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Prepared by Precision Advocacy
California Health & Human Services Agency - Anticipated Impacts of HR 1
In preparation for several big changes as a result of federal bill HR 1, California’s Health and Human Services Agency released a webinar on July 21, outlining projected impacts the measure will have on Medi-Cal, Covered California, and CalFresh.
President Donald Trump signed HR 1 on July 4, 2025, which is the date some of the measure’s provisions became effective. Other provisions take effect in the future as outlined below.
Medi-Cal
Medi-Cal serves nearly 15 million Californians, roughly 35% of the state. As of May 2025, Orange County had 990,740 individuals enrolled in Medi-Cal - 6.7% of the state’s enrollment, surpassed in number only by Los Angeles, Riverside, and San Diego counties. HR 1’s amendments to federal law will fundamentally change the state’s capacity to provide care, extending to emergency departments, rural hospitals, private and public hospitals, community health centers, ambulance providers, and the broader healthcare system.
Director of the California Department of Health Care Services (DHCS), Michelle Baass, provided an overview of Medi-Cal impacts, categorizing them into eligibility and access requirements, financing restrictions, immigrant coverage limitations, and the abortion providers’ ban. DHCS is estimating overall impacts on Medi-Cal to be the potential loss of coverage for 3.4 million Medi-Cal beneficiaries and more than $30 billion annually because of changes to Medi-Cal.
Eligibility and Access Requirements. Changes to eligibility and access requirements include mandatory work requirements, semi-annual redeterminations, retroactive coverage restrictions, and cost sharing.
Mandatory Work Requirements - Effective January 1, 2027: New work requirements are anticipated to result in up to 3 million Medi-Cal members losing coverage and a loss of up to $22.3 billion in federal funding. They are also anticipated to raise costs for hospitals and clinics treating uninsured patients.
- States must condition Medi-Cal eligibility on compliance with work requirements for adults ages 19 through 64.
- Qualifying activities include completing at least 80 hours in a given month of work, a work program, community service, at least half-time enrollment in an educational program, or a combination of these activities. Alternatively, an individual may satisfy the work requirement by having an income of at least $580 per month.
- States can request an implementation delay of work requirements for up to two years through December 31, 2028, from the federal Health and Human Services Secretary, as long as the state is making a good faith effort to come into compliance.
- At minimum, states must verify compliance with work requirements at both application and renewal.
- Individuals who are discontinued because of not meeting the work requirement cannot access subsidized Covered California coverage.
- The law requires states to exempt certain groups and permits exemptions for those experiencing short-term hardships.
- The Federal Department of Health and Human Services must issue an interim final rule by June 1, 2026, and distribute $200 million in federal fiscal year 2026 to states for implementation.
Semiannual Redeterminations - Effective January 1, 2027: States will be required to redetermine eligibility for adults enrolled through the Affordable Care Act (ACA) Medicaid expansion once every 6 months. Currently, states may redetermine eligibility for the ACA expansion adults no more frequently than annually, or unless information received by a state indicates a change in circumstances. 6-month eligibility checks are anticipated to result in up to 400,000 Medi-Cal members losing coverage, higher costs for hospitals and clinics treating uninsured patients, and disruptions to care.
Retroactive Coverage - Effective January 1, 2027: Currently, when an individual enrolls in Medi-Cal, states must provide retroactive coverage for 3 months preceding the individual's Medi-Cal application. HR 1 shortens Medi-Cal retroactive coverage from 3 months to 1 month for ACA expansion adults and 2 months for all other Medi-Cal applicants. 86,000 Medi-Cal members annually are anticipated to be affected by this policy.
Currently, the Children's Health Insurance Program (CHIP) does not have retroactive coverage, and services may only be paid in the month of application. HR 1 allows states to provide 2 months of CHIP retroactive coverage.
