Context:

California Governor Gavin Newsom plans to halt the enrollment of low-income immigrants without legal status into the state's Medi-Cal program starting in 2026, with existing enrollees facing a $100 monthly premium from 2027. This decision is prompted by a $2.7 billion cost overrun and economic uncertainties due to federal tariff policies. While Newsom previously defended the expansion for its long-term savings, the budget strains have necessitated this rollback to maintain fiscal stability. The state anticipates saving $5.4 billion by 2028-2029, although the changes won't affect children or current enrollees. Newsom attributes these financial challenges partly to past federal policies and ongoing debates over Medicaid funding cuts, amid broader budgetary pressures from wildfires and economic volatility.

Dive Deeper:

• Governor Newsom's proposal affects low-income immigrants without legal status, stopping new Medi-Cal enrollments in 2026 and imposing a $100 monthly premium for those already enrolled starting in 2027. This is part of measures to manage costs amid budgetary strains.

• The Medi-Cal expansion initially aimed to provide universal health care but exceeded its budget by $2.7 billion, leading to fiscal challenges. Newsom had previously defended the expansion for its potential long-term savings despite a $6.2 billion Medicaid shortfall.

• California's budget faces additional pressures from federal tariff policies, which have cost the state an estimated $16 billion in tax revenue. These economic uncertainties force tough decisions on state-funded programs.

• The governor's office projects the proposed changes will save $5.4 billion by 2028-2029, a move deemed necessary to ensure Medi-Cal's viability for all Californians. The freeze will not impact children or current enrollees, though the duration of the freeze remains unspecified.

• California's fiscal situation is further complicated by anticipated Republican-led federal cuts to Medicaid and penalties for states providing health care to immigrants without legal status. This context influences ongoing budget negotiations with state lawmakers.

• In response to these financial challenges, Newsom is scaling back baseline spending and negotiating with lawmakers on budget priorities. California's budget, the largest among U.S. states, must be finalized by June, with expectations of continued deficits.

• The state's financial strategy includes maintaining the universal transitional kindergarten program and increasing film and TV tax credits to retain industry jobs. These measures are part of efforts to alleviate budget deficits exacerbated by external economic factors.