While the state government and cities throughout the county are grappling with tight budgets, Orange County’s Medi-Cal program has the opposite problem – over $1.8 billion sitting in the bank two years after state auditors said to spend more on the community.

OC’s health program for the poor and needy, CalOptima, is responsible for the healthcare of around one third of Orange County’s residents and maintains a yearly budget of over $4 billion. 

Its leaders have defended the stockpile, insisting they’re preparing themselves for state budget shortfalls and cuts to Medicaid. 

“This has been our financial approach throughout our 30-year history: ensure funds are spent on health care for Orange County Medi-Cal members,” wrote agency spokesperson Janis Rizzuto in a statement. 

“There has been an even greater level of uncertainty and rapid changes in Medi-Cal based on legislation from the Federal and State governments,” she continued. “When the changes take effect, they could impact the financial stability of our health networks, community clinics and hospitals as well as our members’ access to medical and social services.” 

But the expansion of their reserves started in 2023, before either of those concerns were on the horizon. 

State Auditors Warn About Over-Saving

In May 2023, a state audit found that CalOptima was sitting on over $1.2 billion, over half of which were surplus funds that agency leaders hadn’t decided how to spend. 

That led to concerns from auditors, who highlighted how the agency’s surplus had swelled from $29 million in 2017 to $675 million in 2022. 

The number of people on their health plans grew by 50% from 2014 to 2022.  

[Read: State Auditor Found $1.2 Billion Laying Around at OC’s Health Plan For the Poor]

“The $675 million in surplus funds should have been used to improve services,” auditors wrote in a report to the agency. “These surplus funds represent $740 per member that CalOptima should have used as specified in county ordinance for purposes such as expanding access.”

Auditors noted that the agency’s reserve plan, which held around $570 million at the time, “appears reasonable” and encouraged them to just find a new home for the excess cash. 

Days after the report was released, CalOptima issued a statement highlighting over $600 million worth of programs they were sending excess funds to, including a $153 million program aimed at boosting hospital quality and a $100 million digital transformation strategy. 

“Opportunities to increase transparency and improve services provide a major benefit to CalOptima Health and the patients we serve,” said CEO Michael Hunn at the time. “CalOptima Health is leading the way in providing innovative health care solutions to our community.” 

The audit also noted Hunn’s salary, sitting at over $800,000 in 2023. 

Agency Leaders Boost Reserve Size 

When auditors examined CalOptima’s books, the agency had a reserve policy of keeping enough money on hand to support the agency’s operations for around a one and a half months assuming no other money was coming in. 

But shortly after auditors told the agency they needed to spend more money, board members started ratcheting up that reserve policy. 

In September 2023, less than six months after the audit, board members unanimously voted to change their reserve policy, adding in language stating they could save more if they wanted to. 

“This is a minimum threshold and not a mandate to draw reserves down to this level,” reads the agency’s updated policy. “The Board shall have discretion on the appropriate reserve level, above the minimum threshold, taking into account current and future economic conditions.” 

Nancy Huang, the agency’s CFO, told board members it was an important “clarification,” to make sure they maintained flexibility. 

A staff report pointed to budget concerns at the state level and worries around the federal debt ceiling impacting CalOptima’s funding.  

A Voice of OC review of the agency’s monthly financial disclosures found the board was still sitting on $682 million in unallocated funds by April 2024, with another $629 million in reserves.  

The next month, board members unanimously voted to expand the size of their reserve, pushing it up to allow them to hold three months of their operating budget in reserves at any given time. 

By June 2024, the agency’s unallocated funds dropped to $187 million – a nearly $495 million decrease in unassigned money. 

Meanwhile, the total reserve rose to over $1.1 billion, a $503 million increase,  according to the agency’s financial disclosures. 

Nine months later in March 2025, the agency’s unallocated cash had once again ballooned to $548 million, with the reserve now sitting at over $1.2 billion on top of that.

In April, board members again unanimously voted to increase the minimum size of the reserve to a maximum of four months, pledging it would guarantee “additional stability during potential delays.” 

That shift moved nearly all the unallocated funds into the agency’s reserve, swelling the reserve to $1.7 billion while another $130 million was left unallocated. 

As of May 2025, the healthcare plan has enough money in the bank to pay for its next five months of operations without a single dollar coming in from any outside entity, according to financial disclosures. 

Agency Leaders Defend Reserve Policy 

The agency’s second boost to the reserves comes amid increasing questions over the future of Medicaid, which just received a 15% cut under new federal legislation. 

There have also been increasing questions over funding to Medi-Cal, California’s main medicaid program, that was looking at a $6.2 billion funding gap before state leaders figured out a way to plug the budget. 

CalOptima’s leaders argue the savings are needed to avoid any potential cuts, claiming they spend 92 cents of every dollar on patient care. 

“The Board reviews available funds and has ultimate authority to adjust reserve levels to ensure the long-term financial stability of the plan,” Rizzuto stated. 

County Supervisor Vicente Sarmiento, who also sits on CalOptima’s board of directors as its vice chair, defended the increased reserves in a statement to Voice of OC. 

“Strengthening the reserves allows the agency to protect critical medical services and avoid immediate disruptions in the event state payments are delayed or reduced,” Sarmiento wrote. “It was a proactive measure taken to safeguard the health and well-being of CalOptima members/Medi-Cal recipients amid a shifting fiscal landscape.” 

Doug Chaffee, the other county supervisor who sits on the board, also defended the shift, pointing to programs like CalOptima’s street medicine program and a workforce grant as signs they were using the money well. 

“We want to ensure that our local health care network is not impacted and compromised by any future disruption,” Chaffee wrote in a Tuesday statement. “I am committed to ensuring that CalOptima Health members are getting access to the care they need, uninterrupted.” 

Dr. Veronica Kelley, who heads up the county’s healthcare agency and is a non-voting board member, said she was not concerned about the savings in a Tuesday statement. 

“We trust that CalOptima’s board, of which I am a non-voting member, and leadership are taking thoughtful steps to balance long-term financial stewardship with the needs of the  Medi-Cal communities they serve,” Kelley wrote.

“As one of many partners working closely with CalOptima, we remain committed to supporting efforts that expand access to care for Orange County’s most vulnerable residents.”

Noah Biesiada is a Voice of OC reporter. Contact him at nbiesiada@voiceofoc.org.