California's 2026-27 Budget: Impact on Medicaid and Medi-Cal
On June 29, California Governor Gavin Newsom, alongside legislative leaders, announced the completion of the state's budget for 2026-27. Central to this budget are measures to maintain fiscal responsibility while addressing federal policy changes impacting Medicaid and Medi-Cal. The budget maintains essential Medi-Cal services, allocates funds for struggling safety-net hospitals, and addresses Covered California affordability. However, it incorporates strategic delays and selective reductions in care management. Additionally, certain non-citizen enrollees will transition to a more complex fee-for-service framework.
The budget, largely influenced by temporary financial strategies, leaves long-term structural issues for the next governor, who assumes office in January. This incoming administration will face immediate challenges posed by federal policy changes, affecting resources dedicated to California's healthcare safety net that serves its population of 39 million.
The California Health Care Foundation (CHCF), led by senior policy officers Marissa Montano and Kimberly Chen, is actively preparing for this governmental transition. Critical areas of focus include managing non-citizen enrollees, county responsibilities in public health, and potential increases in emergency room visits and financial pressures on providers.
One significant legislative directive requires the Department of Finance to develop a plan by March 2027. This plan mandates large employers to help offset taxpayer expenses for Medi-Cal-enrolled employees. The new governor’s stance on this proposal may be influenced by a November ballot measure regarding a proposed tax for funding social services.
Amid fiscal pressures, modernizing Medi-Cal remains a vital opportunity. The Future of Medi-Cal Commission is anticipated to release a comprehensive ten-year reform plan in early 2027 to guide systemic improvements. Concurrently, California's health workforce shortage, particularly in rural and underserved areas, demands attention. New federal policies on healthcare visas and student loans, along with workforce burnout and early retirements, exacerbate this challenge.
With advancing artificial intelligence (AI) policies aimed at mitigating bias and enhancing transparency, California must develop regulations that do not inadvertently create barriers to care. Ensuring equitable AI adoption across Medi-Cal and the safety net is crucial.
As California approaches the gubernatorial election, candidates are outlining their strategies for these critical issues. Key topics like managed care organization taxes, corporate healthcare fees, and safety-net funding are expected to feature prominently in campaign platforms and debates. The forthcoming administration’s initial budget proposal, anticipated in January 2027, will provide further insights into the state’s future health policy trajectory.
In California, there is also a target to elevate primary care spending to 15% of total healthcare expenditure by 2034. The CHCF outlines several strategies for health plans aimed at enhancing primary care, improving outcomes, reducing disparities, and supporting a sustainable health system.