WASHINGTON, D.C. — Proposed federal Medicaid cuts could force California counties to shoulder more than $1 billion in additional costs to maintain behavioral health services in what the Senate calls the “Big Beautiful Bill.”
Recent amendments to the “Big Beautiful Bill” in the U.S. Senate “would reduce its 90% funding match for beneficiaries eligible through the ACA Medicaid expansion down to each state’s base match,” according to the Steinberg Institute. Medicaid is essential to many living in California, and pulling government funding would make the state’s behavioral health services inaccessible for most of the people who use them. These proposed changes could leave hundreds of thousands without access to mental health and substance use treatment.
The impact would be particularly devastating for California’s most vulnerable populations. According to state health data, nearly 40% of Medicaid recipients utilize behavioral health services, including treatment for severe mental illness and opioid addiction. Without this coverage, emergency rooms and county jails would likely become the de facto treatment centers for thousands—a scenario that would ultimately cost taxpayers even more than maintaining current Medicaid funding levels.
Due to the budget cuts proposed in this bill, many people will also suffer under current California law, which requires any uninsured person to “pay a penalty when filing a state tax return… [of] at least $900 for every adult and $450 for every dependent child under 18,” reports Covered California. As a result, lower-income households that rely on affordable government health care for survival will be further pushed into financial turmoil and potential medical bankruptcy.
This creates an impossible choice for struggling families: pay for private insurance they can’t afford, face substantial penalties they can’t pay, or go without health care entirely. For the estimated 250,000 Californians who could lose Medicaid coverage under these cuts, the $900 penalty would represent nearly 5% of annual income for someone earning minimum wage—an unsustainable financial burden that could force families to forgo other basic necessities like food and rent. Covered California estimates that a family of four “would face a penalty of at least $2,700” yearly due to the lack of health insurance, an amount that covers six months of groceries for an average household.
The Steinberg Institute’s latest research, Boom, Bust, Repeat, details how California’s behavioral health system has cycled through periods of investment followed by cuts for decades. While the state has “nearly [tripled] behavioral health funding over the past decade to $18 billion annually,” these gains remain vulnerable to funding fluctuations.
“We cannot afford to repeat the mistakes of the past. Historic investments are not enough if we dismantle our system when times get tough. We need sustained commitment from our leaders to protect behavioral health funding through good times and bad,” stated Karen Larsen, CEO of the Steinberg Institute.
As Congress continues deliberations on the “Big Beautiful Bill,” the amendments could determine whether California maintains its current behavioral health capacity or faces another cycle of reduced services that would inevitably lead to increased homelessness and emergency room overcrowding. The outcome will directly affect hundreds of thousands of Californians who rely on Medicaid for mental health and substance use treatment.
