The California Budget Act, SB 101, and AB 102 were passed by the Legislature and signed into law by Governor Gavin Newsom. The state budget package also includes trailer bills. Trailer bills generally make changes to state law related to the Budget Act and, like budget bills, move through the Legislature’s budget committees. AB 116 (Health Omnibus Trailer Bill) was signed by the Governor on June 27th. Below are bullets on the major health care provisions in the  Trailer Bill:

Medi-Cal (California’s Medicaid) Program Adjustments

• Asset Limit Restoration: The Medi-Cal asset limit is restored to $130,000, reversing the Governor’s proposal to lower it to $2,000. This change yields $45 million in savings for 2025-26, increasing to $510 million ongoing.
• Specialty Drug Coverage: The budget excludes coverage for specialty weight loss drugs in Medi-Cal, generating $85 million in savings in 2025-26, rising to $680 million by 2028-29.
• Loan Payment Delay: An additional $1 billion is added to the Governor’s proposed $3.4 billion loan payment delay for the Medi-Cal program, further reducing immediate General Fund outlays.
• Enrollment Freeze for Undocumented Adults: The Medi-Cal enrollment freeze is modified to apply to undocumented individuals aged 19 and older, effective January 1, 2026, with a three-month re-enrollment grace period. This results in $86.5 million in savings in 2025-26, growing to $3.3 billion ongoing.
• Premiums for Unsatisfactory Immigration Status (UIS) Adults: The Medi-Cal premium for adults with UIS is set at $30/month (down from $100), limited to ages 19-59, starting July 1, 2027. This results in $30 million in costs in 2026-27, but $675 million in ongoing savings.
• Dental Benefits and Supplemental Payments: Delays the elimination of $362 million in dental supplemental payments and dental benefits for UIS adults until July 1, 2026, deferring ongoing savings of $336 million.
• Prescription Drug Rebates: Adjusts the planned rebate aggregator for prescription drugs for undocumented populations, achieving $370 million in savings in 2025-26 and $600 million ongoing.
• MCO Tax Offsets: Increases General Fund offsets from the Managed Care Organization (MCO) tax, saving $1.3 billion in 2025-26 and $236.7 million in 2026-27.
• Health Centers and Rural Health Clinics: Delays $1.1 billion in ongoing cuts to health centers and rural health clinics until July 1, 2026.

Rejected or Modified Cuts

• Family Planning and Women’s Health: Rejects the Governor’s proposal to eliminate $172 million in Proposition 56 supplemental payments for family planning and women’s health services, including those with a high federal match.
• Long-Term Care for UIS Adults: Rejects the proposal to eliminate long-term care and in-home supportive services for adults with unsatisfactory immigration status.
• Public Health Funding: Rejects the cancellation of nearly $60 million in unspent public health funding, protecting programs such as the California Reducing Disparities Project, LGBTQ+ health grants, reproductive health justice, STD/Hep C prevention, and workforce initiatives.

Future Policy Directions

• Large Employer Contribution for Medi-Cal: The Senate will begin developing a requirement for large employers whose employees are enrolled in Medi-Cal to contribute financially, potentially starting in 2027-28. This will require future legislation and budget action.

Other Notable Health-Related Provisions

• Delayed Reductions: Several cost-saving measures, such as the elimination of certain supplemental payments and benefits, are delayed rather than implemented immediately, providing more time for stakeholders to adjust.
• Savings and Revenue Generation: The budget employs a combination of program modifications, revenue offsets (e.g., MCO tax), and strategic delays to achieve substantial health care savings while preserving core benefits for vulnerable populations.

The budget largely avoids the most severe cuts proposed by the Governor, instead opting for phased-in changes, targeted savings, and the preservation of critical public health and safety-net programs.

AB 116 is the 2025-26 health omnibus trailer bill that enacts a wide range of statutory changes necessary to implement California’s 2025-26 Budget Act, primarily affecting health care programs and regulatory structures.

Key Provisions:

Department of Health Care Access and Information (HCAI):

• Updates statutes for certified wellness coaches, aligning terminology, supervision, and scope of activities.
• Expands CalRx’s authority to partner for increased competition and lower drug prices, including for reproductive and gender-affirming care, vaccines, and medical devices.
• Repeals statewide certification requirements for community health workers.

Department of Managed Health Care (DMHC):

• Delays implementation of infertility and fertility coverage requirements (SB 729) to January 1, 2026.
• Requires pharmacy benefit managers (PBMs) to be licensed and regulated by DMHC, submit data to HCAI, and comply with new operational, registration, and reporting mandates.
• Establishes grounds for DMHC to suspend or revoke PBM licenses and authorizes annual fees and a dedicated fund for PBM oversight.

Department of Health Care Services (DHCS):

• Expands sanction authority over certain Medi-Cal contractors.
• Creates a permanent Medi-Cal Anti-Fraud Special Deposit Fund.
• Removes certain dementia care requirements.
• Imposes utilization management and prior authorization for outpatient hospice and COVID-19 services in Medi-Cal.
• Institutes a freeze on full-scope Medi-Cal enrollment for undocumented adults (19+), with a grace period, starting January 1, 2026.
• Imposes $30 monthly premiums (with a cure period) on full-scope Medi-Cal for undocumented adults ages 19-59, effective July 1, 2027.
• Eliminates dental coverage (July 1, 2026) and prospective payment reimbursement for community clinics (July 1, 2026) for individuals with unsatisfactory immigration status.
• Reinstates the Medi-Cal asset limit at $130,000 for individuals, $65,000 per additional household member, effective January 1, 2026.
• Modifies supplemental payment programs and eliminates the Skilled Nursing Facility Workforce and Quality Incentive Program.
• Suspends the 96-hour alternative power source requirement for skilled nursing facilities until a reimbursement rate add-on is approved.
• Ties state supplemental rebate amounts for HIV/AIDS and cancer drugs to federal rebate percentages.
• Imposes prior authorization on drugs removed from the contracted drug list and modifies notification requirements.

California Department of Public Health (CDPH):

• Makes technical changes to HIV/AIDS prevention funding.
• Abolishes and re-establishes certain special funds for health facility penalties and quality improvement.
• Authorizes emergency and final regulations for staffing standards at acute psychiatric hospitals.
• Allocates $75 million from the AIDS Drug Assistance Program Rebate Fund to offset lost federal HIV prevention funding.

Department of State Hospitals (DSH):

• Extends the Enhanced Treatment Program pilot to January 1, 2030.
• Changes court reporting for the Not Guilty by Reason of Insanity population from semiannual to annual.