Next Governor To Face Thorny Choices After California’s Rapid Medicaid Expansion

In March 2025, when California ran out of Medicaid funds to pay doctors and hospitals, the state borrowed $3.4 billion to keep the program afloat. It was, as a spokesperson for Gov. Gavin Newsom insisted, nothing new. Indeed, a handful of times over the years, the state had taken out internal, short-term loans to sustain its healthcare program for the poor and disabled. The unprecedented move came a few months later, when Newsom and Democratic state lawmakers agreed to pay down the loan — which grew to $4.4 billion — over 10 years instead of later in the year. California’s healthcare safety net, it seemed, was buckling. Rising healthcare costs systemwide were partly to blame. But so were several state-led expansions that made California’s Medicaid program, known as Medi-Cal, one of the nation’s most generous. Now, with congressional Republicans’ One Big Beautiful Bill Act expected to reduce federal Medicaid spending by more than $900 billion over 10 years, California and dozens of other states must contemplate the limits of their generosity. The problem is particularly acute in the nation’s most populous state, which spends more on Medicaid than New York and Texas combined. “We kno...