California faces $28.4 Billion hit as Medicaid cuts slash Medi-Cal funding

San Diego, California – California is bracing for widespread consequences as the new federal budget signed by President Donald Trump begins to take effect. The sweeping legislation includes deep cuts to health care and social programs, particularly Medicaid—known in California as Medi-Cal—placing millions of Californians at risk of losing coverage, services, or access altogether.

The budget slashes Medicaid funding by $1 trillion over the next decade. State analysts estimate that this could cost California $28.4 billion and strip health insurance from 3.4 million residents. Most of those affected will be lower-income families, working-class adults, and people with chronic health needs—groups that depend heavily on Medi-Cal or subsidized plans through Covered California.

The damage is expected to extend well beyond just the Medi-Cal population. Clinics and hospitals, already operating on thin margins, could be forced to reduce services or close. California’s community clinics warn that cuts to patient coverage will lead to worsening health outcomes, more emergency room visits, and a rise in medical debt. Hospitals that serve a high share of Medi-Cal patients, especially in rural or underserved communities, are particularly vulnerable. They face not only a drop in patient reimbursements but also the loss of federal matching funds due to new restrictions on provider taxes used to fund Medi-Cal.

New federal requirements will also impose work reporting mandates on some adults enrolled in Medi-Cal and increase the frequency of eligibility checks. Advocates and researchers warn that the administrative burden of proving work hours or reapplying every six months could push as many as 1.4 million Californians off the program—not because they are ineligible, but because they cannot navigate the paperwork. Even those who remain eligible may face new co-pays of up to $35 per visit, starting in 2028, depending on income and service type.

Covered California, the state’s health insurance exchange, will also take a hit. The expiration of key federal subsidies is projected to raise premiums by an average of 66% next year. Those with the lowest incomes will bear the brunt. Nearly 600,000 Californians are expected to lose their coverage entirely, according to state projections.

Compounding the crisis, the budget includes a provision cutting off federal Medi-Cal reimbursements to Planned Parenthood clinics—an estimated $300 million loss in California alone. Though temporarily blocked by a judge, the funding ban could threaten the survival of many Planned Parenthood locations. For many Californians, particularly in rural or low-income areas, these clinics are their only access to reproductive health care, family planning, STI treatment, and basic wellness services.

Children are not spared. The changes indirectly impact pediatric coverage by tying eligibility to parents’ documentation and work status. Children of immigrant families, especially those without permanent residency, could lose access to health care through the federal Children’s Health Insurance Program. While California has extended coverage to all children regardless of immigration status, the loss of federal funding means the state will be on the hook to cover the gap.

Food security is also at risk. The federal budget tightens work requirements for the Supplemental Nutrition Assistance Program and limits eligibility to legal permanent residents, a change expected to remove 735,000 Californians from food stamps and reduce assistance for millions more.

California leaders have promised to defend the state’s safety net, but with a $12 billion budget deficit, the ability to absorb such losses is in serious doubt. As these federal changes take root, the consequences will ripple across the state’s health system, economy, and most vulnerable communities.