California’s Gov. Newsom releases 2023-2024 budget with Medi-Cal as priority, but advocates say it’s not enough


Hannah Saunders


Gov. Gavin Newsom announced California’s $297 billion 2023-2024 budget proposal on January 10th, which is a notably lower amount than California’s budget for the 2022-2023 fiscal year of $308 billion due to budget cuts Newsom made to make up for the state’s deficit. 

The budget includes a $230.5 billion investment for the Health and Human Services Agency (CalHHS), $71.5 billion of which would come from the general fund. CalHHS oversees departments and entities that provide health and social services to the most vulnerable individuals within the state, and public health services to all Californians.


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“With our state and nation facing economic headwinds, this budget keeps the state on solid economic footing while continuing to invest in Californians – including transformative funding to deliver on universal preschool, expand health care access to all and protect our communities,” Newsom said. “In partnership with the Legislature, we’ll continue to prioritize the issues that matter most to Californians while building a strong fiscal foundation for the state’s future.”

The proposed budget has significant adjustments, such as the creation of California’s Behavioral Health Community-Based Continuum Demonstration (CalBH-CBC). The Demonstration is a critical portion of CalAIM (California Advancing and Innovating Medi-Cal), and includes statewide and county opt-in components to expand behavioral health services. The department released the CalBH-CBC Demonstration concept paper on November 15th, 2022, which announced DHCS’s intent to apply for a new Medicaid Section 1115 demonstration.

The Demonstration expands the continuum of community-based behavioral healthcare services for Medi-Cal beneficiaries living with serious mental illness and serious emotional disturbance, with a focus on children and youth, individuals who are at risk or are experiencing homelessness, and justice-involved individuals. It will also highlight California’s ongoing behavioral health initiatives and be informed by findings from DHCS’s 2022 Assessing the Continuum of Care for Behavioral Health Services in California.

The budget allocates a total of $6.1 billion to the Demonstration, consisting of $314 million from the general fund, $175 million from the Mental Health Services Fund, $2.1 billion from the Medi-Cal County Behavioral Health Fund, and $3.5 billion in federal funds. Improvements would be made to the integration of medical, behavioral health, and social services for foster children and youth. 

Under the Demonstration, Newsom also wants to strengthen community-based services, as well as clarify insurance coverage for children and youth using evidence-based therapies and home-based services. The investment would add crucial treatment and supports, and would allow counties to cover certain community-based services such as supportive employment, and rent and temporary housing for up to six months for certain high-need beneficiaries.

The budget’s proposed CalAIM Transitional Rent Waiver Amendment would allow up to six months of rent or temporary housing to eligible individuals experiencing homelessness or at risk of homelessness, and would transition individuals out of institutional levels of care, corrections facilities, the foster care system, and those who are at risk of inpatient hospitalization or ER visits. 

Newsom’s budget also proposes $844.5 million, with $635.3 million in general funds for the 2023-2024 year, to expand the scope of Medi-Cal eligibility to all income-eligible adults aged 26 to 49, regardless of immigration status, starting on January 1st, 2024. 

President and CEO of the California Association of Health Plans (CAHP), Charles Bacchi, released a statement in response to Gov. Newsom’s 2023-2024 budget announcement. While Bacchi championed several initiatives in the budget, he expressed his dissatisfaction that there aren’t more provisions to increase affordability for Californians who aren’t eligible for Medi-Cal.

“We are disappointed the budget does not include funding to support increased affordability measures for people purchasing coverage through Covered California exchange,” Bacchi said. “We believe this is an important investment and will continue to support efforts to improve affordability and access to coverage for these individuals and families.” 

Part of Newsom’s budget proposes the renewal of the Managed Care Organization (MCO) Tax that would be effective from January 1st, 2024, through December 31st, 2026. The tax renewal would assist with maintaining funding for Medi-Cal for the expansion of Medi-Cal to all income-eligible individuals. To fund this, Newsom proposes a $1.3 billion investment, with $317 million in reduced general fund spending, from 2023-2024. 

The budget’s Safety Net Plan update includes $28.7 million, with $22.1 million taken from the general fund, and would expand safety net services to support those with complex needs. The updated plan incorporates the development of a residential program for adolescents and adults with high intensity co-occurring developmental disabilities and mental health diagnoses. 

It would also allow for the conversion of two Stabilization Training Assistance Reintegration homes to Intermediate-Care-Facility-licensed homes, adjustments to Crisis Assessment Stabilization Teams staffing, the expansion of supports for foster youth who are eligible for regional center services, and the establishment of an Autism Services Branch to support the statewide focus on addressing the needs of those living with autism spectrum disorder. 

Erica Murray, president and CEO of the California Association of Public Hospitals and Health Systems, issued a statement in tandem with Newsom’s announcement, where she explained her belief that more funding is needed.

“We commend the Governor for his support of the health care safety net, including the preservation of the Medi-Cal expansion and the inclusion of the Managed Care Organization tax to support the Medi-Cal program,” Murray said. “While we appreciate the proposed investments and are sympathetic to the State’s budget situation, public health care systems continue to face a looming financial crisis.”

Murray explained how funding is needed now more than ever to protect individuals who are most at risk, but in order to do so, the state must support the hospital industry’s request for one-time funding to protect access for patients who are most in need.

“Public health care systems, like other providers across the state, are experiencing an unprecedented workforce crisis that has only been made worse by the unrelenting stressors of the pandemic,” Murray said. “We urge the full funding of the workforce investments that were passed as part of the 2022 State Budget, which are desperately needed to grow and rebuild the health care workforce.”

Over the next several months, the administration will continue to work with the federal government, including Congress, to leverage more federal resources and assess operational needs, to inform the 2023-2024 investment in these efforts, which will be included as part of the May Revision. Appropriations subcommittees will review the budget by category, and the legislature must pass its own budget package before the governor signs it.