Federal Policy

Medi-Cal Funding

Protecting Medi-Cal: Vital Health Coverage for Californians and Funding for California’s Public Health Systems

Medi-Cal, California’s Medicaid program, is a cornerstone of the state’s health care system, providing coverage to one in three residents. Through Medi-Cal, public health care systems serve 3.7 million Californian’s annually—comparable to the combined populations of Los Angeles and San Francisco—ensuring access to essential care for some of the state’s most underserved communities. 

Medi-Cal funding is critical to sustain this care, supporting preventive services, emergency treatment, mental health care, and specialized medical services for low-income individuals and families across California. 

However, proposed federal changes that would reduce state and provider funding and impose new requirements on enrollees threaten access to these essential services. If enacted, these cuts would lead to coverage reductions and place significant strain on California’s safety net, especially public health care systems, making it more difficult for millions to receive the care they depend on. 

Impact of Federal Cuts to Medi-Cal 

Proposed federal Medi-Cal cuts would be catastrophic, putting immense strain on the state’s public health care systems. 

Shrinking FMAP Support:  

Proposed reduction to the Federal Medical Assistance Percentage (FMAP) would lower the federal share of Medi-Cal, shifting more financial responsibility to states, counties, and public health care systems themselves, requiring either dramatic increases in state or local spending or in massive cuts to services, including layoffs. California’s public health care systems, which provide billions of dollars already in Medi-Cal matching funds on behalf of the state, would be disproportionately affected, putting access to essential care at risk and forcing reductions in essential services. 

Fundamental Restructuring of Medi-Cal: 

Proposals such as per capita caps and block grants would fundamentally restructure Medi-Cal, eliminating its entitlement structure and imposing strict funding limits. These constraints would compound over time, increasing financial pressure not only on the state, but also on public health care systems that contribute the non-federal share to draw down federal funds. Without the flexibility to adjust funding based on actual health care needs or public health emergencies, public health care systems could face deep reductions in key funding. Forcing them to scale back essential services or close their doors altogether, making it harder for Californians to access care.  

Protecting Key Medi-Cal Financing Tools: State Directed Payments, Provider Taxes, and the MCO Tax 

Medi-Cal has a long history of paying providers at rates below the actual cost of delivering care. To help address this problem, CMS allows states to establish provider taxes, MCO taxes and state directed payments (SDP’s).  These payments are essential Med-Cal payments that help expand access to care for patients and allow public health care systems and other providers who predominantly serve Medicaid patients to keep our doors open.  In many cases, state directed payments make up 50% or more of public health care system’s Medi-Cal revenue.  

Without this funding, California’s public health care systems will need to reduce services and staff, and potentially close. These impacts will be felt first by Medi-Cal patients but will ultimately ripple across entire communities that rely on these systems for emergency services, trauma care, and other essential health care infrastructure.  

 New Barriers and Bureaucratic Hurdles to Medi-Cal Enrollment: 

New federal requirements such as work mandates or additional paperwork, would create additional layers of bureaucracy and confusion for beneficiaries, which will result in millions of individuals across the country losing coverage.