Cost Sharing - Effective October 1, 2028: The cost sharing requirement directs states to impose cost sharing for services provided to ACA expansion adults with incomes above 100% of the federal poverty level ($15,560 annually). States would decide that amount not to exceed $35 per service, and subject to an aggregate limit of 5% of family income. The provision retains existing exemptions under current law for services such as prenatal family planning and certain emergency services, and provides new exemptions for primary care services, mental health care services, substance use disorder services, and services provided by federally qualified health centers, rural health clinics, and certified community behavioral health clinics. DHCS anticipates that the cost sharing requirement will limit access due to members delaying or foregoing care, and providers will likely see an increase in uncompensated care.
Financing Restrictions. Medi-Cal financing changes include provider tax limitations, state directed payment restrictions, establishment of the rural health transformation fund, and federal funding repayment penalties.
Provider Taxes - Effective July 4, 2025: HR 1 places a moratorium on future, new, or increased provider taxes and creates new requirements on provider tax frameworks. All states except Alaska use provider taxes to fund a portion of the non-federal share of their Medicaid programs.
Prior to HR 1, states were entitled to more flexibility in implementing provider taxes if they demonstrated to the Centers for Medicare and Medicaid Services (CMS) that the tax is generally redistributive, meaning that it does not shift the burden of paying the tax on to Medicaid providers. As enacted, HR 1 prohibits any tax that imposes a higher tax rate on Medicaid plans. The effective date of the revised tax framework is July 4, 2025, unless the Federal Department of Health and Human Services Secretary chooses to allow for a transition period of up to three years.
California’s current managed care organization (MCO) tax structure is non-compliant under these new parameters and will need to be modified to align with the new federal standards, likely through a change in state law that will generate significantly less revenue than the current tax. DHCS is estimating that the MCO tax revenue collected from January 1 to July 3, 2025, will total $2.6 billion. The new constraints also jeopardize other major provider taxes, including the Hospital Quality Assurance Fee, and limitations may undermine California’s strategy to finance the non-federal share of Medi-Cal.
Ramp Down of Provider Tax Cap - Effective October 1, 2027: For ACA expansion states such as California, HR 1 reduces the existing 6% cap on provider taxes by .5 percentage points per year, until the cap reaches 3.5% in 2032. Skilled nursing facilities and intermediate care facilities are exempt from this ramp down. Provider taxes are utilized to keep hospitals, nursing homes, physicians and other healthcare safety net providers stable.
State Directed Payments - Effective July 4, 2025: State directed payments (SDPs) are a Medicaid financing mechanism that allows states to direct how Medicaid MCOs pay providers. These payments are used to address state-specific health priorities, such as improving quality of care, enhancing access to services, or addressing specific needs of vulnerable populations.
Currently, SDPs may be made up to the average commercial rate. HR 1 limits the scope of any new SDP to 100% of Medicare rates for ACA expansion states like California and 110% of Medicare rates for non-expansion states. In California, both public and private hospitals have inpatient and/or outpatient rates exceeding Medicare. This provision significantly constrains the state's ability to raise the nonfederal share of Medi Cal funding, which may reduce provider participation and decrease access and Medi Cal.
Reduction in Existing State Directed Payments - Effective January 1, 2028: States with existing SDPs above Medicare rates will need to reduce payments by 10 percentage points per year, beginning in 2028, until the SDPs are no greater than 100% of Medicare payment levels for expansion states and 110% for non-expansion states.
Rural Health Transformation Fund: HR 1 establishes a $50 billion fund over 5 years for rural health providers, with the application date to be determined. CMS is required to approve or deny applications from states by December 31, 2025. The provision allocates $10 billion for each federal fiscal year starting 2026 through 2030, with half of the funding allocated equally across states with approved applications, and 50% allocated according to CMS discretion pursuant to specific rural impact factors. A broad range of healthcare providers will qualify for funding, including rural hospitals, rural health centers, federally qualified health centers, and community mental health centers.
Federal Funding Repayment Penalties - Effective October 1, 2029: HR 1 eliminates the ability for CMS to waive financial penalties for administrative payment errors associated with improper payments related to eligibility, beginning October 1, 2029, even if the state is implementing a corrective action plan to address them.
