Proposed Medicaid cuts could have devastating impact in California, UC Berkeley analysts say

A plan to impose historic cuts on the federal Medicaid program could lead millions of low-income Californians to lose health care coverage and cause a cascade of negative health and economic impacts across the state, according to analyses authored by UC Berkeley experts.

Almost four in 10 Californians rely on Medi-Cal for their health care, says a report by Miranda Dietz, Nari Rhee and Laurel Lucia at the UC Berkeley Labor Center. Before the measure was approved yesterday in the U.S. House of Representatives, the researchers cited an external study showing that 2.3 million to 3.5 million Medi-Cal recipients could be at risk.

“We know just how important Medi-Cal is for our state, what an integral part of our health care system it is — from the coverage it provides to millions of people, to the support it gives to health care providers and health care workers, and then just the overall impact that those federal dollars have on our economy,” said Dietz. “This would be a major cut that really would impact all of us.”

The budget plan sent to the U.S. Senate for action would impose requirements that most Medicaid recipients hold a job or attend school, and regularly document their work and schooling. But most adults receiving Medi-Cal already work or attend school, the Labor Center report says, and the reporting requirements threaten to tangle them in bureaucratic red tape.

The proposed new requirements could lead to confusion, delays — and cancelled coverage.

A cascade of harmful impacts to health and economies

The measure passed yesterday as part of the Republicans’ “One Big, Beautiful Bill” represents the toughest restrictions ever placed on federal Medicaid programs. Reporting requirements would be more demanding, and recipients who don’t meet the requirements would find it more difficult to re-enroll. Fewer recipients would be exempt from the rules.

The Labor Center, a branch of the Berkeley Institute for Research on Labor and Employment, has extensively studied the health, economic and policy aspects of Medi-Cal. Recent research has detailed the impact of potentially massive federal cuts.

The harm would extend beyond recipients: The health of their children also could suffer as families fall deeper into stress.

Health care networks could lose essential revenue, especially in rural areas such as the Central Valley, where a high share of residents are enrolled in Medi-Cal. Health facilities might shrink or close. Tens of thousands of doctors, nurses and other health workers could lose their jobs, and the lost income and reduced spending could lead to economic harm throughout those communities.

A separate report by Lucia last month said federal cuts to Medicaid funding could lead over time to the loss of 109,000 to 217,000 health care jobs in California, while reducing state and local tax revenues by up to $1.7 billion.

Very simply, Medicaid saves lives. There’s good evidence on this now.

Miranda Dietz

The Medi-Cal program relies on both state and federal funds, and California Gov. Gavin Newsom, a Democrat, is also proposing to scale back some Medi-Cal benefits. But the federal cuts proposed by Republicans would be massive: The most recent estimates by the Congressional Budget Office projected more than $800 billion in cuts over the next 10 years.

The measure requires recipients of federal Medicaid dollars to document 80 hours per month of work, public service or school. Some groups would be exempted — parents of minor children, for example, or people with disabilities, complex medical conditions or substance abuse issues.

But most of the adults at risk of losing health care are already working, the Berkeley authors report. They cite a Kaiser Family Foundation study showing that 63% of adult Medi-Cal recipients hold paying jobs; another 29% can’t work because of family caregiving responsibilities, because they’re in school or because of an illness or disability.

The proposals under negotiation in Washington are intentionally “adding red tape to get people to fall off” the Medicaid rolls, said Dietz. “Requiring people to renew their eligibility every six months rather than every 12 months — that’s twice the amount of paperwork, and twice the chance for people to fall off because something gets lost in the mail.”

Cautionary tales: Arkansas, New Hampshire and Georgia

Arkansas and New Hampshire have taken a similar approach in recent years, the authors wrote.

When Arkansas became the first state in the nation to institute work requirements in 2018, some 18,000 adult recipients were knocked off the rolls within six months. A federal judge ended the work requirement in March 2019.

The Berkeley authors wrote that a subsequent study in the New England Journal of Medicine found that most people targeted by the Arkansas policy “had never heard of it, were confused about whether it applied to them, or had difficulty accessing assistance related to reporting requirements.”

The New Hampshire program soon met a similar fate.

Georgia in 2023 imposed strict work requirements on Medicaid recipients, and enlisted a vintage-car mechanic to endorse the initiative in a glossy media campaign. Within months, however, the mechanic’s health policy had been cancelled twice by bureaucratic red tape, and the mechanic went public with his frustration.

“Other states’ experiences demonstrate that work requirements do not increase employment among enrollees,” the Labor Center report said. “Instead, their onerous documentation requirements increase administrative costs and reduce enrollment and access to care, including for people who are already working or otherwise should be exempt.

“For policymakers interested in encouraging employment, this reduction in care access is counterproductive: Research shows that access to health care improves individuals’ ability to find and keep jobs.”

The threat to California’s rural communities

Dietz is a senior policy researcher at the Labor Center and a project director for the California Simulation of Insurance Markets initiative. In an interview, she said the consequences of deep Medicaid cuts could be “devastating” in the state’s rural regions.

While 38% of Californians are supported by Medicaid funding, in some parts of the Central Valley more than half of the population is enrolled in Medi-Cal.

“Rural hospitals are deeply reliant on Medi-Cal for their funding,” Dietz explained. “If that funding gets cut, or the number of people coming through the door with Medi-Cal goes down, then they have more uncompensated care that they’re providing. That would make it harder for them to stay open or shut down services.

“That means that for all of us, that hospital or that particular department would not be available.”

But, Dietz said, if less health care is available for people in need, the implications are clear.

“Very simply, Medicaid saves lives,” she said. “There’s good evidence on this now, with economists confirming that if you have comprehensive health insurance coverage, you’re more likely to get the care that you need. You’re less likely to die.

“So there could be huge impacts for the folks who wind up uninsured as a result of these policies.”

UC Berkeley Labor Center resources:

• California Could Lose Up to 217,000 Jobs if Congress Cuts Medicaid
• Medi-Cal Enrollment and Spending by District and County 2024
• Medi-Cal Enrollment (All Ages) and Spending by District and County 2024
• Medi-Cal Enrollment Among Children and Teens by District and County 2024
• California Health Care Employment by District and County 2023