California’s finances are in crisis, and once again, political leaders are looking for a quick fix, no matter the cost to the most vulnerable. The latest scheme? San Diego’s much-hyped ambulance “alliance model,” which may sound innovative but in reality, exposes a dangerous trend: diverting critical Medicaid dollars away from improved patient care to patch up the city’s bloated budget.
Here’s what’s happening behind the scenes. For years, San Diego worked with private ambulance providers for EMS services, in order to ensure swift response times at a reasonable cost. This was a win for patients and taxpayers. But now the city has decided that the cost of private EMS was too low, so it fired those companies to increase those costs to taxpayers.
If you are a normal person, you are probably asking, “Why would they do that?” The answer: it’s a government gimmick to shift Medicaid dollars from health care to other budgetary “needs,” such as government employee pensions.
Put simply, the reimbursement rates for government run EMS in California are multitudes higher than the previous arrangement. The kicker? San Diego still uses private companies to do the actual EMS work.
Even more confused? Here’s an analogy: You pay a neighborhood kid $25 to mow your lawn. You fire the kid, tell your wife it’s now $125 to mow the lawn, and re-hire the kid at $25. You spend the excess $100 from your wife on fast food for yourself. This would never work in the confines of a marriage, but it’s precisely how San Diego chooses to operate.
On paper, the city now controls ambulance deployment, staffing, and billing. In practice, this move allows San Diego to inflate emergency service charges and collect tens of millions in additional federal Medicaid reimbursements through a little-known trick called an intergovernmental transfer.
The result? Since 2023, the city’s fire department has generated over $17.3 million in “profit” that hasn’t gone back into improving 911 response times or upgrading aging ambulances. Instead, it’s being used to plug unrelated budget gaps in other departments, while federal Medicaid picks up the $42 million tab. There is no proven benefit to patients, no performance improvement tracking, and no infrastructure investment tied to the funding.
This isn’t just a local issue. What San Diego is doing is part of a larger pattern across California: exploiting Medicaid loopholes to make up for fiscal mismanagement. Fire departments and EMS agencies statewide are inflating ambulance and emergency service costs to maximize federal reimbursements. And instead of going toward care, these extra dollars are being diverted into underfunded public employee pension systems.
Meanwhile, California is facing a $12 billion budget deficit, and Medi-Cal spending is projected to hit $44.6 billion next year, a $7.2 billion increase over the previous year. To cover this, the state is borrowing $3.44 billion, even as it expands benefits to undocumented immigrants without matching federal support. The math doesn’t lie: California is spending more while cutting critical services.
The consequences are already here. Seniors, people with disabilities, and foster youth are facing enrollment freezes and service reductions, and proposals are on the table to eliminate long-term care and dental benefits for undocumented adults. At the same time, the state has made little to no investment in healthcare workforce development or hospital infrastructure, leaving core services overstretched.
Let’s be clear: healthcare is a right, and our system should protect those in greatest need. But California’s current strategy is reckless and shortsighted. Misusing Medicaid to bail out local budgets undermines public trust, weakens our entire healthcare infrastructure, and risks triggering a federal crackdown that could jeopardize billions in future funding for everyone, especially the vulnerable.
We need reform. That starts with restoring discipline to the state budget and prioritizing healthcare dollars for actual care, not gimmicks. We need transparency and accountability in how Medicaid funds are used. And we need bipartisan leadership willing to call out abuse, even when it’s politically inconvenient.
The San Diego model is not a solution. It’s a warning sign. If California continues down this path, the entire Medicaid system and the people it was designed to protect could pay the price.
Victor Lopez is CEO of Imperio Strategies, a Latino-focused public affairs firm, and former executive director of the Lincoln Club.
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