Gov. Gavin Newsom‘s (D-CA) Sacramento is spending like a drunken sailor, and it’s American taxpayers who are left with the hangover.
The governor’s latest budget “fixes” are less about fixing California’s real problems and more about siphoning off federal health dollars to paper over his own fiscal mismanagement. The result? Money meant for Medicare and Medicaid is being funneled into political pet projects and bloated pensions while the most vulnerable patients are left with less care and more uncertainty.
Newsom’s administration is effectively running a Medicaid money-laundering operation that would make Wall Street blush. California jacks up taxes on Medicaid insurers, then turns around and uses those inflated payments to claim billions of dollars in extra federal matching funds — federal dollars that were supposed to help the poor and elderly, not bankroll Sacramento’s wish list. The state then pockets the difference, using the windfall to fund everything from free healthcare for undocumented immigrants to shoring up public employee pensions.
This isn’t just creative accounting; it’s a direct raid on the federal treasury. While the federal government is supposed to cover half the cost for the truly needy, California’s schemes now stick Washington with 100% of the bill for certain groups, including illegal immigrants and even the wealthy who now qualify for long-term care after Newsom eliminated the asset test. All told, California will have extracted more than $19 billion in federal money through this shell game by the end of 2026.
If you think all this spending is making California’s healthcare system better, think again. The state’s Medicaid program, Medi-Cal, is now facing a $12 billion deficit, forcing Newsom to propose deep cuts to healthcare spending, even as enrollment and costs soar. Pharmacy expenses are exploding, and the price tag for covering undocumented immigrants has tripled to $8.4 billion a year, far beyond what was promised. Meanwhile, services for the truly needy — seniors, disabled people, and low-income families — are on the chopping block.
And don’t forget the fire departments. As I’ve written before, California’s fire departments have become experts at gaming the Medicaid system, inflating ambulance costs to collect bigger federal reimbursements. Those extra dollars aren’t going to better emergency care — they’re being diverted to plug holes in underfunded pension plans. It’s a classic case of robbing Peter to pay Paul, with taxpayers in every other state footing the bill.
Medicare and Medicaid were created to ensure that the most vulnerable Americans — our seniors, the disabled, the poor — get the care they need. But under Newsom, these programs are being twisted into tools for budgetary sleight of hand. Instead of investing in primary care, provider networks, or patient outcomes, Sacramento is obsessed with expanding eligibility and capturing more federal money, regardless of whether the system can actually deliver for those it’s supposed to serve.
The losers? Patients who can’t find a doctor, providers whose reimbursements are slashed, and taxpayers across the country who are forced to subsidize California’s recklessness.
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It’s time for Congress and federal watchdogs to put a stop to these shenanigans. Medicaid and Medicare dollars should be spent on patient care, not on backdoor bailouts for state budgets or public pensions. Newsom’s spending spree is not just unsustainable, it’s unfair to every American who plays by the rules and expects their tax dollars to be used responsibly.
If Sacramento can’t prioritize the health of its own citizens over political giveaways and accounting tricks, then maybe it’s time to put conditions on the federal money California receives. Until then, the Newsom administration will keep spending like crazy, robbing Medicare, and leaving the people who need help most with less than they deserve.
Robert Goldberg is the vice president of the Center for Medicine in the Public Interest.