California's Medi-Cal program has grown so large and complex that it's become increasingly vulnerable to fraud, waste, and fiscal mismanagement, according to a new issue brief released by the Pacific Research Institute. The report, titled "Too Big, Too Broken: Restoring Integrity to Medi-Cal," warns that taxpayers are paying the price for a program that has grown beyond the state's ability to effectively manage it. The study comes just weeks after California approved a record state budget of $351.7 billion that scaled back portions of Medi-Cal expansion because of soaring costs, and as the federal government paused $867.5 million in Medicaid payments to California.
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. Recent documented fraud cases include a $270 million prescription drug reimbursement scheme 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 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 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.
"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, and author of the issue brief. 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. "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."
The report makes the case that oversight has failed to keep pace with Medi-Cal's growth, leaving the program increasingly difficult to manage effectively. After facing multibillion-dollar cost overruns, state leaders approved budget measures that mark a significant shift for a program that had expanded eligibility repeatedly in recent years. The report recommends 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. California needs to restore accountability before Medi-Cal's financial and administrative problems grow even worse.