Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Advanced Search Go
Free Newsletter Sign Up

California Health Expansion Plans Shelved in Virus Budget Crunch

May 14, 2020, 9:24 PM

California Gov. Gavin Newsom reined in his health-care agenda to buffer the state against a recession caused by the coronavirus, dealing a blow to his plans to expand health coverage.

The Newsom administration backtracked on the governor’s January announcement to offer Medicaid coverage, known as Medi-Cal, to undocumented seniors. That will save about $87 million from the general fund, according to the revised budget.

The budget pulls back on the California Advancing and Innovating Medi-Cal (CalAIM) initiative, a broad set of reforms to address the high health-care costs for a small subset of Medi-Cal beneficiaries—saving $347.5 million in the general fund. A plan to extend Medi-Cal to seniors and disabled people with incomes between 123% and 138% of the federal poverty level is also shelved to save $66.7 million.

The state’s Department of Finance projected a $54 billion deficit through fiscal year 2021 as a result of the pandemic, and said the unemployment rate could hit 18%.

Newsom appealed to President Donald Trump to sign the latest $3 trillion coronavirus aid package, saying many of the budget cuts could be erased by federal support.

“Let’s support that federal appropriation, and if we do, that will soften the blow and give us that pathway to get back on our feet,” Newsom said at a press conference Thursday.

The White House has threatened to veto the Democrat-backed aid package, called the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act (H.R. 6800).

Newsom Thursday unveiled a $133.9 billion general-fund budget for next fiscal year, down about 13% from the $153.1 billion he proposed in January. This year’s budget is $149.7 billion.

In January, Newsom called for $105 million to deal with loss of revenue faced by clinics that participate in the 340B program, which helps them provide medication for Medicaid recipients.

His revised budget withdraws that proposal, as well as his plan to create a new Office of Health Care Affordability. The office would set cost targets and collect data from health-care providers, with the possibility of penalties if physicians, hospitals, or other providers don’t meet the targets.

To contact the reporter on this story: Tiffany Stecker in Sacramento, Calif. at

To contact the editors responsible for this story: Fawn Johnson at; Andrew Childers at