Newsom Defends Medi-Cal Spending on Housing and Food Amid GOP Criticism

SACRAMENTO, Calif. — California Gov. Gavin Newsom is standing behind his state’s use of Medicaid funds for housing assistance, food support, and other social services, even as Republican lawmakers and the Trump administration question whether those expenses belong in healthcare.

The dispute has turned California’s Medi-Cal program into a new flashpoint in the broader fight over Medicaid. Sen. John Kennedy of Louisiana has been among the most vocal critics, accusing California of fraud and saying the state is spending state and federal Medicaid dollars on services that should not be covered. In May, Kennedy described the state’s approach as “outrageous fraud” and “stealing,” arguing that money intended for basic medical treatment is being used for services such as housing, meal deliveries, gym memberships, tribal prayers, and, he claimed, exorcisms.

Newsom, a Democrat who has said he is proud of the state’s approach, argues the program is a practical response to the needs of medically frail patients. He said California’s social services are legal, evidence-based, and more cost-effective than relying only on clinical care. In his view, helping patients with housing, food, and related needs can keep them out of emergency rooms and hospitals and improve their long-term health. “It’s about whole-person care,” Newsom said, adding that he hopes the Trump administration will see California’s model as a national best practice.

The clash reflects a larger philosophical divide. Conservatives say Medicaid should focus on medical services and that social services are an improper use of healthcare dollars. Liberals counter that prevention and support outside the clinic can reduce expensive crises later. The issue has gained urgency as federal officials move to tighten oversight of Medicaid spending and states weigh how to keep similar benefits in place.

For patients, the debate is not abstract. Lucy Rodriguez, a 73-year-old in Hollister on California’s Central Coast, said Medi-Cal has helped change her life. Rodriguez, who has diabetes, high blood pressure, and kidney disease, said an intensive case manager with Titanium Healthcare began helping her manage appointments, prescriptions, and chronic diseases. The care manager also picked up free food boxes for her. Rodriguez said Medi-Cal has helped pay her utility bills, and she was recently approved for home-delivered meals.

“This has been a godsend,” Rodriguez said. She said she had been stressed and depressed while living on a fixed income, especially as grocery and electricity costs rose. She worries that the Trump administration could cut benefits for low-income older adults.

Federal oversight is a major part of the story. Last year, the Centers for Medicare & Medicaid Services warned states that federal funding for social services would be assessed case by case. CMS spokesperson Christopher Krepich said the agency is not ending current waivers, which give states temporary permission to provide social services with state and federal dollars. But future requests, whether for new services or extensions of existing programs, could be denied if they move too far from traditional healthcare. Krepich said CMS will work with states on waivers that address core healthcare needs and are tied to evidence-based approaches and clinical diagnoses.

The politics have escalated further. The Justice Department recently issued a memo allowing states to institutionalize people with disabilities and severe mental illness instead of providing community-based care. Republicans have also accused several states, especially blue ones, of failing to root out waste, fraud, and abuse in Medicaid. In May, CMS Administrator Mehmet Oz appeared with Vice President JD Vance when the administration announced a deferral of $1.3 billion in Medicaid money to California over suspicions of fraud.

California Attorney General Rob Bonta said Republicans are using fraud allegations as a political tool while overlooking the needs of low-income residents. He said the federal government wants to politicize fraud and use it to pressure blue states.

Health policy researchers say the dispute is occurring against a backdrop of evidence that many health outcomes depend on more than medical care. They point to factors such as housing instability, homelessness, food insecurity, and exposure to violence. That thinking helped drive Biden-era efforts to support social services through Medicaid, and at least 24 states now use state money alongside federal Medicaid funds for similar experiments. States including Colorado, Massachusetts, New York, North Carolina, Oregon, and Pennsylvania provide housing and nutrition assistance in some form.

California has gone further than most. The state has used Biden-era waivers to build out a broad set of services through a Medicaid initiative called California Advancing and Innovating Medi-Cal, or CalAIM. The program operates within Medi-Cal, which has a proposed budget of $217 billion and more than 14 million enrollees. The state has been selective about who receives help from 15 types of social services, including enhanced care management for people with complex needs.

