May 4, 2026 – The Health Policy Landscape Is Changing. Over the past decade, federal and state policy changes have expanded access to health care in California. This policy landscape is changing, however. In June 2025, the Legislature enacted numerous state budget solutions in Medi‑Cal, California’s Medicaid program, to help address the state budget’s structural deficit and control rising programmatic costs. Then in July 2025, Congress enacted H.R. 1, which makes additional changes to Medicaid and the health insurance marketplace. Both sets of changes likely will have notable effects on access to health care and the state’s health care system.

Report Analyzes Projected Effects on California’s Health Care System. This report builds on previous Medi‑Cal‑focused analyses by assessing the changing landscape for the broader health care system. Our analysis is subject to considerable uncertainty, however. As such, it should be treated as preliminary. Actual effects could be quite different from our projections. Moreover, our analysis focuses on what we understand to be the largest effects, but is not comprehensive in addressing every effect or policy change.

Effects of Changing Landscape

More Californians Will Become Uninsured. Currently, around 2 million Californians (5 percent of the state) do not have health insurance. We project this amount to roughly double by 2030. Most of the increase in the uninsured population (nearly 90 percent) will be due to eligibility changes under H.R. 1, most notably from community engagement requirements. We project the remainder of the increase to come from people leaving Covered California coverage due to a series of federal policy changes. We also project that another 1.3 million adults with unsatisfactory immigration status (UIS)—mostly undocumented immigrants—will leave comprehensive coverage in Medi‑Cal due to several state policy changes. Our projections assume that people in this latter group remain enrolled in Medi‑Cal, but only with emergency coverage.

Hospitals and Clinics Likely Will Face Tighter Finances. The increase in the uninsured population will place greater financial pressures on hospitals and clinics. This is because many providers will still provide some care to these populations without receiving reimbursement, also known as uncompensated care. We project the aggregate cost increase in uncompensated care for hospitals and clinics could be at least a few billion dollars by 2030. Coverage reductions for adults with UIS and upcoming Medi‑Cal reimbursement reductions could add to these effects, but the magnitude is difficult to predict due to limited data. These impacts likely will have bigger impacts on certain kinds of providers, such as safety‑net hospitals and clinics.

Some Private Health Insurance Premiums Could Increase at Faster Rates. Departures from Covered California are also expected to drive up average premiums in the individual health insurance marketplace. The reason is that healthier enrollees are more likely to leave coverage, leaving behind a higher‑risk pool for insurance plans. Initial data suggest this effect explains around one‑fifth of the growth in gross premiums in 2026, though longer‑term effects in future years are uncertain. Effects on employer‑sponsored health insurance premiums are more uncertain and largely depend on the health acuity of new enrollees.

Counties Face Increasing Cost Pressures. State law tasks counties with providing basic health care to low‑income uninsured residents. In practice, county indigent health programs have served as a last resort of care for the uninsured. Caseloads in these programs have notably declined over the last decade, due to various expansions in Medicaid and marketplace insurance coverage. As the uninsured population rises in the coming years, however, counties likely will experience additional demand for services and greater cost pressures. Pinpointing these costs is challenging, as counties have flexibility to determine program eligibility and benefits. That said, we estimate that costs to provide county services to an increased population could be as high as the low billions of dollars annually (including some uncompensated care for county hospitals).

Issues to Consider

In Short Term, Enhance Oversight and Consider Targeted Responses. The magnitude of the effects we describe is uncertain. Moreover, the state’s fiscal situation is notably constrained due to projected structural deficits. Given these issues, we recommend the Legislature focus in the short term on bolstering its oversight over hospitals, clinics, and county programs as the nature and extent of the impacts from forthcoming policy changes come into clearer focus. This oversight could include more systematically tracking caseloads and fiscal conditions of affected entities. The Legislature also could explore providing limited‑term, targeted assistance for entities particularly at risk of near‑term financial distress.

In Long Term, Weigh Trade‑Offs of More Structural Changes. With more information available over time, the Legislature could explore structural policy changes to adjust to the new health financing landscape. For example, the Legislature could revisit its existing expectations of providers and counties, either by tightening requirements to ensure more consistent service delivery statewide, or by loosening requirements to allow more flexibility to manage costs. The Legislature also could revisit long‑term financing approaches, such as its funding approach for county indigent health programs, to better reflect the new landscape.

Transition Could Be Challenging, but Not Unprecedented. Health care consumers, providers, and payors in California will face heightened fiscal constraints as a result of the changing fiscal and policy landscape. The circumstances of these constraints are not unprecedented, however—much of the new landscape likely will resemble conditions that existed more than a decade ago. This is because these changes unwind some eligibility and financing changes that occurred after state implementation of federal health policy reforms in 2014. Moreover, from an access standpoint, the state will still be in a better position than before 2014, with key reforms (such as the Covered California marketplace) still intact. Keeping this broader context in mind, the Legislature, administration, providers, and counties likely will need to work collaboratively to adjust policies, financing structures, and services to align with the new landscape and fiscal realities.

This report is available using the following link: https://lao.ca.gov/Publications/Detail/5180