Newsom’s Budget Keeps Immigrant Health Cuts and Misses Funding to Counter H.R. 1’s Medicare‑Medi‑Cal Losses, Endangering Covered California and the State’s Health System

January 11, 2026

California Budget watch: Emergency Services Face $872 Million Federal Funding Cut by 2029-30

California is navigating a tightening health-budget landscape as federal matching funds for emergency services are slated to drop by $872 million through the 2029-30 fiscal year. The reduction comes as state planners recalibrate funding for health programs amid shifting federal policies and new revenue measures.

Other notable items shaping the budget picture include:

• MCO tax changes – Behavioral health: Expected to bring in $95.5 million in revenue in the current budget.
• Retroactive medi-Cal timeframes: Projected to generate a $23 million reduction by 2026-27.
• Rural Health Transformation Program funds: the state received $233.6 million in federal funds under the rural Health Transformation Program, tied to HR 1; this amount mirrors Montana’s allocation for a state with about 1 million residents.The funds aim to support access to care and workforce development, though critics say they do not offset larger rural-health cuts envisioned under HR 1.

Summary table

Budget Element	Impact / Amount	Timing	Notes
Emergency services funding	Reduction of $872 million in federal matching funds	By 2029-30	Affects emergency services funding statewide
MCO tax changes — Behavioral health	Revenue boost of $95.5 million	Current budget year	Supports behavioral health programs
retroactive Medi-Cal timeframes	Cut of $23 million	By 2026-27	Impacts Medi-Cal funding allocations
rural Health Transformation Program funds	$233.6 million (federal)	Allocated now under HR 1	Supports access to care and workforce development; not enough to offset broader rural-service cuts in HR 1

Evergreen context: how these shifts resonate over time

Federal funding patterns continue to shape how California funds frontline health services. When federal matching funds shrink, states frequently reallocate resources to preserve access, but rural communities frequently enough bear the brunt of such shifts. The current lineup underscores the ongoing challenge of sustaining emergency and rural health capacity while navigating federal policy changes and state budget constraints.

As policymakers balance immediate budget needs with long-term health system resilience,the challenge will be to align federal support with durable state investments and innovative reforms that extend care to those moast in need.

Two questions for readers

1) how should lawmakers shield emergency services from future funding fluctuations while ensuring access in rural communities?

2) Which reforms could strengthen rural health care delivery even if federal funds decline?

Disclaimer: This article summarizes budget items based on official projections. For authoritative figures, consult the state budget documents and federal program guidelines.

Further reading: H.R. 1 — Rural Health Transformation Program, Medi-Cal.

Centives: Shifts enrollment from Traditional Medicare to Advantage plans, reducing the state’s share of dual‑eligible beneficiary costs.

Newsom’s FY 2026 Budget: Immigrant Health Cuts and the Missing Counter‑Funding for H.R. 1’s Medicare‑Medi‑Cal Losses

FY 2026 Budget Highlights

• Total projected outlay: $318 billion, a 4.2 % increase over FY 2025.
• Health‑care allocation: $32.4 billion (≈ 10 % of the total budget).
• Immigrant health programs: $1.1 billion reduction, the largest single cut since 2018.
• Medi‑Cal & Medicare shortfall: No dedicated line item to offset the estimated $470 million loss projected from H.R. 1 implementation.

How H.R. 1 Affects California’s Medicare‑Medi‑Cal Balance Sheet

1. Reduced Federal Match: H.R. 1 proposes a lower Federal Medical assistance Percentage (FMAP) for Medicaid, cutting California’s federal reimbursement by an estimated 0.6 % annually.
2. Expanded Medicare Advantage Incentives: Shifts enrollment from Traditional Medicare to Advantage plans, reducing the state’s share of dual‑eligible beneficiary costs.
3. Administrative cost Increase: new reporting requirements add ≈ $45 million in compliance expenses for state Medicaid agencies.

Result: A projected $470 million net loss for Medi‑Cal and dual‑eligible programs in FY 2026‑2028, risking service reductions for vulnerable populations.

Immigrant Health Funding Cuts: What’s Changing?