Since 2022, California has spent nearly $12 billion in joint state and federal money on social services under CalAIM, with the goal of reducing long-term Medicaid spending by keeping people out of emergency rooms, jails, nursing homes, and mental health crisis centers. State data show that by September 2025, more than 528,000 patients had received social services through CalAIM, and nearly 453,000 low-income Californians had received intensive case management. Some people received both.

The services include rental security deposits and up to six months of rent for homeless patients seeking an apartment, home-delivered meals for people with chronic illnesses such as diabetes and heart disease, mold removal for patients with asthma, wheelchair ramps for low-income seniors with disabilities, and immediate connections to primary care, mental health, and substance use treatment for people leaving jail or prison.

California officials say the services have helped stabilize the most medically complex patients and lower costs by reducing emergency room visits, hospitalizations, and reliance on institutions such as nursing homes. In the Central Valley, Health Plan of San Joaquin CEO Lizeth Granados said CalAIM has helped move homeless patients out of repeated hospital stays and into housing. She also said patients with uncontrolled diabetes saw blood sugar improvements after receiving nutrition counseling and home-delivered meals.

Granados said the plan has seen better chronic disease management and fewer hospital stays, with inpatient hospitalizations falling to 44 per 1,000 members after CalAIM launched in 2022, down from 61 per 1,000 before the program.

In Orange County, CalOptima Health officials said housing services under CalAIM helped contribute to a nearly 27% drop in unsheltered homelessness. CalOptima’s chief operating officer, Yunkyung Kim, said the insurer has also been able to expand street medicine programs.

Other states are taking different paths as federal pressure increases. Michigan and Minnesota use state plan amendments, which do not require federal waiver approval, to cover recuperative care for homeless patients after hospitalization. These short-term facilities give patients a place to recover between discharge and independent living. A Michigan health department spokesperson said the model offers a permanent statewide benefit with more stability and predictability because it does not depend on repeated federal renewals.

Arizona, by contrast, relies on a federal waiver. State officials said they plan to ask by the end of September to continue a program that provides housing and other services to homeless patients or those at risk of homelessness who have a serious mental illness and a chronic condition or recent incarceration. An Arizona health official said stable housing and supportive services make it more likely that people will stay in care and less likely that they will end up in avoidable emergency department visits or inpatient admissions.

California is trying to keep its programs alive through a two-pronged strategy. The state is using its authority to make most existing social services and benefits permanent in Medi-Cal managed care, which avoids the need for federal waiver approval. At the same time, the Newsom administration is seeking new waivers to keep other services going and to add more.

But the federal response remains uncertain. Newsom said he is concerned the latest waiver requests could be denied. “How could you not be with this administration?” he said. “I’m always concerned.”

The administration’s stance has already forced California to cut some benefits. Room-and-board assistance is ending, and the state is cutting short-term post-hospital housing meant to keep homeless patients or those at risk of homelessness from being discharged to the streets. Medi-Cal will also stop paying for beds in recuperative care settings, though wraparound services will remain. In San Francisco, health officials said those overnight beds have been important in reducing overdose deaths, moving people from the streets into housing, and lowering demand for hospital beds.

Budget pressures are adding another layer of strain. Newsom has proposed cutting CalAIM social services funding by $68.3 million this fiscal year, with the reduction growing next year and reaching $150.2 million annually beginning in 2028. Providers worry those changes will reduce access to housing help, meals, and other services.

Some insurers and providers say the program still shows promise, even with tighter eligibility and funding pressures. Others say California should be more careful about who receives benefits, noting that some housing and food services were given to people who may not have been among the highest-need patients. State officials are also narrowing eligibility in some areas. For example, Medi-Cal members with food insecurity would no longer qualify for home-delivered healthy meals unless they have a qualifying condition such as diabetes, and help finding an apartment for a homeless patient would be limited to six months.

Even so, supporters say the central idea remains the same: spending on social needs can improve health and avoid higher costs later. Dorothy Seleski, Medi-Cal president for Health Net, said the insurer remains committed and is already seeing fewer avoidable emergency room trips, fewer avoidable hospital admissions, and better preventive care access.

For now, California’s experiment continues under political and budget pressure, with its future tied to both state decisions and federal approval.