Faced with a $12 billion budget deficit for the upcoming fiscal year, California Gov. Gavin Newsom has proposed substantial cuts to healthcare initiatives in a revised budget plan.
The May Revision, unveiled May 14, proposes a $321.9 billion budget, which includes $226.4 billion from the state general fund and $15.7 billion in state reserve funds. Amid the projected revenue shortfall, the administration is targeting healthcare spending cuts, with a significant focus on Medi-Cal, the state’s Medicaid program that serves 15 million residents.
The most contentious proposals include eliminating free healthcare for low-income undocumented immigrants, imposing $100 monthly Medi-Cal premiums for select populations starting in 2027, and restricting overtime for in-home supportive service workers. Additionally, the state plans to cut payments to federally qualified health centers, reinstate asset limits for seniors and disabled adults, and reduce Proposition 56 supplemental payments to dental and women’s health providers.
The budget also proposes to eliminate GLP-1 weight loss drug coverage under Medi-Cal and introduce a rebate aggregator to negotiate lower drug prices.
The California Hospital Association denounced the budget revision, arguing that it undermines voter-approved healthcare funding and jeopardizes access to care for vulnerable populations.
“Just two days after a congressional committee released a federal budget proposal that would hollow out Californians’ healthcare services through drastic Medicaid cuts, the state’s May budget revision proposal piles on,” Carmela Coyle, president and CEO of the California Hospital Association, said in a statement. “The state would fill its spending gap by taking $1.6 billion from resources that voters directed to Medi-Cal providers and protecting access to care.”
Ms. Coyle has urged lawmakers to reject the “smoke and mirrors” budget and honor the intent of Proposition 35 — a 2024 ballot measure that permanently extended a tax on managed health insurers to fund Medi-Cal services, pending federal approval.
Shannon Udovic-Constant, MD, president of the California Medical Association, also condemned the diversion of Proposition 35 and 56 funds, warning that the budget proposal undermines voter trust and would exacerbate California’s healthcare crisis.
“Instead of honoring the clear intent of Prop 35 and voters — to increase access to care for Medi-Cal patients — the governor is proposing to use this money to patch a budget shortfall of the state’s own making,” Dr. Udovic-Constant said in a statement. “This isn’t just a broken promise — it’s a dangerous precedent that will worsen California’s healthcare crisis.”
With federal Medicaid cuts on the horizon and 15 million Californians dependent on Medi-Cal, providers warn that the proposed budget threatens access to care, especially for the state’s most vulnerable populations.
“CMA is committed to increasing access to care and ensuring these funds go where voters intended, not for solving a budget problem of the state’s own making,” Dr. Udovic-Constant said.
