California’s drug spending has surged, doubling since 2018, according to the state’s Legislative Analyst’s Office (LAO). A significant portion of the increase is linked to weight loss medications, with an unclear amount stemming from drugs used by illegal immigrants.
Medi-Cal, the state’s public health care program for low-income residents, has seen its drug spending rise from about $4 billion in the 2018-2019 fiscal year to around $8 billion in 2023-2024. During the same period, Medi-Cal enrollment grew by about 15%, from 33.2% of California’s population to 38.2%.
Despite this modest enrollment increase, drug spending has more than doubled. The LAO attributes a quarter of the growth to weight loss drugs like Ozempic, a popular treatment for obesity and diabetes. According to UCLA, nearly two-thirds of Californians are overweight or obese. Medi-Cal enrollment among obese individuals is even higher, with 40% of Medi-Cal enrollees affected compared to 29% of the general population.
The LAO report highlights that specialty drugs for diabetes and weight loss, such as Glucagon-Like Peptide-1 (GLP-1) agonists, account for 25% of the total increase in drug spending. Semaglutide, the active ingredient in Ozempic, has been the most commonly used GLP-1 agonist within Medi-Cal.
The state’s spending on drugs for undocumented immigrants also contributes to the overall cost increase. California taxpayers are shouldering the full cost of these drugs, as they are not eligible for rebates that reduce the price of medications.
For undocumented beneficiaries, the state covers the entire cost of drugs, and these drugs are generally not eligible for price reductions through rebates. A single dose of Ozempic can cost close to $1,000.
The LAO noted that it could not determine the exact cost of providing drugs to illegal immigrants due to insufficient data. The report points out that while the state tracks overall Medi-Cal spending, it does not break down costs for undocumented populations.
Since 2016, California has progressively expanded Medi-Cal eligibility to illegal immigrants, starting with children and young adults, and most recently, to all undocumented residents in 2024. This expansion has added to the financial strain on the program. In 2023, the state spent $9.5 billion on health care for illegal immigrants.
Lawmakers have noted that Governor Gavin Newsom’s administration attributes half of the increase in Medi-Cal costs over the past six years to expanded coverage for illegal immigrants. To address the growing budget shortfall, Newsom has requested a $6.2 billion bailout for Medi-Cal this year, prompting lawmakers to call for an audit of the rapidly expanding program.
