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DHCS and DSS propose multiple Medi‑Cal and IHSS reductions to close $12B shortfall; lawmakers and advocates warn of health and equity harm
Summary
To close a $12 billion general‑fund shortfall the administration proposed a slate of Medi‑Cal and IHSS changes: a freeze on optional expansion enrollment for some immigrants, $100 monthly premiums for state‑only adults, elimination of select state‑only benefits, a pharmacy savings package and IHSS hour and eligibility changes.
Overview Department of Health Care Services and the Department of Social Services presented a wide package of May‑Revision budget solutions aimed at trimming general fund exposure in Medi‑Cal and long‑term supports. Administration staff described a $12 billion general fund shortfall and said the health and human services budget — which makes up about one‑fifth of the general fund — must bear a portion of the adjustment.
Key DHCS proposals presented - UIS enrollment freeze: an enrollment freeze for full‑scope state‑only Medi‑Cal adults with "unsatisfactory immigration status" effective Jan. 1, 2026, producing scored multi‑year savings in the May Revision. DHCS estimated cumulative, long‑run savings but acknowledged disenrollment impacts would accumulate over multiple years. - $100/month premiums: a proposal to levy a $100 monthly premium for adult beneficiaries in the optional expansion with unsatisfactory immigration status, starting Jan. 1, 2027; the administration's estimate assumed a phased disenrollment effect (DOF and LAO asked for further modeling). DHCS estimated a modest near‑term fiscal effect that grows in later years. - Elimination of state‑only benefits: proposals to eliminate several state‑only benefits for UIS adults, including adult dental (07/01/2026), state long‑term‑care coverage for certain adults (01/01/2026), and wrap payments to FQHC/RHCs for UIS patients — measures the administration said would materially reduce stateonly spending. - Pharmacy and rebate measures: a suite of proposals to tighten pharmacy controls and increase rebates, including a PBM rebate aggregator, updated rebate percentages for HIV/AIDS and oncology drugs, step therapy and prior authorization in some classes, and an exclusion of GLP‑1 weight‑loss coverage (ensuring diabetic indications preserved). DHCS estimated roughly $1 billion in pharmacy‑related savings across several proposals. - Provider payments and Prop 56: the May Revision proposes eliminating Proposition 56 supplemental payments for dental, women's health and family planning supplemental payments, saving approximately $504 million in general fund, and suspending a cohort of loan‑repayment awards; LAO, providers and lawmakers raised concerns about access and lost federal match.
DSS IHSS proposals DSS presented five major IHSS proposals tied to the broader Medi‑Cal discussion: - Eliminate IHSS for undocumented adults age 19 and older (DSS estimated full‑year and pro‑rated savings, and said implementation would require coordination with DHCS with a proposed effective date Jan. 1, 2026). - Cap provider hours: limit provider work to 50 hours per week (DSS estimated this would reduce aggregate overtime hours and scored savings but acknowledged county and implementation issues; travel time would not count toward the cap). - Residual program automation: align IHSS residual program eligibility with Medi‑Cal redeterminations by automating the existing statutory linkage (DSS said the current process is manual and uneven across counties; proposal would make implementation consistent statewide and prevent inadvertent continuation of state‑funded residual cases). - CFCO penalties: require counties to cover penalties when enhanced Community First Choice Option (CFCO) matching funds are withheld because reassessments are overdue; DSS noted counties can prioritize CFCO reassessments to avoid penalties. - Asset‑test conformity: align IHSS eligibility with the proposed reinstatement of Medi‑Cal asset limits; DSS estimated smaller IHSS impacts because many affected populations are not in IHSS or are SSI‑linked.
Committee and stakeholder reaction Senators and the LAO repeatedly pressed DHCS and DOF for more granular modeling, alternative revenue options, and the long‑term effects of eligibility and benefit cuts. Committee members repeatedly emphasized equity concerns: many of the budget proposals would selectively reduce benefits for noncitizen or recently lawfully present people, seniors, and people with disabilities.
Advocacy groups, provider associations and hundreds of individual commenters warned that eligibility and benefit cuts would create real human harm — increased emergency care, institutionalization, home‑lessness for care recipients, loss of community providers and a higher total cost of care in later years. County associations warned the proposed CFCO penalty pass‑through would hit local budgets and social services staffing capacity.
Status No subcommittee votes were taken. DHCS and DSS were asked to provide more detailed fiscal and operational modeling, lists of affected contracts/cases, and legal analyses in writing prior to final budget decisions.
