In a significant policy shift, California Governor Gavin Newsom announced plans to halt the enrollment of additional low-income immigrants without legal status in the state-funded Medi-Cal health care program starting in 2026. Furthermore, beginning in 2027, those already enrolled will be required to pay a monthly premium of $100. This decision arises from unexpected costs associated with the program and economic uncertainty linked to federal tariff policies, as explained by Newsom during a press conference on Wednesday.
California was one of the pioneering states to extend free health care benefits to all low-income adults, regardless of their immigration status, a bold initiative that Newsom championed. This expansion aimed to bring the state closer to achieving universal health care for its residents. However, the actual costs of this ambitious plan exceeded initial estimates by a staggering $2.7 billion, contributing to financial strains on the state budget.
Despite earlier assurances in March that he would not consider rolling back health benefits for low-income immigrants, Newsom now faces a $6.2 billion shortfall in Medicaid funding. He had previously defended the expansion, arguing that it ultimately saves the state money over time. Notably, the Medi-Cal program is entirely state-funded, relying on state revenues rather than federal dollars.
Under the new plan, low-income adults who do not have legal status will no longer be eligible to apply for Medi-Cal starting in 2026. However, those currently enrolled will not be removed from their plans due to the enrollment freeze, and children will remain unaffected by these changes. The duration of this enrollment freeze has not been specified by Newsom’s office.
Beginning in 2027, adults categorized as having "unsatisfactory immigration status" on Medi-Cal—comprising both those without legal status and those with legal status who are ineligible for federally funded Medicaid—will be required to pay a $100 monthly premium. This fee aligns with the average premiums paid by individuals on subsidized health plans through California's health marketplace. Presently, most individuals on Medi-Cal do not incur any premiums.
According to estimates from Newsom’s office, these proposed changes could save the state approximately $5.4 billion by the 2028-2029 fiscal year. The governor's office emphasized the necessity of these steps to ensure fiscal stability and to safeguard the long-term viability of the Medi-Cal program for all Californians. The expansion of Medi-Cal, coupled with escalating pharmacy costs and an increase in enrollment among older individuals, has compelled California to borrow funds and authorize new financing to address the substantial budget deficit encountered earlier this year.
The announcement comes at a critical time, as Newsom prepares to address an updated budget amid ongoing pressures from wildfires, shifting federal tariff policies, and the financial burden of the health care expansion. Lawmakers anticipate a multibillion-dollar shortfall this year, with projections indicating continued deficits in the years to come. Newsom is expected to attribute some of these fiscal challenges to former President Donald Trump’s tariff policies, which he estimates have cost the state around $16 billion in tax revenues.
As negotiations regarding the budget commence, the response of California Democrats, who control the Legislature, to Newsom's plan to freeze new Medi-Cal enrollment for some immigrants remains uncertain. A finalized budget proposal is required to be signed by June, and Assemblymember Jesse Gabriel, chair of the budget committee, has already indicated that the upcoming budget will be challenging, necessitating difficult decisions.
Looking ahead, analysts warn that California may be confronted with even larger deficits in the coming years, potentially reaching tens of billions of dollars, driven by economic sluggishness and stock market volatility resulting from ongoing tariff disputes. The budget proposal initially presented by Newsom in January included minimal new spending, yet it allows for the full implementation of the nation’s first universal transitional kindergarten program and boosts the state’s film and TV tax credit to $750 million annually to revitalize Hollywood jobs lost to other states.
Newsom has also called on the federal government to enact a $7.5 billion film tax credit to further support the industry. Last year, in response to the state’s budget crisis, Newsom and the Legislature agreed to draw from the state’s rainy day fund, implement spending cuts—including nearly a 10% reduction across most state departments—and temporarily raise taxes on certain businesses to address an estimated $46.8 billion budget deficit.
