DC Explained: Medi-Cal Cuts Loom in San Diego as ‘Big Beautiful Bill’ Begins to Hit Home

Since President Donald Trump and Congress enacted H.R. 1 — the bill formerly known as the “One Big Beautiful Bill Act” — back in July, many local leaders have sounded alarms about what the new law will do to Medi-Cal, California’s health insurance program for low-income individuals and families.

County Board of Supervisors Chair Terra Lawson-Remer warned that, “These cuts are real and the fallout is coming fast.” Community-based nonprofits such as San Ysidro Health, where the majority of patients are on Medi-Cal, are worried about their clients losing access to care. And major systems such as UCSD Health are citing mounting financial pressures from “federal impacts to health care” as justification for recent layoffs.

What’s happening here? Like most things about American health care, it’s complicated. Because the changes federal lawmakers have set in motion are so large and consequential, it’s worth unpacking what they could mean for San Diego, and what might happen next.

What Does H.R. 1 do to Medi-Cal?

H.R. 1 is a massive budget bill that Congress adopted under special reconciliation rules, allowing the legislation to avoid a Senate filibuster and pass with a simple majority. Republican leaders in Congress and the White House authored and advanced the bill primarily to extend soon-to-expire tax cuts enacted during the first Trump administration in 2017. Those tax cuts, plus a few others added to the final bill, will cost the U.S. Treasury a whopping $4.5 trillion over the next 10 years.

To help the legislation appear a bit more fiscally responsible, the bill’s authors included more than $1 trillion in net spending reductions. Most of those cuts came from two programs: the Supplemental Nutrition Assistance Program (SNAP, known as Cal-Fresh in California), and Medicaid (known as Medi-Cal in California).

Medicaid, which accounts for most of the bill’s spending cuts, is funded jointly by federal and state governments. Most of California’s Medi-Cal expenditures are matched 1:1 with federal dollars; for a subset of low-income adults who became eligible under the 2010 Affordable Care Act, the federal government covers 90 percent of costs. This past year, federal funding for Medi-Cal totaled more than $100 billion, and the program covered nearly 15 million Californians, more than one-third of the state’s residents. A similar share of San Diego County residents — about 1 million altogether — rely on Medi-Cal.

H.R. 1 wrings federal savings from Medicaid/Medi-Cal in two main ways. First, it effectively limits eligibility for the program by increasing paperwork requirements for enrollees; imposing work requirements on certain types of program participants; and making several categories of immigrants ineligible for full Medi-Cal participation. Second, it reduces federal contributions to the program, mostly by limiting special taxes on health care providers that states use to help pay for their share of Medicaid spending.

These cuts were controversial, to put it mildly. Congressional Democrats and health care stakeholders decried the bill as “Robin Hood in reverse.” Republican leaders cast the cuts as necessary to curb waste, fraud, and abuse, and to ensure that the non-deserving poor did not benefit from free government-sponsored health care.

How Will Medi-Cal Cuts Affect San Diego?

Low-income individuals and families will bear the primary impacts of the new eligibility rules for Medi-Cal. The bill’s work requirements apply largely to non-elderly childless adults, who account for 327,000 current local Medi-Cal recipients, according to County estimates. Added paperwork burdens will require many of these same individuals to more frequently submit documents to verify their eligibility. Both of these provisions will go into effect in January 2027. And in a year’s time, an estimated 75,000 local immigrants — people who are in the United States legally but lack permanent residency status, such as refugees and asylees — could lose Medi-Cal eligibility altogether.

Most experts expect that these rules will not only cut off newly ineligible people from Medi-Cal, but also will unfairly terminate eligible individuals and families, or prevent them from enrolling in the first place. Similar policy experiments in Arkansas and Georgia validate those concerns.

State and local governments will bear added costs, too. Conducting employment checks and verifying other eligibility paperwork more frequently will cost San Diego County between $25 and $68 million annually, according to staff estimates. The law’s limitations on provider taxes could dramatically reduce the amount of federal matching funds California can access, and force the state to curtail Medi-Cal eligibility further, or adopt cuts that curb enrollees’ access to services. What’s more, the law will place greater demands on San Diego County Medical Services, a program that funds health care for uninsured adult residents, and make it harder to provide supportive services to the county’s homeless population.

And Medi-Cal cuts will affect local health care providers, who depend on the program to pay for care they deliver. Impacts could be especially significant for providers already facing financial challenges, such as Tri-City Medical Center in Oceanside and Palomar Health, not to mention community-based clinics such as San Ysidro and Family Health Centers, where two-thirds of patients are on Medi-Cal. Ultimately, patients of all kinds, not just those covered by Medi-Cal, could end up navigating a system that offers fewer facilities, fewer clinicians, and fewer services.

What Happens Next?

Most of the changes H.R. 1 makes to Medicaid don’t take effect immediately, but phase in over the next 1-2 years. Notably, the bill’s authors scheduled many of these changes to take effect after the 2026 midterm elections, in hopes that they might avoid political penalties for supporting broadly unpopular cuts. Now, Congressional Democrats are trying to repeal those cuts in exchange for agreeing to support legislation to avert a federal government shutdown come Oct. 1.

In the likely event the cuts move forward, federal officials will have to develop regulations in the coming months that further define program eligibility and federal contributions to Medicaid under the new law. Policymakers in Sacramento and here in San Diego County will then need to decide how to respond, which could involve spending more state and local dollars to close significant budget gaps that emerge, or trimming Medi-Cal eligibility and benefits. And program directors and providers will have to adapt their staffing and systems to these new and uncertain realities.

In the end, H.R. 1 could take San Diego back to the future: to a pre-Affordable Care Act future, where many more people lack health insurance, and the whole region pays the price in higher costs for uncompensated care, lower access to services, and poorer health outcomes. Chances still remain to avoid that future, but local, state, and federal officials have a tall order ahead if they wish to slow down that DeLorean.  

The post DC Explained: Medi-Cal Cuts Loom in San Diego as ‘Big Beautiful Bill’ Begins to Hit Home appeared first on Voice of San Diego.