Reduction in Federal Medical Assistance Percentage (FMAP) for Emergency Medi-Cal - Effective October 1, 2026: New federal law prohibits states from receiving the 90% enhanced federal matching rate for emergency services provided to individuals who, but for immigration status, would have qualified for the ACA expansion. Instead, states will receive their regular FMAP, which for California is 50% for all emergency Medicaid services. This will require increased General Fund spending and/or a rollback of services covered under the emergency Medi-Cal benefit. This may increase financial pressure on safety-net providers, particularly hospitals that deliver high volumes of emergency care to non-citizens.
Immigrant Coverage Limitations. Effective October 1, 2026, approximately 200,000 immigrant Medi-Cal members will shift from satisfactory immigration status, eligible for full federal financial participation, to unsatisfactory immigration status, eligible only for emergency and pregnancy-related federal financial participation. States will no longer receive federal Medicaid funding for most refugees, asylees, victims of human trafficking, certain individuals whose deportation is being withheld, those who are granted conditional entry, or individuals who receive humanitarian parole. This will require increased state General Fund spending and/or a rollback of services covered under the emergency Medi-Cal benefit. Additionally, this may increase financial pressure on safety net providers, particularly hospitals that deliver high volumes of emergency care to non-citizens.
Abortion Providers Ban. For the 1-year period following the enactment of HR 1, this provision bars Medi-Cal participation by providers that offer abortion services. In California, roughly 80% of Planned Parenthood patients rely on Medi-Cal for reproductive health care. Impacts to California are estimated at $305 million in federal funding to providers offering abortion services, likely resulting in reduced services, limited appointments, or the closure of centers - particularly in underserved areas. On July 7, a federal judge in Boston issued a temporary restraining order that blocked the Trump administration from implementing this provision nationwide for 14 days.
Covered California
Jessica Altman, Executive Director of Covered California, outlined the impacts of HR 1 on Covered California, stating that as many as 660,000 of the current 2 million Covered California enrollees could go uninsured, all Covered California enrollees will see significantly higher costs, and it will be harder for Californians to obtain health care coverage and stay covered. As of March 2025, Orange County had 181,160 residents enrolled in Covered California (9.4% of the entirety), 159,970 who receive subsidies, and 21,890 who do not.
As California’s ACA marketplace, Covered California generally covers those who don't have access to health care through another source. It provides them with access to coverage, and tax credits that bring the cost of that coverage within reach for many. Below is a quick snapshot of changes to be implemented as a result of HR 1.
- Eliminates any income-based special enrollment period. This ends a practice that has allowed the lowest income marketplace enrollees, those just above eligibility for Medi-Cal, to enroll, even outside of the annual open enrollment period - beginning 2026.
- Eliminates caps on repayment of excess advanced premium tax credits. Tax credits are based on projected income. Higher than anticipated income results in a requirement to pay back a portion of the tax credit. Previous law capped repayments based on income - beginning 2026.
- Denies advanced premium tax credits to Medi-Cal enrollees who lost Medi-Cal coverage due to not meeting the work requirement - beginning 2027.
- Restricts premium tax credit eligibility to lawful permanent residents, Cuban and Haitian entrants, and Compact of Free Association migrants. Approximately 40 other categories of immigrants are currently eligible and will lose financial assistance - beginning 2027.
- Ends automatic reenrollment in coverage which is currently utilized by 70% of enrollees - beginning 2028.
- Ends conditional eligibility which is utilized until the paperwork has been submitted and approved that an individual is eligible for a tax credit - beginning 2028.
In addition to changes from HR 1, absent congressional action, enhanced premium tax credits expire at the end of 2025, which will increase prices for Covered California enrollees. Enhanced premium tax credits were introduced during the pandemic and increased the amount of premium assistance available for consumers already eligible. Enhanced tax credits bring $2 billion in annual premium savings to Covered California enrollees - an average of over $100 per month for each enrollee. It is projected that as many as 400,000 enrollees will lose coverage based only on this change.
