California Governor Gavin Newsom has announced plans to halt the enrollment of low-income immigrants without legal status in a state-funded healthcare program by 2026 and introduce a monthly premium for current enrollees in 2027. This decision is motivated by the unexpectedly high cost of the program and economic uncertainties stemming from federal tariff policies. Despite initially championing free healthcare benefits for all low-income adults, the program’s expansion incurred a $2.7 billion overrun.

While facing a $6.2 billion Medicaid shortfall, Newsom defended the program, emphasizing long-term cost savings. Under his proposal, low-income adults without legal status will be ineligible to apply for Medi-Cal from 2026 onwards, with current enrollees unaffected by the freeze. Starting in 2027, those with “unsatisfactory immigration status” will be required to pay a $100 monthly premium.

The changes are estimated to save California $5.4 billion by 2028-2029, as the state grapples with rising healthcare costs and a substantial budget deficit. Newsom attributes much of the shortfall to federal tariff policies, projecting a $16 billion loss in tax revenues. With looming budget deficits and uncertain economic conditions, Newsom faces challenges in negotiating with lawmakers, who must approve the final budget proposal by June.

As California navigates complex financial pressures, Newsom’s budget proposal aims to address immediate concerns while preparing for future economic uncertainties. Analysts warn of significant deficits in the years ahead, underscoring the need for strategic budget planning and policy adjustments to safeguard the state’s financial stability.