California, a state where almost four in 10 residents rely on Medi-Cal for healthcare, faces a potential crisis. Proposed federal cuts to the Medicaid program, now under consideration in the U.S. Senate, could strip millions of low-income Californians of their health coverage, triggering a ripple effect of negative health and economic consequences.

The Proposed Cuts: A closer Look

The budget plan under scrutiny includes requirements for most Medicaid recipients to hold a job or attend school, with regular documentation of their activities. However,data suggests that many Medi-Cal recipients already work or attend school. The real threat lies in the bureaucratic hurdles these requirements create.

• Work/School Mandate: Recipients must document 80 hours per month of work, public service, or schooling.
• Exemptions: Parents of minor children, individuals with disabilities, complex medical conditions, or substance abuse issues may be exempt.
• Red Tape: The reporting requirements could lead to confusion, delays, and ultimately, cancelled coverage.

Economic Fallout: Job Losses and Revenue Decline

The impact extends beyond individual recipients. Healthcare networks,especially in rural areas like the Central Valley,could face significant revenue losses. This could lead to facility closures, job losses for tens of thousands of healthcare workers, and a decline in state and local tax revenues.

A separate report indicated that California could lose up to 217,000 healthcare jobs due to federal Medicaid funding cuts, reducing state and local tax revenues by as much as $1.7 billion.

Voices of Concern

Experts warn of the devastating consequences of these cuts. We know just how crucial 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 one researcher. This would be a major cut that really would impact all of us.

The National Context: A History of Restrictions

The proposed measure represents some of 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 challenging to re-enroll. Fewer recipients would be exempt from the rules.

Cautionary Tales: Lessons from othre States

other states’ experiences with similar work requirements offer a grim preview of what could happen in California.

• Arkansas: Instituted work requirements in 2018, leading to 18,000 adults losing coverage within six months. The policy was later struck down by a federal judge.A 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.”
• New Hampshire: Faced a similar fate with its work requirement program.
• Georgia: Imposed strict work requirements in 2023, only to see its own spokesperson, a vintage-car mechanic, lose his health policy twice due to bureaucratic issues.

Other states’ experiences demonstrate that work requirements do not increase employment among enrollees, the report stated. 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.

Rural Communities at Risk

The consequences of deep Medicaid cuts could be particularly devastating in California’s rural regions. 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, explained one expert. 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.