Governor Newsom Releases His Revised Budget Plan

By Brett Johnson
May 21, 2019

On May 9, 2019, Governor Newsom released a revised state budget proposal (known as the “May Revise”) focusing on health care, housing, early childhood, and education. The budget addressed his priorities for the “Healthcare for All” policy agenda, which includes expanding Medi-Cal coverage to young adults regardless of their immigration status. The budget also proposes first-in-the-nation subsidies for middle-income earners to be able to purchase health insurance on the Covered California health benefit exchange. Some of the key takeaways from the May Revise are listed below:

  • Medi-Cal Caseload: Medi-Cal is projected to cover approximately 13 million Californians in 2019-20, including 3.8 million in the optional expansion population.
  • Pharmacy Transition to Fee-for-Service: The transition of pharmacy services from Medi-Cal managed care to a fee-for-service benefit savings are estimated to reach $393 million General Fund by 2022-23. While the transition is scheduled for January 1, 2021, savings will not be realized immediately due to timing of drug rebates and the managed care rate setting process.
  • Medi-Cal Drug Rebate Fund Reserve: Drug rebates are a major source of General Fund spending volatility in the Medi-Cal program. To reduce this volatility, the May Revision projects a $172 million reserve in the Medi-Cal Drug Rebate Fund. In the future, the reserve in this fund will be increased when savings exceed initial drug rebate estimates. When savings fall short of initial estimates, the reserve will be accessed to reduce the impact on the General Fund.
  • Full-Scope Medi-Cal Expansion for Undocumented Young Adults: The May Revision includes $98 million ($74.3 million General Fund) to expand full-scope Medi-Cal coverage to eligible young adults aged 19 through 25 regardless of immigration status, starting no sooner than January 1, 2020. The assumed implementation date is six months later than assumed in the Governor’s Budget. This expansion will provide full-scope coverage to approximately 90,000 undocumented young adults in the first year. Nearly 75 percent of these individuals are currently in the Medi-Cal system.
  • Whole Person Care Pilots: The May Revision includes one-time $20 million Mental Health Services Fund over five years for counties that currently do not operate Whole Person Care Pilots. This is in addition to the $100 million one-time General Fund proposed in the Governor’s Budget for counties that currently operate pilots. With this funding, additional counties will be able to develop and implement essential programs focused on coordinating health, behavioral health (for individuals with a mental health and/or substance use disorder), and critical social services, such as housing. Priority will be given to individuals with mental illness who are also homeless, or at risk of becoming homeless.
  • Peer-Run Mental Health Crisis Line: The May Revision allocates $3.6 million Mental Health Services Fund annually for three years to the Department of Health Care Services to provide support for a statewide peer-run mental health crisis line, a critical resource for those on the brink of a mental health crisis. This proposal maintains the Administration’s focus on prevention and early intervention by providing a resource offering information, referrals, emotional support, and non-judgmental peer support to those living with mental illness. This statewide crisis line would also increase employment opportunities to those who have recovered from mental health issues.
  • HIV/AIDS: The Department is currently implementing a “Getting to Zero” HIV and AIDS prevention and treatment plan. The May Revision includes $40 million one-time General Fund to slow infectious disease epidemics. The funds will be available over a four-year period through local public health departments and tribal communities to assist in providing prevention, testing, and treatment services.
  • California Home Visiting and Black Infant Health Programs: The May Revision includes additional reimbursements from the Department of Health Care Services for Medicaid-eligible activities previously not reflected in the Governor’s Budget. See the Early Childhood Chapter for more information.
  • Emergency Preparedness, Response, and Recovery: The May Revision includes $959,000 ($569,000 General Fund) to support health care facilities and mass care shelters during emergencies as well as disaster preparedness, response, and recovery efforts.

CLSA will continue to closely monitor the budget process this year, as a number of budget items could impact the life sciences industry. Any CLSA members who would like to provide input or would like further information please reach out to Oliver Rocroi, CLSA’s Vice President of State Government Relations ( or Brett Johnson, CLSA’s Senior Director of Policy & Regulatory Affairs ( The full budget report is available here.