title
Receive a presentation on potential social safety net program impacts resulting from H.R. 1, signed on July 4, 2025 and the FY2025/26 California State budget
body
Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The County Administrator’s Office recommends that the Board of Supervisors receive a presentation on potential social safety net program impacts resulting from H.R. 1, signed on July 4, 2025 and the FY2025/26 California State budget.
SUMMARY:
H.R. 1 was signed into law on July 4, 2025. The Act includes a number of tax provisions, funding for immigration and border enforcement, reductions and/or eliminations of tax credits and programs related to clean energy programs, and significant changes and funding reductions for social safety net programs. Without further intervention by lawmakers, the Act will also trigger automatic spending reductions under the Pay-As-You-Go (PAYGO) law which could result in reductions to additional programs including Medicare, Social Services Block Grant, the Maternal, Infant, and Early Childhood Home Visiting program and the Promoting Safe and Stable Families program.
County residents may be impacted by one or more of the Act’s provisions. However, the focus of this presentation is on the social safety net impacts to County provided programs and services including CalFresh (federally known as the Supplemental Nutrition Assistance Program - SNAP) and Medi-Cal (federally known as Medicaid).
In addition to H.R. 1, the FY2025/26 California State Budget implemented changes to Medi-Cal impacting eligibility, and services and costs for some enrollees.
FINANCIAL IMPACT:
The costs associated with preparing the agenda item and presentation are nominal and absorbed by the Department’s FY2025/6 Working Budget.
DISCUSSION:
CalFresh is a food assistance program for people with low income who meet federal income eligibility rules. H.R. 1 modifies work requirements for able-bodied beneficiaries, limits certain allowances which impact beneficiary benefit amounts, and limits eligibility to U.S. citizens or lawful permanent residents. In Solano County, the estimated staffing costs to implement the new work requirements is up to $500,00 based on the current applicable caseload of 6953 persons, and 373 persons could lose eligibility under the modified citizenship requirements. Eligibility system modifications and the impact on caseload due to enrollees’ inability to meet the work requirements are unknown at this time. These changes occurred upon enactment although federal guidance has not yet been issued to states. Other changes will be implemented over staggered timeframes and include:
• The elimination of the Snap-Ed (nutrition education and support) program (October 1, 2025). Will result in a loss of $590,000 in direct services to the Napa/Solano Area Agency on Aging and $230,000 in Public Health for staff support for the period of 10/1/25 - June 30, 2025;
• A 25% reduction, from 50% to 25%, of the federal administrative cost share (October 1, 2025). The cost share will increase counties’ cost share from 15% to 22.5% or between $2.2-$2.5 million for Solano County;
• SNAP benefit cost shares for states based on payment errors rates (October 1, 2027). California’s FFY2024 error rate was 10.98% which, if the same in 2027, would equate to a 15% cost share. Solano County administered $121,435,076 in benefits in 2024 with a .98% error rate.;
• A household cap on the Thrifty Food Plan and limits on the Plan’s update timeline and cost (October 1, 2025). The cap and limits on the update will lower benefits over time.
Medi-Cal is a public health insurance program which provides health care services for low-income individuals. Under the Affordable Care Act, states were given the option to expand Medicaid (Medi-Cal in California) eligibility beginning January 1, 2014. The “expansion population” under the ACA refers to low-income, non-elderly adults (19-64), including those without dependent children, earning up to 138% of the Federal Poverty Level). The federal government originally (2014-2016) paid 100% of the cost of the newly eligible adults, referred to as “FMAP”, and over the subsequent 4 years lowered this cost share down to 90% for 2020 and onward with states responsible for the remaining 10%.
The changes embedded in H.R. 1 impact states’ abilities to pay for Medicaid, counties’ administrative costs, enrollee eligibility and enrollee benefits. Most of the H.R. 1 Medi-Cal related changes occur at future dates but the Act did include immediate program changes:
• Delay until 2035 the implementation of a rule simplifying Medi-Cal application, enrollment, and renewal process and removing access barriers for children who access the Children’s Health Insurance Program (CHIP);
• Prohibits Medicaid funds from being paid to providers for one year starting July 4, 2025 that meet all of the following criteria: nonprofit essential community providers primarily engaged in family planning services or reproductive services, and provide for abortions outside of the Hyde (rape, incest or life endangerment) exceptions, and received $800,000 or more in payments from Medicaid in 2023; and
• Expansion states may not impose new or increased provider taxes (July 4, 2025). California’s recently passed Proposition 35 - the Managed Care Organization tax may be undermined by federal limits, and the MCO tax generates approximately $14 billion per year and is a substantial contributor to the State’s Medi-Cal program.
