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Published: January 11, 2024

Governor’s 2024-25 Proposed Budget Preserves Key Investments in Health Care

Governor Gavin Newsom released his 2024-2025 Budget Proposal on Wednesday, January 10, 2024. Despite a projected budget deficit, the budget proposal preserves key investments in healthcare, including Medi-Cal eligibility for undocumented immigrants, Medi-Cal primary care provider rate increases, and Song Brown funding.

The 2024-25 Governor’s Budget proposes spending $291.5 billion in state dollars. Consisting of approximately $208.7 billion from the General Fund, $80.8 billion from special funds, and $2 billion from bond funds. Almost a quarter (24.5 percent) of total state expenditures is dedicated to health-related expenditures.

The Governor’s Budget includes $73.9 billion General Fund dollars for all health and human services programs in 2024-25.

The 2024-2025 Budget includes:

  • Provider Rate Increases- In December 2023, the federal government approved California’s Managed Care Organization Provider Tax (MCO Tax) effective through December 31, 2026. The MCO tax allows California to draw down significant federal matching funds. The Administration is seeking to offset some of the budget shortfall by asking the federal government to approve an amendment to increase the tax to achieve $20.9 billion in total funding to the state, an increase of $1.5 billion compared to the previously approved MCO Tax. Of the $20.9 Billion in the proposed budget $12.9 billion will be allocated to support the Medi-Cal program and $8 billion ($2.8 in 2024-25 and approximately $6.5 in 2025-26) will be used for targeted rate increases and investment.
  • Medi-Cal Expansion-The Budget maintains $1.4 billion ($1.2 billion General Fund) in 2023-24, $3.4 billion ($2.9 billion General Fund) in 2024-25, and approximately $3.7 billion ($3.2 billion General Fund) ongoing, inclusive of In-Home Supportive Services (IHSS) costs, to expand full-scope Medi-Cal eligibility to income-eligible adults aged 26 to 49 regardless of immigration status as of January 1, 2024.
  • California Advancing and Innovating Medi-Cal (CalAIM)-The Budget maintains approximately $2.4 billion ($811.1 million General Fund) in 2024-25 to support the DHCS CalAIM
  • Behavioral Health Continuum—The Budget maintains over $8 billion total funds across various Health and Human Services departments to expand the continuum of behavioral health treatment and infrastructure capacity and transform the system for providing behavioral health services to children and youth.
  • Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) Demonstration—The Budget maintains $7.6 billion ($350.4 million General Fund, $87.5 million Mental Health Services Fund, $2.6 billion Medi-Cal County Behavioral Health Fund, and $4.6 billion federal funds) through the term of the waiver, for the Department of Health Care Services (DHCS) and the Department of Social Services (DSS) to implement the BH-CONNECT Demonstration, effective January 1, 2025.
  • Reproductive Health Services—The Budget includes $200 million total funds ($100 million General Fund) in 2024-25 to provide funding for the California’s Reproductive Health Access Demonstration (CalRHAD). to support access to reproductive health services beginning no sooner than July 1, 2024. By 2026-27, $85 million of the General Fund will be offset by Designated State Health Program federal funds.
  • Vaccinations- The federal Food and Drug Administration (FDA) and Centers for Disease Control and Prevention (CDC) approved two RSV vaccines and one injectable drug to protect against RSV. The vaccines are targeted to older adults and pregnant individuals. Healthy children have the option of an injectable drug. The RSV vaccines and injectable drugs were available starting in October 2023, and costs are estimated to be $138.7 million total funds ($61.4 million General Fund) in 2023-24 and $215.8 million total fund ($95.5 million General Fund) in 2024-25.


Budget Shortfalls

The Governor's Budget forecasts a $37.9 billion budget gap for the 2024-2025 fiscal year, attributed to a stock market decline in 2022 and a delay in income tax collections. To address this, the budget involves drawing down $13.1 billion from State reserves, reducing funding by $8.5 billion for various programs. The Governor is also helping to close the budget gap by generating $5.7 billion from revenue and internal borrowing, including a $3.8 billion increase in Managed Care Organization Tax Support for Medi-Cal. The budget implements $5.1 billion in funding delays, $3.4 billion in fund shifts, and $2.1 billion in deferrals. As budget deliberations continue, the Administration may propose additional measures, potentially including program reductions, to address the budget shortfall. Some of the proposed solutions to the budget shortfall include program funding delays, borrowing from State special funds and delaying payment for certain programs and services into the 2025-26 fiscal year.


Next Steps

CAFP will work with the legislature and allies to advocate for healthcare enhancement and expansion across California. Our ongoing dedication includes working with the Administration and the Legislature to ensure continuous growth in the primary care physician workforce. We will work to fortify healthcare resources, enhance access, and help to safeguard funding for a robust and resilient healthcare system benefiting all Californians.


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