California’s Medi-Cal program faces state and federal budget pressures

California’s Medicaid program, known as Medi-Cal, covers roughly one in three Californians — more than 15 million people. It’s one of the most generous Medicaid programs in the country, offering low-cost or free coverage for doctor visits, hospital care, prescriptions, mental-health services, and more.

In January 2024, the state became the first in the nation to extend full Medi-Cal benefits to all low-income adults aged 26–49, regardless of immigration status. That expansion stays in place for now under the 2025-26 enacted health budget, but significant changes are coming.

Beginning July 2026, the budget will end dental coverage for undocumented adults in Medi-Cal, leaving only emergency procedures covered. A year later, in July 2027, they will face a new $30 monthly premium to stay enrolled. The Department of Finance estimates that most of the projected $700 million in annual savings will come from people dropping coverage because they can’t afford to pay.

Why it Matters

The 2024 expansion gave tens of thousands of previously uninsured women access to preventive and specialty care for the first time. State analysts project that large numbers of undocumented adults will lose coverage once premiums begin in 2026. Public-health experts warn that the cuts could raise costs elsewhere, as untreated infections, diabetes, and oral-health issues end up in emergency rooms instead of primary-care clinics.

At the same time, federal policy is changing. The new One Big Beautiful Bill Act (OBBBA), passed in 2025, restructures Medicaid funding starting in 2026 and adds new work-reporting requirements in later years. Analysts expect the law to reduce federal Medicaid spending by hundreds of billions of dollars nationwide. That means California may have to make even more cuts to Medi-Cal, given the added burden on its state budgets.

Background

Medi-Cal is jointly funded by the state and federal governments and has long been central to California’s health-care system. The program expanded dramatically under the Affordable Care Act, then through a decade-long effort to cover undocumented residents — first children, then older adults, and finally working-age adults in 2024.

The 2025-26 Enacted Budget keeps that final expansion technically intact but introduces cost-saving measures aimed at the undocumented adult population. Ending dental coverage in 2026 is expected to save about $300 million annually, and the $30 monthly premium starting in 2027 is projected to save about $700 million — primarily from people losing coverage.

The rest of Medi-Cal’s benefits, including postpartum and behavioral-health expansions, remain in place for now. However, the Legislative Analyst’s Office warns that overall Medi-Cal costs will continue to grow faster than revenues, meaning further adjustments may be debated in the 2026–27 budget cycle.

Resources

KPBS - Advocates say revised Medi-Cal cuts still harm immigrant communities
Cal Matters - Hoping for ‘a miracle’ to cure fiscal woes, California lawmakers nix some of Newsom’s Medi-Cal cuts for immigrants
Legislative Analyst's Office - The 2025-26 California Spending Plan (Health)