California Medicaid Work Requirements: Implementation and Budget Outlook

California is preparing to implement Medicaid work requirements for adults in the Affordable Care Act (ACA) Medicaid expansion group and enrollees in partial expansion waiver programs. This shift follows the 2025 reconciliation law, which mandates that states condition Medicaid eligibility on meeting work requirements starting January 1, 2027.

The implementation of these requirements comes as California faces significant fiscal challenges. According to a KFF issue brief published April 6, 2026, the governor projects a $3 billion budget deficit for fiscal year 2027.

To address these budget gaps and anticipate reductions in federal funding caused by the 2025 reconciliation law, the governor has proposed changes to slow Medicaid spending.

Fiscal Impact and Program Scale

California Medicaid, known as Medi-Cal, provided coverage to 14.8 million enrollees as of June 2025. The scale of the program makes it a central component of the state’s financial planning.

Under the proposed budget for fiscal year 2027, Medicaid is expected to account for approximately 40% of the state budget and 20% of General Fund spending. This represents a total of $49 billion, an increase from the $45 billion allocated in fiscal year 2026.

The state previously enacted several budget solutions in June 2025 through the 2025-26 Budget Act, which were intended to slow the growth of Medi-Cal spending.

Operational Challenges of Implementation

Transitioning to a system with work requirements involves substantial administrative and operational overhauls. The KFF report notes that implementing these mandates will require complex changes to enrollment and eligibility systems.

The state will need to coordinate several key areas to ensure the transition is managed:

• Enrollee outreach and education to inform beneficiaries of new requirements.
• Comprehensive staff training to manage the new eligibility criteria.
• Coordination with providers, managed care plans, and other healthcare stakeholders.

These administrative requirements are being developed while the state manages slowing revenue growth and broader reductions in federal funding.

Impact on Access and Eligibility

The introduction of work requirements, combined with additional cuts to the Medi-Cal program, is expected to significantly affect the population. Analysis indicates these changes will likely have a large impact on eligibility, enrollment, and the retention of Californians within the program.

The policy shift represents a departure from previous stances. Reporting from Politico indicates that Governor Gavin Newsom had previously railed against Medicaid work requirements before the current implementation phase.

The 2025 reconciliation law effectively removes the state’s discretion on this matter by requiring the condition of eligibility for the ACA expansion group and specific partial expansion waiver programs, such as those in Georgia and Wisconsin, by the start of 2027.