Q&A: How does the new federal budget law undermine health care for California’s kids?

Q: What changes does the so-called “One Big Beautiful Bill Act” (HR 1) make to health care for California’s children and youth? 

A: HR 1, which was signed into law on July 4, 2025, will create profound problems for California’s entire health care system and health coverage for children, youth, and families. While some of the most impacted will be children and families who rely on Medicaid (called Medi-Cal in California) and those who seek coverage on the Covered California marketplace, ALL families who use the health care system will be impacted by longer appointment wait times, more crowded ERs, and less support for hospitals, clinics, and doctors. The law puts up new eligibility barriers and enrollment restrictions that make it harder for families to get and keep coverage, and makes significant and unprecedented cuts to Medicaid that will destabilize the state’s health care financing and delivery systems, restrict access to providers and care especially in rural or underserved areas, and undercut health outcomes for children and youth. The interaction of these provisions will ultimately make health care and coverage less reliable and affordable for California’s families.

 

Q: How will HR 1 specifically impact the millions of children who rely on Medi-Cal?

A: California has more children and youth on Medicaid than any other state – nearly 5.5 million statewide. Medi-Cal (California’s Medicaid program) is a cornerstone of children’s health coverage, and is also an economic driver and a critical part of the healthcare infrastructure in the state. HR 1 threatens to undermine that infrastructure because it puts new limits on how nearly all states, including California, can finance their Medicaid programs, and it corrodes the federal-state partnership that has been a hallmark of the Medicaid program since it was created in 1965.

Specifically, HR 1 puts new limits on an important mechanism (a tax on providers) that every state except Alaska uses to finance their share of Medicaid spending, Of note, just last year, more than two-thirds (68%) of California voters supported a Medicaid provider tax through Proposition 35 which provides funds to ensure healthcare providers are paid a reasonable rate to care for Medi-Cal patients. HR 1 also imposes new restrictions on a mechanism (called “state-directed payments”) that states can use to ensure Medicaid enrollees have sufficient access to services. In total, the federal Medicaid changes will slash more than $28 billion from California’s health care system over the next 10 years.

There are also several eligibility changes that will slash key health supports for families, bury Medicaid enrollees in confusing paperwork and administrative red tape, impose new and expensive costs on the state’s enrollment system, and make health care less accessible. The table below provides a non-comprehensive overview of some of the Medicaid provisions in HR 1 and the California populations that will be impacted. It should be noted, however, that there are indirect and cascading effects of these provisions – for example, even though children are technically exempt from new work verification requirements, an estimated 150,000+ children could lose coverage as their families get caught up in red tape, despite children remaining eligible for Medi-Cal.

 

 

Q: Does HR 1 make changes to Covered California (Affordable Care Act) insurance?

A: Yes. This is one of the changes that goes into effect soon and will hurt the most. According to Covered California, approximately 1.75 million Californians (including 115,000 children under 18) get tax credits to offset the cost of their health coverage. HR 1 did not extend these tax breaks, so costs for families will increase starting in 2026. For a family of four earning $64,000 a year, that amounts to a $2,400 annual increase in healthcare premiums. The same family earning $130,000 would have to shoulder a 101% increase in premiums, totaling almost $10,000! HR 1 would also make it harder for families to keep coverage by ending automatic renewals. In all, an estimated 660,000 Californians will lose Covered California coverage as a result of HR 1.

 

Q: Is it true that HR 1 protects care for the “nation’s most vulnerable populations,” such as children, as some lawmakers claim?

A: Not at all. There is no way to cut billions of dollars from Medicaid without hurting kids – and everyone else who needs health care. In fact, the law’s authors are relying on kids and others losing their health coverage, because that’s where they get “savings” to spend on tax cuts for the wealthy. Supporters of the bill know full well that cuts to Medicaid threaten the viability of providers and hospitals, and thus strip away coverage and access to care.  

Even rules that are supposed to exempt most children and parents from losing coverage don’t actually do so in practice. For example, the work reporting requirements in HR 1 do not apply to those under age 19 or parents with kids 13 and under. However, state experiences in Georgia and Arkansas show that implementing this kind of red tape is a mess and is never as targeted as proponents claim, so lots of “exempt” people wind up losing their coverage as collateral damage.

 

Q: Could there be additional cuts to Medicaid coming?  

A: Unfortunately, yes. Less than a week after HR 1 was signed, some members of Congress were already talking about how they could move forward with additional dangerous proposals to Medicaid that did not make it into the final bill. For example, lawmakers want to pursue extreme proposals like prohibiting Medicaid coverage for gender-affirming care and penalizing states that use their own funds to provide health care to undocumented populations.

 

Q: What about cuts to food assistance for kids?  

A: The federal budget law slashes more than $200 billion from the Supplemental Nutrition Assistance Program (SNAP, called CalFresh in our state). SNAP provides absolutely critical food supports for almost 2 million Californian kids as well as millions more adults, seniors, and others in the state. Early estimates show that 388,000 California families with kids will lose an average of $77 per month in food benefits – which could make the difference between a well-fed kid who can concentrate in school and one who goes to bed hungry. The cuts to food assistance hurt the very same kids who are impacted by Medicaid cuts, compounding the cruelty of HR 1 and making it even harder for families to make ends meet while caring for their kids.

 

Q: What should California lawmakers do to make sure kids don’t lose health care?  

A: We’ve seen California’s legislature find creative and brave solutions before, and they need to step up for kids now. California is home to the 4th largest economy in the world, and no kid living in our state should lose health coverage, timely access to health care, or food supports. 

For context, only 3% of kids in California are currently uninsured. But in 1998, nearly 20% of our kids were uninsured and lacked access to key health services. We can’t go backwards now. It will be up to the state to use a combination of legal action, budget shifts, tax parity for corporations, and other bold and courageous moves to shield our kids from the impacts of this horrific federal law. 

Health coverage is extremely important to the health, development, and well-being of children and youth. To risk any child losing health coverage is irresponsible policymaking since we know that health insurance yields dividends – children who have Medicaid, for example, do better in school, miss fewer school days, are more likely to graduate high school and less likely to drop out, are more likely to go to college, and have fewer emergency room visits and hospitalizations as adults.