Medi-Cal Under Threat: Who’s Covered and What Could Be Cut?
By Don Thompson
April 23, 2025
SACRAMENTO — Medi-Cal, California’s extensive Medicaid program, which operates on a staggering budget of $174.6 billion, serves as a vital health insurance lifeline for nearly 15 million residents with low incomes and disabilities. Compared to New York and Texas—which are the second and third largest states by Medicaid enrollment—California’s figures are remarkable, with the state enrolling twice as many individuals as New York and more than three times as many as Texas.
Enrollment and Benefits at Risk
Medi-Cal’s enrollment success can be attributed to California’s policy of extending eligibility beyond federal requirements, allowing more low-income residents access to healthcare. The program offers a wide array of benefits including vision, dental, and maternity care, many of which are predominantly funded by federal dollars. However, this expansive structure is now facing political scrutiny.
Democratic leaders are voicing concerns over proposed cuts amounting to $880 billion from GOP budget plans, which could impose stricter eligibility criteria, including work requirements. Republicans contend that rising costs stem from fraud and the program’s expansion, particularly citing the inclusion of immigrants regardless of their legal status.
The urgency of the matter was highlighted recently when Governor Gavin Newsom’s administration borrowed $3.4 billion to address an unexpected shortfall in Medi-Cal funding. In April, lawmakers allocated an additional $2.8 billion for the current fiscal year. Despite the fiscal challenges, Governor Newsom has defended efforts to broaden coverage, pointing out that California’s uninsured rate among residents under 65 has fallen to a record low of 6.2%, as reported by the California Health Care Foundation.
Who Benefits from Medi-Cal?
Currently, more than a third of Californians rely on Medi-Cal or the Children’s Health Insurance Program for important health services, including doctor visits and mental health therapy. For families, Medi-Cal provides essential support to ensure individuals with disabilities and seniors can remain at home, along with coverage for caregivers. The program also funds nursing care for seniors, critical for maintaining their quality of life.
Majority of enrollees qualify due to income levels at or below 138% of the federal poverty line, which amounts to $21,597 for individuals and $44,367 for a family of four. Although these figures are relatively low compared to California’s median household income of over $96,000, they are still significantly more lenient than states like Alabama and Florida.
As of now, Medi-Cal provides coverage for approximately 7.3 million low-income families, alongside about 5 million low-income adults without dependents, plus an additional million individuals with disabilities. Moreover, it covers about 1.4 million seniors over the age of 65 for essential services not included in Medicare, which encompass long-term care and various forms of preventive care.
Financial Outlook for Medi-Cal
Funding for Medi-Cal derives significantly from the federal government, which covers approximately 60% of its costs. Out of the near $175 billion budget for the current fiscal year, the federal contribution is projected at $107.5 billion. The state’s general fund contributes an additional $37.6 billion, with other revenue sources including taxes on hospitals, managed care organization fees, tobacco taxes, and rebates from pharmaceutical companies, amounting to around $29.5 billion.
California benefits from a matching federal rate of 50% for basic services such as coverage for children and low-income pregnant women. However, under the Affordable Care Act, the state receives a higher matching rate of 90% for the 5 million newly enrolled individuals.
Potential Cuts and Future Implications
The political landscape suggests that if sweeping reductions to Medicaid occur at the federal level, the ramifications could be profound. Experts warn that essential services may face cuts, particularly if GOP proposals to introduce work requirements for nondisabled adults go into effect, which could affect over 1 million enrollees in California alone.
Additionally, lawmakers could consider retracting the Medicaid expansion that was enabled by the Affordable Care Act. This action could cost California billions yearly if the state decides to continue coverage for the additional beneficiaries who came on board under the expansion.
Efforts could also be made to restrict how states, including California, access federal funds through provider taxes, which generate significant revenue for the state—a risk that has previously been raised in political discussions.
Any funding cuts would likely force California officials to make tough decisions about maintaining services. Compromises could involve eliminating optional benefits such as dental and vision care or cutting reimbursements to the managed care plans that serve the majority of Medi-Cal recipients—strategies that were employed during the financial crises in preceding years.
As Medi-Cal faces these mounting challenges, the future of this essential program remains uncertain, with significant impacts for millions of Californians who depend on it for their healthcare needs.
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