California legislature secures Medi-Cal expansions in new budget agreement

In a win for California Democrats, the almost-finalized $262.6 billion “June 28th Package” budget agreement between the state legislature and Gov. Gavin Newsom provides funding for expanding Medi-Cal coverage to undocumented individuals over 50 and for removing the Medi-Cal asset test for seniors.

These changes to Medi-Cal were key priorities for legislative Democrats, who included them in their original budget proposal. Lawmakers are expected to finalize the package during floor session on Monday.


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Currently, undocumented individuals under 26 are eligible for Medicaid. While both Democratic lawmakers and Newsom have called for expanding eligibility to undocumented seniors (a large number of which lack coverage and rely on safety net providers), Newsom was initially more conservative, calling for an expansion to individuals 60 and older.

The legislature has also consistently called for removing the asset test for Medi-Cal-eligible seniors, which removes an otherwise eligible senior’s Medi-Cal coverage if they have $2,000 or more in savings. According to California Health Advocates, the test disproportionately impacts people of color because they’re more likely to have cash savings instead of exempt assets, such as property. 

Following the legislature’s request to remove the test, the Newsom administration conducted an evaluation of the fiscal and caseload impacts of eliminating it in February. From this evaluation, the California Department of Health Care Services (DHCS) concluded that eliminating the asset test would be a viable option, and received approval for the state to do so from the Centers for Medicare and Medicaid Services (CMS). 

This may have contributed to Newsom ultimately agreeing to the proposal. Until last week, the governor had been silent on the effort.

For the new expansion to older undocumented individuals, the agreement allocates $48 million in General Fund dollars in FY 2021-2022, with an expected growth of $1.3 billion in General Fund dollars by FY 2024-2025. 

This growth is attributable to the fact that implementation of the expansion is not expected to occur until May 2022, meaning there will only be two months of costs for FY 2021-2022. In addition, caseloads and service costs for the newly eligible population are expected to increase over the next few years before stabilizing.

The new budget provides $197 million from the General Fund and $394 million in total funds for eliminating the asset test. These funds are allocated for FY 2022-2023, when the expansion is expected to take place.

The updated budget agreement comes on the heels of the “placeholder” budget the legislature passed earlier this month before a constitutional budget deadline that threatened the loss of their paychecks. 

Although this new package will serve as the “official” budget passed before the start of California’s next fiscal year on July 1, negotiations will continue on several issues that Newsom and legislators have yet to reach an agreement on. These changes — including yet-to-be negotiated funding for childcare, infrastructure, and wildfire response — will take the form of budget “trailer bills.”