Medi-Cal and One Big Beautiful Bill: Federal Medicaid Reforms and the Fiscal Premise of California's Billionaire Tax Act

• State & Local
• California

• California Decides
• Empowering State and Local Governance

Abstract: Proponents of the 2026 California Billionaire Tax Act argue that the One Big Beautiful Bill Act (OBBBA) of 2025 created a "$19 billion per year budget hole" in California's "already underfunded health care safety net," justifying a one-time five percent wealth tax on California billionaires. We examine the OBBBA's actual fiscal effect on California, the Billionaire Tax Act's capacity to address it, and the broader spending trajectory of Medi-Cal in which both would be absorbed. Medi-Cal expenditures have nearly tripled since 2011 to $185 billion per year in FY 2024-2025. Using section-by-section cost analysis, we estimate that the OBBBA will reduce federal spending on Medi-Cal by $156 billion over ten years. Two-thirds of this reduction is concentrated after 2030, by which time the one-time wealth tax revenues would be exhausted, making them structurally unsuited to finance a recurring reduction in federal spending. Even the upper-bound on reduction to providers represents less than 10 percent of what California would otherwise have spent on Medi-Cal over the budget window. If the state accepts OBBBA's eligibility provisions, the remaining cuts would total only $67 billion over ten years. We identify policy levers within the state's control that could generate over $125 billion in ten-year savings without new revenue. Taken together, these findings show that the OBBBA does not justify the Billionaire Tax Act: the magnitude of cuts is materially smaller than the proponents claim, the wealth tax is mismatched in timing and structure to the obligation it would address, and the state has policy options sufficient to address the remaining reductions.