CalFresh
CalFresh provides monthly food and economic benefits to more than 5.5 million low-income individuals and 3.3 million low-income households across California, with an average monthly benefit of $333 per eligible household, and $194 per individual. The Budget Act of 2025 includes $13.3 billion in federal funding for CalFresh benefits, and $2.7 billion in administrative funding which is shared by federal, state, and local governments ($1.4 billion federal, $1 billion state, and $300 million local). As of January 2025, the state had about 5.6 million CalFresh recipients, with 321,315 of them residing in Orange County.
During the webinar, Jennifer Troia, Director of the California Department of Social Services (DSS), provided estimates that HR 1 will cut federal funding for CalFresh benefits and administration by between $1.7 and $3.7 billion annually. As many as 395,000 Californians could lose eligibility for benefits, and the overall reduction in benefits may reach $827 million annually, likely increasing food insecurity, poverty, and child welfare involvement as a result of the losses of concrete food assistance. Additionally, there will be an estimated loss of $178 million in nutrition education funding known as CalFresh Healthy Living and a loss of $15 million in federal matching funds for the CalFresh Outreach Program.
Troia noted that although many HR 1 policies are effective upon enactment, states are still waiting for federal guidance with more details, including more information about implementation timing. Benefits and eligibility rules in California have not yet changed.
Administration Cost Sharing - Effective October 1, 2026: Prior to HR 1, CalFresh administration was shared with 50% of the cost covered by the federal government and 50% by the state. California’s 50% share is divided between the state (70%) and counties (30%). HR 1 decreases the federal share for administration to 25% and increases the state share to 75%. This is estimated to increase costs to California by $685. 2 million, which will be divided as stated in statute, with the state paying $474.2 million (55.2% of total) and counties paying $211 million (22.5% of total).
Benefit Cost Sharing - Effective October 1, 2027: HR 1 introduces benefit cost sharing based on the state's payment error rate related to eligibility and benefit determinations, which represents the sum of under and over payments of issued benefits. If the state's payment error rate is below 6% the federal government will continue to cover 100% of the cost of benefits. California's most recent error rate is over 10% which means the state would cover 15% of the cost of benefits, estimated at $2 billion annually. There is a delayed implementation trigger that may impact some states if the state’s payment error rate is equal to or above 20% when it's multiplied by 1.5.
Expanded Time Limit and Work Requirements for Able-Bodied Adults Without Dependents (ABAWDs) - Effective Upon Enactment: ABAWDs are limited to 3-months of CalFresh benefits in a 3-year period if they do not meet work requirements. Prior to HR 1, ABAWDs were defined as those aged 18 to 54 who can work and do not have a child, age 18 or under in their home. Under HR 1, ABAWDs are now considered to be individuals ages 18 to 64 who can work and do not have a child aged 14 or under in their home. HR 1:
- Eliminates work requirement exemptions for individuals experiencing homelessness, adults under age 24 who were in foster care on their 18th birthday, and veterans.
- Adds an exemption for Native Americans and those eligible for Indian Health Services.
- Removes the time limit waiver based on a lack of sufficient jobs which California has historically utilized.
DSS estimates that 303,000 ABAWDs are at risk of losing benefits if they are unable to comply with work requirements, equating to $499.1 million in federal funds annually.
Eliminates CalFresh Eligibility for Most Lawfully Present Non-Citizens - Effective Upon Enactment: Prior to HR 1, certain lawfully present non-citizens were eligible to receive CalFresh, including refugees, asylees and others. CalFresh will now only be available to U.S. citizens, lawful permanent residents, Cuban and Haitian entrants, and individuals who lawfully reside in the U.S. in accordance with the Compacts of Free Association. DSS estimates that approximately 74,000 individuals will lose eligibility under this provision, equating to $133 million in federal benefits lost annually.
