SACRAMENTO – Just weeks after California approved a record state budget of $351.7 billion for fiscal year 2026-27 that scaled back portions of its Medi-Cal expansion because of soaring costs, and as the federal government announced it was pausing $867.5 million in Medicaid payments to California, the Pacific Research Institute today released a new issue brief warning that the program has become increasingly vulnerable to fraud, waste, and fiscal mismanagement.
Click here to download “Too Big, Too Broken: Restoring Integrity to Medi-Cal”
The brief makes the case that taxpayers are paying the price for a program that has grown beyond the state’s ability to effectively manage it.
“Every dollar lost to fraud, waste, or improper payments is a dollar taken from California taxpayers and from truly vulnerable patients who depend on Medi-Cal,” said Sally C. Pipes, PRI President, CEO, Thomas W. Smith Fellow in Health Care Policy, and author of the issue brief. “The program has grown so large and so administratively complex that oversight has failed to keep pace. California should strengthen eligibility verification, improve transparency, and refocus Medi-Cal on its original mission as a safety net for those most in need.”
Years of rapid expansion have transformed Medi-Cal from a targeted safety-net program into one of the nation’s largest government-run health care programs, now covering nearly 15 million Californians and costing taxpayers nearly $220 billion in fiscal year 2026-27. The report concludes that the program’s enormous size and complexity have made it increasingly difficult to prevent fraud, improper payments, and administrative failures while many beneficiaries still struggle to obtain timely medical care.
The study comes as documented Medi-Cal fraud cases and allegations continue making headlines, including a recent $270 million prescription drug reimbursement scheme recently brought down by the state Attorney General’s office, widespread hospice fraud investigations by state and federal officials in Southern California, and the U.S. Department of Justice’s launch of a new West Coast Health Care Fraud Strike Force targeting Medi-Cal. This week, the Center for Medicare and Medicaid Services announced that it was deferring hundreds of millions in Medicaid payments to California as the state submits additional documentation supporting high-risk Medicaid claims.
California’s newly enacted 2026-27 budget underscores the growing fiscal strain facing Medi-Cal. After facing multibillion-dollar cost overruns, state leaders recently approved a budget that freezes new Medi-Cal enrollment for undocumented adults beginning in 2026, establishes monthly premiums for certain enrollees starting in 2027, and commits billions in additional funding to keep the program solvent.
“A health care program shouldn’t be judged simply by how many people are enrolled,” Pipes added. “Success means patients can actually see a doctor when they need one, doctors are willing to see Medi-Cal patients, taxpayers can have confidence that their money is being spent responsibly, and fraudsters know they’ll be caught. California needs to restore accountability before Medi-Cal’s financial and administrative problems grow even worse.”
Among the report’s reform recommendations are:
- Strengthening eligibility verification and redeterminations
- Increasing oversight of managed care organizations,
- Improving transparency surrounding Medi-Cal financing, and
- Refocusing limited taxpayer resources on California’s most vulnerable residents.