SACRAMENTO — The state does not have the fiscal capacity to make up for the massive, oncoming federal cuts to healthcare programs used by millions of vulnerable Californians, a stark reality that will force state lawmakers to consider reducing benefits and eligibility and swell the number of residents without medical insurance.
That blunt assessment, released by the state’s Legislative Analyst’s Office, comes at a time when the state faces ongoing budget deficits — with a $17-billion shortfall estimated for the next fiscal year — and imminent cuts to food support programs, such as SNAP, caused by the government shutdown.
On Tuesday, Gov. Gavin Newsom said the combined fallout from the shutdown and the Republican-backed “Big, Beautiful Bill” has left states in the lurch.
We’re looking at “the largest cuts to Medicaid in American history,” Newsom said at a news conference. “They supported the largest cuts to food stamps and SNAP in American history — $186 billion over the next ten years — before this manufactured crisis, this decision they are making not to provide the contingency funds to mitigate the impacts.”
The governor said he’s working with state legislators to identify additional resources to help offset the cuts, but there’s only so much states can do.
Top California health officials on Monday also warned that the federal cuts will deliver a devastating blow to public health and affect all Californians, including those with private health insurance, as the state struggles to mitigate the damage.
“These changes will impact our emergency departments, rural hospitals, private and public hospitals, community health centers, ambulance providers and the broader health care system that serves every community,” said Michelle Baass, director of the California Department of Health Care Services.
Baass was among several experts who spoke at a briefing about the effects of HR 1, a massive tax and spending bill passed by the Republican-led Congress and signed by President Trump that shifts federal funding away from safety-net programs for the vulnerable and toward tax cuts and immigration enforcement. She said the legislation makes sweeping changes to Medi-Cal, as Medicaid is known in California.
It “will cause widespread harm by making massive reductions in federal funding and potentially cripple the health care safety net,” Baass said. “These changes put tens of billions of dollars of federal funding at risk for California and could result in a loss of coverage for millions of Californians.”
The nonpartisan Legislative Analyst’s Office, which advises the California Legislature on budget and policy issues, in an Oct. 24 report estimated the federal cuts could reduce funding “as much as tens of billions of dollars.” The report warned that about 1.2 million people may lose coverage under Medi-Cal, which provides healthcare to eligible low-income residents. Baass predicts that number may be much higher.
“The state does not have fiscal capacity to backfill all of the lost federal revenue resulting from H.R. 1,” the legislative report stated. “As such, the Legislature will want to consider how to balance Medi‑Cal eligibility, benefits, and financing moving forward. Changes to Medi‑Cal will come with key policy trade‑offs around access, costs, and other priorities that the Legislature will need to weigh.”
To alleviate some of the effects, state lawmakers could possibly raise existing taxes on private health plans and hospitals, but those extra costs probably would increase costs for all Californians seeking care at a time when people already are struggling with the state’s high cost of living.
About 15 million Californians — a third of the state — are on Medi-Cal, with some of the highest percentages being in rural counties. More than half of the children in California receive healthcare coverage through Medi-Cal, according to the state Department of Health Care Services.
Baass explained that the federal legislation creates new eligibility requirements for Medicaid. Starting in 2027, many individuals ages 19 to 64 will need to work for at least 80 hours a month, or perform 80 hours of community service or be enrolled in an educational program, to qualify. The law allows various exemptions, including pregnancy, disabilities, or caring for children under the age of 19.
She estimated that 3 million Medi-Cal recipients could lose coverage as a result.
“This would significantly drive up the uninsured rate that raises cost for hospitals treating uninsured patients,” Baass said.
Baass said HR 1, the “Big, Beautiful Bill,” also bans abortion providers from receiving federal Medicaid funding — even for healthcare services they offer that are not related to the procedure — and reduces federal dollars for emergency medical care for undocumented immigrants. It additionally limits state funding mechanisms, such as taxes paid by managed care providers, and establishes federal penalties for improper payments.
CalFresh, the state name for the Supplemental Nutrition Assistance Program, is expecting long-term cuts of at least $1.7 billion annually, said Jennifer Troia, director of the California Department of Social Services. About 395,000 people could lose their benefits for government food assistance.
SNAP benefits are also being hit by the current government shutdown, with payments temporarily halting altogether in November.
At the heart of the shutdown is a political standoff in Washington over the expiring tax credits for people who get health insurance through the Affordable Care Act, also known as Obamacare. Democrats said they will not vote to reopen the government until Republicans agree to renew the expanded subsidies. Republican leaders refused to negotiate until Democrats vote to reopen the government.
Covered California, the state’s Affordable Care Act health insurance marketplace, estimated over the summer that as many as 660,000 of the roughly 2 million people in the program will either be stripped of coverage or drop out because of increased cost and the onerous new mandates to stay enrolled.
Effects of the new federal cuts and policies are already being felt across the state and nation.
A Planned Parenthood program in Orange and San Bernardino counties announced its imminent closure earlier this month due to being federally defunded. Los Angeles County’s health system has implemented a hiring freeze and is bracing to lose $750 million per year for the county Department of Health Services, which oversees four public hospitals and roughly two dozen clinics. Meanwhile, food banks nationwide are seeking donations and preparing for longer lines.
Kim Johnson, secretary of the state Health and Human Services Agency, discussed how California is fighting back.
Newsom recently announced he is deploying the National Guard and fast-tracking $80 million to support food banks, she said. This came alongside the governor’s decision to allocate $140 million in state funding to Planned Parenthood.
Johnson said Atty. Gen. Rob Bonta has filed more than two dozen lawsuits related to HR 1.
“Here in California,” she said, “we will continue to mitigate the harm of these federal changes wherever we can.”