Standard Utility Allowance Limitations - Effective Upon Enactment: The Low-Income Home Energy Assistance Program currently provides a payment known as the standard utility allowance subsidy to ensure that all CalFresh households can claim the highest available utility deduction. That option ensures the maximum allowable household utility expenses are deducted when determining CalFresh eligibility and benefits. Under HR 1, this option is now limited to households with an elderly or disabled member. Approximately 185,000 CalFresh households/444,000 individuals will see a reduction in benefits, and approximately 15,000 households/18,000 individuals will lose eligibility. This equates to a loss of approximately $183 million in federal benefits annually.
Restrictions on Internet Expenses - Effective Upon Enactment: HR 1 dictates that the cost of basic internet expenses must be excluded when determining the standard utility allowance for CalFresh eligibility.
Thrifty Food Plan Benefit Cap - Effective October 1, 2025: Households of 9 or more will be eligible for a capped amount of benefits under the Thrifty Food Plan, impacting approximately 43,000 individuals, who will see a reduction in benefits, equating to $11.3 million annually.
CalFresh Healthy Living Elimination - Effective October 1, 2025: Funding for CalFresh Healthy Living, a nutrition education and obesity prevention grant program was eliminated in HR 1. This results in the loss of $178.3 million in federal funds.
CalFresh Outreach Reduction - Effective October 1, 2026: HR 1 reduces the federal match for CalFresh outreach from 50% to 25% - a $15 million annual loss of funding.
The California Health and Human Services Agency is awaiting federal policy guidance that will provide further detail related to implementation and will be discussing mitigation strategies needed for any state policy changes and/or changes to funding. Additionally, the Assembly Budget Subcommittee on Accountability and Oversight is scheduled to meet on August 20, where lawmakers will discuss the impact of HR 1 on California.
Conditional Release Program for Sexually Violent Predators
The Joint Legislative Audit Committee held a hearing last week on the “Conditional Release Program for Sexually Violent Predators.” The hearing was Chaired by Senator John Laird (D-Santa Cruz) and Assemblymember John Harabedian (D-Pasadena) and attended by Assemblymembers Carl DeMaio (R-San Diego), Gregg Hart (D-Santa Barbara), and Juan Carrillo (D-Palmdale) as well as Senators Rhodesia Ransom (D-Stockton), Brian Jones (R- Escondido), and Suzette Martinez Valladares (R- Lancaster).
The State Auditor released the audit report on the Department of State Hospitals (DSH) Sexually Violent Predator (SVP) Conditional Release Program in November of 2024. The report found that program participants were less likely to reoffend while highlighting some of the challenges with placing program participants, monitoring Liberty Healthcare’s administration of the program, and program costs. During the hearing, Grant Parks, the California State Auditor, and Ben Ward, Audit Principal from the state department, gave an overview of the audit report.
Parks highlighted that the audit report found that SVP's participating in the Conditional Release Program were convicted of new offenses less frequently than SVPs who were unconditionally released by the courts and did not participate in the Conditional Release Program. By contrast, the rate of new offenses was higher for SVPs who were unconditionally released by the courts without participating in the program. 24 of the 125 unconditionally released SVPs were convicted of a new crime and these 24 SVPs were convicted of 55 new offenses, 42 of them were felonies and 13 of them were misdemeanors.
The auditor’s primary conclusion in the audit remains the same, despite a recent court ruling around the timing of placing SVPs into housing. It takes a long time for the DSH and its contractor, Liberty, to find suitable housing for SVPs in the community.
Senator Laird and several other legislators raised the issue of SVPs being placed in rural areas at higher rates due to the restrictions around where SVP’s can be placed.
Stephanie Clendenin, Director of the Department of State Hospitals (DSH); Chris Edens, the Chief Deputy Director of Program Services at DSH; and Kenneth Carabello, Senior Vice President atLiberty Healthcare were on hand to respond to the audit and answer questions from legislators. Clendenin highlighted the numerous challenges and hurdles in placing SVPs into communities given the constraints in law. Most SVP’s must be placed in the county where they originally resided.