Other H.R. 1 changes occur over time:
• Limits Medi-Cal eligibility to U.S. citizens or lawful permanent residents after a 5 year waiting period (October 1, 2026). There are currently 16,715 individuals in Solano County who could lose eligibility;
• Medicaid expansion states cannot receive the expansion FMAP of 90% when reimbursing for emergency medical care to low-income adults who are ineligible for full scope Medi-Cal due to their immigration status (October 1, 2026). Impacts are unknown.;
• States must conduct eligibility determinations at least every 6 months for the Medi-Cal expansion population (December 31, 2026). Currently, there are 42,456 individuals in this category. Based on historical application processing data, an additional 14 FTE will be needed to complete timely processing of applications resulting in an increase of $1.77 million. An unknown percentage of enrollees will lose eligibility.;
• Limit retroactive Medi-Cal coverage to one month before the application date for expansion enrollees and two months for traditional (non-ACA) enrollees (December 31, 2026). Provider reimbursements are likely to be negatively impacted.;
• Impose an 80/hour per month work, education or “community engagement” requirement for individuals aged 19-64 with limited exemptions. Individuals must demonstrate compliance with the work requirement for the month preceding enrollment - states can choose to expand to 3 months prior to enrollment. There are some hardship exemptions and the potential for a waiver for areas with an unemployment rate of 8% or higher or 1.5 times the national average. $200 million in implementation grants will be allocated by formula to states (December 31, 2026). Approximately 16,280 recipients may be subject to the work requirements and county verification efforts will require between 6-20 FTE resulting in an additional $750,000 - $2.4 million in administrative costs;
• Requirements related to address and death verifications (January 1, 2027/January 1, 2028). As long as state system changes are made for linkages to required databases, there should be minimal administrative impact as Solano County already conducts address and death verifications.;
• Restricts new State Directed Payments cannot exceed 100% of the Medicare rate in expansion states and existing SDPs must reduce by 10 percentage points annually until they equal 100% of the Medicare rate (January 1, 2028). Unknown impacts but expected to result in large revenue losses to hospitals and a further reduction in the provider network.;
• Provider taxes and provider taxes must begin an annual reduction of .5% per year until it is not higher than 3.5% in 2032 (October 1, 2027);
• Requires states to charge expansion individuals earning over 100% of the Federal Poverty Level a co-pay per service on a sliding scale of $0-$35 with some exemptions (October 1, 2028). Co-pays will be new and complicated necessitating staff training and enrollee education. Billing system updates may be necessary. Enrollees will likely avoid some medical services due to costs.; and
• Creates a new Rural Health Transformation grants program ($50 billion over 5 years) to help mitigate the effects of Medicaid reductions. $25 billion is distributed equally among all approved states, the balance is allocated based on need, as determined by the Centers for Medicare and Medicaid Services (CMS) Administrator (applications due December 31, 2025). Unknown which states and areas will benefit from the program.
Separately, the FY2025/26 California State Budget requires additional Medi-Cal changes. Effective January 2026, there is an enrollment freeze for undocumented residents 19 years and over, and a resumption of the asset limits which impacts enrollee eligibility. In July 2026, non-emergency dental coverage terminates for certain immigrant populations and in July 2027, a $30 per month premium will be required for certain immigrants aged 19-59.
ALTERNATIVES:
The Board could choose not to receive the presentation; however, there is no cost associated with the presentation and the topic informs the Board of potential future impacts to county provided services and services received by county residents.
OTHER AGENCY INVOLVEMENT:
Information on H.R. 1 was gathered from multiple sources including, but not limited to, Paragon Government Relations, the California Health and Human Services Agency including the Departments of Social Services and Health Care Services, the California Primary Care Association, CSAC, and the Solano County Health and Social Services Department.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION