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May Revision: State to move about 2 million Medi‑Cal members with 'unsatisfactory' immigration status to fee‑for‑service, DHS says
Summary
DHCS told the Assembly subcommittee that a September CMS clarification requires transitioning approx. 2 million Medi‑Cal members with unsatisfactory immigration status from managed care to fee‑for‑service on Jan. 1, 2027; DHCS also proposed premium increases, reinstated asset tests and other benefit refinements to address budget pressures.
The Department of Health Care Services (DHCS) told the Assembly Budget Subcommittee on Health that federal guidance requires states to deliver emergency‑scope Medi‑Cal for individuals with unsatisfactory immigration status (UIS) through a fee‑for‑service structure rather than risk‑based managed care.
"This change is not a change in Medi‑Cal eligibility; it is a change in the delivery system," said Tyler Sadwick, DHCS state Medicaid director. He said the department plans to operationalize the eligibility‑system updates in late December and switch affected members to fee‑for‑service on Jan. 1, 2027. Sadwick estimated the population includes about 2 million members, including undocumented individuals and other groups federally treated as eligible for emergency‑only coverage.
DHCS said the shift will mean certain managed‑care‑only benefits will no longer be available to UIS members under managed care — for example, some community supports and enhanced care management are managed‑care benefits — though DHCS said some care coordination can continue in fee‑for‑service and counties will continue to provide specialty behavioral health and long‑term services.
Michelle Boss, DHCS director, framed the operational steps and fiscal assumptions. The May Revision assumes net savings associated with the change in delivery system but also new costs to manage the transition: the department requested provisional authority for up to $25 million (general fund) for state operations to support the conversion (notice and communications, utilization reviews, provider outreach) and $33 million in local assistance for increased claims processing volume. DHCS projected a budget‑year general‑fund reduction tied to UIS delivery‑system changes of about $471 million (total funds $583 million), with larger ongoing savings reflected in later years.
DHCS also outlined other May Revision measures to reduce the state's structural shortfall: raising monthly Medi‑Cal premiums for certain adults with UIS from $30 to $50 (estimated savings $427 million in 27‑28), reinstating a limited Medi‑Cal asset test for seniors and people with disabilities (projected caseload losses of roughly 25,900 in the budget year), elimination of optional adult acupuncture, caps to PACE payments at actuarially sound lower bounds, and refinements to community supports and Enhanced Care Management eligibility and utilization controls. DHCS estimated savings and costs for each element and acknowledged these changes introduce volatility into forecasting.
Assembly members pressed DHCS on implementation details, including how members would be notified, whether trusted providers would be available under fee‑for‑service, and how continuity of care for high‑need patients would be preserved. Sadwick said the department plans outreach, multilingual FAQs, provider outreach to encourage enrollment in fee‑for‑service billing, and targeted monitoring of authorization and referral data to avoid disruptions.
No formal action was taken at the hearing; legislators sought additional data and signaled a desire for more details on provider access and transition safeguards before approving final budget language.