Clendenin detailed how DSH has fully implemented each of the 5 recommendations of the audit report and discussed the audit’s recommendation to utilize transitional housing. After investigating its possible use, DSH determined that transitional housing would not work well in California, nor would it speed housing placement times.
She additionally testified that at any given time, DSH may have around 20 patients in the program, with very few counties having more than one SVP patient released through the program in the county simultaneously. If individuals could be placed in transitional facilities in alternate counties, any county identified for potential placement of these types of facilities would likely respond with significant protest against the placement of the facility into their county and against housing SVPs from other counties.
Addressing questions about a lack of competitive respondents to DSH’s request for proposal for services for its Conditional Release Program, Edens testified that DSH had issued 4 solicitations in the last several years. 1 in 2015, 3 in 2022, and 1 in 2023. DSH did not receive any responses other than from Liberty Healthcare, despite proactively reaching out to other prospective service providers. Clendenin emphasized how closely DSH is working with Liberty Healthcare on implementation of the program.
Legislators expressed concern and frustration over how SVPs are placed in their communities and pressed DSH’s opposition to using transitional facilities. Others expressed concern over the rising cost of the program and the lengthy time it takes to place SVPs into housing. Several legislators raised specific SVP placement cases and expressed their general dissatisfaction with Liberty Healthcare as a service provider.
No public comments were made and Assemblymember Hart adjourned the hearing thanking legislators and participants for the ongoing discussion, which will likely be incorporated into recommendations on future legislation.
Grant Opportunities
Below is a list of the latest grant opportunities released by the state. All opportunities for local jurisdictions may be found here.
Deadline: 10/16/25 11:59
Grant Title: Tire-Derived Aggregate Grant
State Agency / Department: Department of Resources Recycling and Recovery
Match Funding? No
Estimated Total Funding: $750,000
Expected Award Announcement: 6/15/26
Grant Title: Beet Curly Top Virus Control Program Grants
State Agency / Department: CA Department of Food and Agriculture
Match Funding? No
Estimated Total Funding: up to $190,000 per recipient
Governor’s Press Releases
Below is a list of the governor’s press releases beginning July 16.
July 23: Following increased CHP operations, California sees 13% reduction in stolen vehicles statewide
July 22: ICYMI: California’s economic leadership shines in three recent studies
July 21: Governor Newsom calls for immediate withdrawal of all soldiers in Los Angeles
July 19: California prepositions resources in Plumas and Sierra Counties ahead of critical fire weather conditions
July 19: Governor Newsom and Acting Governor Kounalakis honor fallen Los Angeles County Sheriff’s Department Detectives
July 17: California sends more search and rescue crews to Texas
July 17: Governor Newsom and Acting Governor Kounalakis honor fallen CDCR Parole Agent
July 17: California sues to stop Trump’s politically motivated attack on high-speed rail
July 17: ICYMI: 287,000 jobs and $55 billion in economic growth on the line with key climate program’s extension
July 16: Governor Newsom responds to Trump’s latest gift to China: Defunding America’s only high-speed rail
July 16: Governor Newsom announces appointments 7.16.25
- Jennifer Osborn, of Orangevale, has been appointed Director at the California Department of Industrial Relations
- Gentian Droboniku, of Sacramento, has been appointed Chief Deputy Director of the California Department of Tax and Fee Administration
- Sean Connelly, of Sacramento, has been appointed the Assistant Secretary for the Office of Public and Employee Communications at the California Department of Corrections and Rehabilitation
- Melissa Bacon, of Sacramento, has been appointed Deputy Director at the Office of Legislative and Governmental Affairs at the California Department of Health Care Services
- C. Mike Tomlinson, of Thousand Oaks, has been appointed to the California Veterinary Medical Board
July 16: Governor Newsom calls on Trump to end Los Angeles militarization, shares community resources
July 16: Governor Newsom invites LA Fire survivors to continue shaping rebuilding efforts through Engaged California
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