severely penalize states (there are 14 of them) that continue to provide health insurance to undocumented immigrants. California, of course, has the largest number of such folks on its Medi-Cal plan and would be the hardest hit if that penalty does indeed become the new law — to the tune of $27 billion over six years, according to the Center on Budget and Policy Priorities.

To put that in perspective, the governor is now estimating a nearly $12-billion budget shortfall this year. That federal cut would add at least $3 billion a year to our costs once it hits.

That federal cut, Newsom said, was “not anticipated in this budget,” which means we are ignoring it for the time being.

Federal programs aren’t open to noncitizens, and no federal dollars are used to support California’s expansion of healthcare to undocumented people.

But Congress is threatening an approximately 10% cut in reimbursements to states that insure undocumented people via the Medicaid expansion that was part of the Affordable Care Act. That expansion allows millions of Americans to have access to healthcare.

Those expansion funds are working in ways that many don’t know about. For example, as Newsom pointed out, behavioral health teams doing outreach to homeless people are funded by Medicaid dollars.

In all, about one-third of Californians rely on Medi-Cal, including millions of children, so this threat to cut federal funds is not an empty one, especially in a lean year.

Katherine Hempstead, a senior policy advisor for the Robert Wood Johnson Foundation, which advocates for universal healthcare, said that the bill being debated by Congress is so full of cuts to healthcare that arguing against the provision penalizing coverage for undocumented people may not be a priority for most Democrats — making it more likely that the cut will get through.

“I don’t know if this is going to be a do-or-die issue,” she said.

Gov. Gavin Newsom presents his revised 2025-26 state budget during a news conference Wednesday in Sacramento.

(Rich Pedroncelli / Associated Press)

And indeed, the pressure by Republicans to kill off coverage entirely for undocumented folks was quick.

“Gov. Newsom has only partially repealed his disastrous policy,” Rep. Kevin Kiley (R-Rocklin) said in a statement. “ It needs to be reversed entirely, or Californians will continue to spend billions on coverage for illegal immigrants and our state will lose an even larger amount in federal Medicaid funding.”

Newsom has given economic reasons for sticking with the state’s coverage for all low-income residents, regardless of status. When people don’t have access to routine care, they end up in emergency rooms and that is extremely expensive. And also, Medicaid has to cover that emergency care, so taxpayers often end up spending more in the long run by skimping on upfront care.

“It’s definitely important to the people that get the coverage because they don’t really have an alternative,” Hempstead said.

But that care has been vastly more expensive than California expected, also to the tune of billions of dollars in unexpected costs, in part because so many people have signed up.

To the dismay of many, Newsom’s budget reflects both recent economic woes — a $16-billion revenue hit caused by what he’s dubbing the “Trump slump” — as well as the state vastly understimating the cost of covering those undocumented folks.

That shortfall may force cuts in the coverage that undocumented people qualify for if the Legislature goes along with Newsom’s plan, or even parts of it.

Most notably, it would cap enrollment for undocumented adults age 19 and over in 2026, effectively closing the program to new participants. That’s a huge hurt. His plan also calls for adding a $100 per month premium, and other cuts such as ending coverage for the extremely popular and expensive GLP-1 weight loss drugs for all participants.

“I don’t want to be in this position, but we are in this position,” Newsom said.

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Amanda McAllister-Wallner, executive director of Health Access California, called those cuts “reckless and unconscionable” in a statement.

“This is a betrayal of the governor’s commitment to California immigrants, and an abandonment of his legacy, which brought California so close to universal healthcare,” she said.

I strongly believe in universal single-payer healthcare (basically opening up Medicare to everyone), so I don’t disagree with McAllister-Wallner’s point. In better days, I would hope to see enrollment reopen and benefits restored.

But also, we’re broke. This is going to be a year of painful choices for all involved.

Which makes Newsom’s, and California’s, commitment to keep insurance for undocumented people notable. The state could back down under this real federal pressure, could try to find a way to claw back the benefits we have already given.

But there’s a moral component to providing healthcare to our undocumented residents, who are such a valuable and vital part of our state.

Although the fiscal realities are ugly, it’s worth remembering that in providing the coverage, California is sticking with some of its most vulnerable residents, at a time when it would be easier to cut and run.