The new federal budget signed into law by President Donald Trump is expected to raise some health care insurance premiums and force millions off coverage, reverberating the most in lower-income families and communities that are already struggling.
Trump’s new budget reduces spending for Medicaid — called Medi-Cal in California — by $1 trillion over the next 10 years. These savings would happen in part because new requirements will result in people falling off coverage.
In addition, some people enrolled in Covered California, the state’s marketplace for subsidized health plans, can expect new rules and higher costs, which means more people will be unable to afford the insurance.
Over the next 10 years, the federal changes are estimated to cost the state $28.4 billion and result in 3.4 million Californians losing coverage, according to an estimate from Gov. Gavin Newsom and state health officials.
Less federal funding for Medi-Cal means California will have to make decisions on who is covered and which services are offered. That loss of coverage could be a big blow to California, where lawmakers like to boast about having one of the nation’s lowest uninsured rates.
Alex Rossel, CEO of the community clinic Families Together of Orange County, says as people lose coverage, they’ll get sicker and be left in debt. “All that hard work that clinics have been doing to help people manage their chronic illnesses… is going to be in jeopardy,” he said.
And the effects of these changes could be felt beyond people enrolled in Medi-Cal and Covered California as clinics and hospitals warn that their financial challenges are likely to be exacerbated. Some may have to reduce services or close their doors.
Here are five things to know about how the new federal budget will affect Californians:
Some Medi-Cal enrollees will have work requirements and co-pays
Most notably, the new law requires adults ages 19 to 64 to report at least 80 hours a month of “community engagement,” which could be employment, school or volunteer work.
People who fail to do so will no longer qualify for Medi-Cal. Parents of children 13 and under and people with mental and physical disabilities will be exempt from the work requirements. The new requirement takes effect Dec. 31, 2026, although states could choose to start sooner.
The Urban Institute estimates that this rule alone could force up to 1.4 million Californians off their Medi-Cal insurance in the first year of implementation — not necessarily because they don’t work, but because filing paperwork is likely to pose a challenge for many enrollees. Enrollment counselors say some workers, such as housekeepers and gardeners, don’t have regular paychecks or documentation to prove their employment.
This same group of adults will have to reapply for coverage every six months, instead of once a year. And those who earn more than $15,060 a year, starting in October 2028, may have a co-pay of up to $35 per visit — although the exact amount will be up to states. Some visits will be exempt, such as prenatal and primary care, pediatric care and emergency room visits. (A single adult qualifies for Medi-Cal with an annual income of up to $21,597.)
Higher premiums for Covered California
One of the most significant changes is by omission: The Republican-led Congress opted to not renew some Affordable Care Act subsidies that will expire at the end of this year.
Nearly 90% of Californians who purchase insurance through Covered California, the state’s Affordable Care Act insurance exchange, receive financial assistance from federal subsidies that help lower monthly premiums.
On average, for all enrollees, premiums are expected to increase by 66%, or $101, per month starting next year. Lower-income people will see the biggest premium increase because they receive more subsidies, said Covered California Executive Director Jessica Altman.
Those making less than 400% of the federal poverty level (about $60,240 per year for an individual) are projected to pay an average of $191 more monthly, according to Covered California data.
More than 170,000 middle-income enrollees will lose financial assistance entirely.
Other changes made in Trump’s sweeping budget and policy bill include the elimination of automatic renewal, more income verification requirements and limiting special enrollment periods. The groups most likely to forego coverage because of administrative barriers are those who are young and healthy, Altman said.
Combined, the added enrollment complexities, along with higher out-of-pocket costs, are expected to drive nearly 600,000 Californians off of coverage, according to Covered California projections.
Hospital cuts could impact everyone
When people lose coverage, they are likely to skip routine care; they wait until they are very sick and then visit an emergency room. And without insurance, most people cannot afford to pay their hospital bills.
For hospitals, more uninsured patients means less compensation.