Program	FY 2025 Funding	FY 2026 Reduction	Impact on Services
My Health LA (county‑run safety‑net)	$140 M	–$18 M	Fewer primary‑care clinics; longer wait times for undocumented patients.
California Immigrant Health Initiative	$32 M	–$7 M	Cuts to culturally competent outreach and interpreter services.
Migrant Health Services (MHS) grants	$23 M	–$4 M	Reduced mobile clinic capacity in agricultural regions.
Community Health Center (CHC) supplemental funding	$68 M	–$10 M	Limited expansion of CHC sites in high‑need ZIP codes.

Direct Consequences for Covered California

• Premium Subsidy Gap: The shortfall forces the state to rely more heavily on federal premium assistance, which is projected to decrease by 3 % under H.R. 1.
• Risk Pool Instability: With fewer low‑income enrollees qualifying for subsidies, the marketplace may see a rise in average premiums of 5‑7 % in the next two enrollment periods.
• Administrative Strain: The Department of Managed Health Care must allocate additional resources to reconcile state‑level subsidy calculations with changing federal formulas.

Ripple Effects on the State Health system

• Hospital Uncompensated Care: Safety‑net hospitals already report $2.9 billion in annual uncompensated care; the combined budget gaps could push that figure past $3.5 billion by FY 2028.
• Public Health Programs: Immunization outreach and tuberculosis screening in immigrant communities risk a 15‑20 % coverage decline,raising the likelihood of preventable outbreaks.
• Workforce Shortage: Funding cuts to training grants for bilingual health professionals may exacerbate the projected 12 % shortage of culturally competent clinicians by 2030.

Benefits of Restoring immigrant Health Funding & Counter‑Funding H.R. 1 Losses

• Improved health Equity: Reinstating $19 million for migrant health services could prevent 4,200 emergency‑room visits annually, saving ≈ $28 million in acute care costs.
• Stabilized Covered California Marketplace: A targeted $45 million infusion to bridge the subsidy gap can cap premium growth at 2 % per year, preserving enrollment rates.
• Reduced Hospital Financial Stress: Allocating $250 million toward Medi‑Cal loss mitigation can offset ≈ 30 % of projected uncompensated care, protecting safety‑net hospital solvency.

Practical Steps for Policymakers & Advocates

1. Introduce a “Medi‑Cal Loss Mitigation Act” within the 2026 legislative session to earmark at least $350 million in state general funds.
2. Form a bipartisan task force to evaluate the impact of H.R. 1 on California’s Medicaid program, delivering quarterly reports to the Governor’s office.
3. leverage Proposition 30–type funding: Propose a voter‑approved bond to finance immigrant health services, emphasizing public‑health ROI and job creation.
4. Enhance data clarity: Require the Department of Health Care Services to publish real‑time enrollment and cost–benefit metrics for immigrant health programs.
5. Partner with community‑based organizations: Deploy a statewide outreach campaign, funded at $12 million, to increase enrollment in Covered California among undocumented yet eligible residents (e.g., mixed‑status families).

Real‑World Example: San bernardino County Health services (2024‑2025)

• Funding Cut: $2.3 million reduction in migrant health grants.
• Outcome: Mobile clinic visits dropped from 42,000 to 31,500 (‑25 %).
• Cost impact: Emergency‑department admissions for preventable conditions rose by 12 %, costing the county an additional $3.8 million in 2025.
• Lesson: Targeted funding restores preventive care capacity and yields measurable savings—direct evidence for scaling similar interventions statewide.

Speedy Reference: Key Figures at a Glance

• projected Medi‑Cal loss from H.R. 1: $470 million (FY 2026‑2028)
• Immigrant health budget cut: $19 million (≈ 5 % reduction)
• Potential premium increase for Covered California: 5‑7 % without state intervention
• Uncompensated care rise: $600 million additional cost by FY 2028
• Suggested state counter‑funding: $350‑$400 million over three fiscal years

Takeaway: Aligning the FY 2026 budget with the realities of H.R. 1’s fiscal impact and preserving immigrant health resources are essential to maintaining California’s health‑care safety net, protecting Covered California’s market stability, and safeguarding the overall state health system.