Medi-Cal Under Siege: What’s Safe and What’s at Risk?
SACRAMENTO, Calif. – Medi-Cal, California’s $174.6 billion Medicaid program, provides health insurance to nearly 15 million residents with low incomes and disabilities. The Golden State covers twice as many people as New York and more than three times as many as Texas, the second and third largest Medicaid populations, respectively.
What’s at Stake for Medi-Cal?
Medi-Cal’s high enrollment stems from California’s commitment to exceed federal eligibility standards, offering coverage to a broader population. The state also includes a wide range of benefits such as vision, dental, and maternity care. These services are largely funded by federal dollars but still affect the state’s budget.
However, Medi-Cal is currently caught in the eye of a political storm.
Democrats argue that the primary threat to Medi-Cal comes from the $880 billion in proposed GOP budget cuts being debated in Washington, D.C. Health experts warn that these cuts could lead to stricter eligibility requirements—such as work mandates—and cuts to benefits to meet savings goals. On the other side, Republicans claim that Medicaid’s costs have soared due to fraud and waste, blaming state Democrats for expanding benefits to immigrants, regardless of their legal status.
In March, Governor Gavin Newsom’s administration secured a $3.4 billion funding boost to address a Medi-Cal shortfall. In April, legislators approved an additional $2.8 billion to cover the rest of the gap. While Newsom acknowledges the need for adjustments, he defends California’s efforts to extend coverage to more people. According to the California Health Care Foundation, as of 2022, California’s uninsured rate for residents under 65 hit a historic low of 6.2%.
As lawmakers debate funding for this vital safety-net program, here’s a look at who’s covered and what’s at risk.
Who’s Covered?
More than a third of Californians rely on Medi-Cal or the related Children’s Health Insurance Program (CHIP) for essential health services, from doctor visits to mental health care and dental treatment. Medi-Cal also offers crucial prescription drug and therapy coverage. It’s a lifeline for families, allowing people with disabilities and seniors to live at home while providing coverage for their caregivers. Medi-Cal even covers nursing home care for the elderly.
Most enrollees qualify because their income is 138% or less of the federal poverty level—$21,597 per year for an individual or $44,367 for a family of four. While these thresholds are relatively low, especially in a state where the median household income exceeds $96,000, California’s eligibility is far more generous than states like Alabama, where the eligibility limit is just 18% of the poverty level, or Florida, at 26%.
In contrast to these states, California extends coverage to low-income adults without dependents, including more individuals with disabilities who work, as well as prisoners and other groups who wouldn’t qualify under federal guidelines. This expansion has been critical in offering health coverage to more people across the state.
Currently, Medi-Cal serves about 7.3 million low-income households and 5 million adults, the majority of whom are without dependents. Additionally, approximately 1 million individuals with disabilities rely on the program, while 1.4 million individuals aged 65 and older receive benefits not covered by Medicare, such as long-term care, dental, hearing, and vision services.
Where Does the Money Come From?
The federal government covers approximately 60% of Medi-Cal’s expenses. Of the $175 billion allocated for 2025, Washington is expected to contribute $107.5 billion, while California’s general fund will cover $37.6 billion. Other funding sources include hospital fees, managed-care provider taxes, cigarette tax revenue, and pharmaceutical rebates, which together make up the remaining $29.5 billion.
For core services like children’s and low-income pregnant women’s coverage, California receives a 50% match from the federal government. However, for the 5 million Californians enrolled through Medicaid expansion under the Affordable Care Act (ACA), the federal government covers 90% of the cost.
How Is the Money Spent?
On average, Medi-Cal spends about $8,000 per recipient. However, costs vary widely depending on the type of care. Individuals with disabilities, who make up only 7% of enrollees, account for 19% of the program’s total spending, with an average annual cost of $21,626 per person. Senior care costs average about $15,000 per recipient.
California also shoulders much of the cost of covering roughly 1.6 million undocumented immigrants, spending about $8.4 billion of the program’s $9.5 billion budget on this group.
What’s at Risk?
Despite past assurances that Medicaid would remain untouched, the current political climate poses significant threats to Medi-Cal. If Congress follows through with massive spending cuts to fund tax cuts, Medicaid benefits could be substantially reduced.
Republicans have proposed introducing work requirements for nondisabled adults, which could affect at least 1 million Medi-Cal enrollees in California, according to an analysis by the Urban Institute. Additionally, lawmakers may seek to cut back on the Medicaid expansion introduced under the ACA, which would deeply impact the 5 million Californians who gained coverage through this expansion.
California might also face pressure to limit certain funding mechanisms, such as the managed-care provider tax, which generates about $5 billion annually. If the federal government limits how these taxes are imposed, it could create a funding gap for the state.
If federal cuts occur, Newsom’s administration has acknowledged that the state would struggle to absorb the costs of maintaining current coverage. Republicans are also pushing for the state to end Medi-Cal coverage for undocumented residents, but Newsom and Democratic leaders have firmly opposed this move.
To stay within budget, California may need to cut optional benefits like dental and vision care or reduce payments to managed-care plans that cover 94% of Medi-Cal recipients. During the Great Recession, California made similar cuts, including eliminating adult dental and optometry benefits.
As Medi-Cal faces these potential cuts, many Californians could see their coverage and benefits dramatically reduced or eliminated. With the political battles over funding still ongoing, the stakes are high for those who rely on this critical health safety net.
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