The law also adds new restrictions on provider taxes that states levy on hospitals and insurers to draw down matching federal funds to help pay for Medi-Cal. Hospitals receive payments from the revenue generated by these taxes that help them fill the gaps from traditional reimbursement.
Rural and community hospitals that care for a large share of low-income patients enrolled in Medi-Cal may have an especially difficult time absorbing the losses, so they may have to cut services, reduce staff or close, hospital leaders say.
“Hospitals will be forced to make difficult decisions, and access to vital health care services will be jeopardized for all Californians — not just those who rely on Medi-Cal for their health care coverage,” Carmela Coyle, the president of the California Hospital Association said in a statement.
In a recent press briefing, Newsom noted that a number of hospitals in California have been struggling for some time. In 2023, California rolled out $300 million in interest-free loans to bail out 17 distressed hospitals. The state, currently dealing with a budget deficit, would have a harder time helping hospitals again.
“Those distressed hospital loans came at a time of abundance. Those distressed hospital loans came at a time when we had much more stability with state funds and federal funds, and they were 3x the request for support,” Newsom said.
A funding ban for Planned Parenthood
Effective immediately after Trump signed the bill, Planned Parenthood clinics were banned from receiving federal Medi-Cal payments. Three days later, a federal judge temporarily blocked the funding cut after Planned Parenthood sued.
But as the litigation plays out, advocates say the move could be financially devastating to clinics across the country. In California, a million people use Planned Parenthood clinics each year, and Medi-Cal makes up 80% of its patients.
Federal law already prohibits the use of federal dollars to pay for abortions except in extremely limited instances. But Planned Parenthood does much more than that for patients. While it’s the largest abortion provider in the state, abortions account for less than 10% of its services. Contraceptives, sexually transmitted infection testing and treatment and check ups account for the vast majority of patient visits.
California Planned Parenthood clinics stand to lose more than $300 million, jeopardizing their ability to remain open. The national Planned Parenthood association estimates that 200 clinics across two dozen states are at risk of closure.
All clinics are open and taking patients, said Jodi Hicks, affiliate CEO and president. But the funding cuts could amount to a de facto abortion ban because in many California communities, Planned Parenthood is the only provider that performs abortions.
“People should be angry,” Hicks said. “We will fight back with every tool that we have to ensure that patients are able to be seen at our health centers, but the damage of defunding an entity that has such a large footprint in California is deep.”
Some kids will lose health care and food stamps
The vast majority of health and social services cuts in the federal budget are aimed at adults, but experts say kids will suffer as well. That’s because many of the changes implemented for adults, like work requirements and more frequent income eligibility checks can impact the eligibility of the entire family.
“There are a lot of ways that kids can fall through the cracks,” said Mike Odeh, senior health policy director for Children Now.
About 5.5 million children in California, half of the state’s youths, use Medi-Cal. The state insurance program also pays for some school-based health services, such as counseling and speech therapy.
One of the biggest health cuts targeting children specifically restricts eligibility for the Children’s Health Insurance Program to legal permanent residents, meaning other immigrant children with temporary legal status such as visas or refugee status could not qualify. California already provides health care for all children regardless of immigration status, but the federal prohibition means the state will have to pay more if it wants to continue covering them.
On top of the Medi-Cal cuts, the budget bill makes significant changes to the Supplemental Nutrition Assistance Program, often referred to as food stamps. It institutes stricter work requirements for many adults including veterans and parents of teenagers, ties future spending to inflation and shifts more of the cost-sharing onto states. Similar to the immigration requirement for children’s Medi-Cal, food stamp eligibility will also be restricted to legal permanent residents.
Newsom’s office estimates that 735,000 people will lose food stamps. Early estimates from the Urban Institute project that 3.1 million California families will lose at least some of their food assistance. About a third of all newborns in California are enrolled in food stamp programs, according to the Public Policy Institute of California.