Can California avoid catastrophic health care cuts by taxing the rich? | Opinion

Deep inside House Resolution 1 — the so-called “Big, Beautiful Bill” — is something that uniquely harms California which few people understand. Soon, it will have dire impacts on our state.

For years, California health care providers have been voluntarily taxing themselves, paying extra state fees so the state can participate in a program where the federal government matches those fees (at rates as high as 90%) and reimburses providers. This unique program is one available to all states, but California has utilized it more than anywhere else.

This program is one reason an impressive 94% of Californians currently have health insurance.

But now, by imposing severe restrictions to this program through HR 1, Congress has figured out a way to disproportionately harm Californians. Hospitals, community clinics and everyday people are facing steep cuts threatening to upend our entire health care system.

The bottom line is pretty dire. Luckily, there are clear moves California — a state that’s no stranger to protecting and expanding health care access — can make to counter these threats.

The most important tax in question is one paid by managed care organizations that provide coverage via Medi-Cal, which covers approximately 40% of all state residents. Californians showed clear support for the managed care organization tax by passing Proposition 35, which made this tax permanent and used it to increase funding for Medi-Cal and other health programs.

Importantly, Prop. 35 also establishes clear rules for Medi-Cal funds generated by California’s managed care organization tax, ensuring 99% of those funds are used exclusively for patient care, provider reimbursements and Medi-Cal services. Prop. 35 would also change which health services get increased funding, with behavioral health programs, outpatient facilities and community health workers slated for more resources.

Notably, Prop. 35 received wide support from both Democratic and Republican voters and elected officials across the state.

But HR 1’s financing restrictions strip billions of dollars in federal support, essentially knocking down one of California’s health care system’s central financing pillars. This means the managed care organization tax and the voter-approved benefits of Prop. 35 are essentially moot.

Yet, rather than put forward revenue solutions to these federal health care cuts, California’s state budget includes even more direct cuts to Medi-Cal and essential programs for our state’s most vulnerable populations. In fact, California’s budget alone — with no federal cuts taken into consideration — would force state health clinics to face a 20% cut in funding.

Medi-Cal recipients won’t be the only ones to suffer — the hollowing out of the entire health care system will cause insurance premiums in the Covered California marketplace to nearly triple. Experts estimate up to 30% of Covered California enrollees will be forced to drop their coverage over the next few years. This would be catastrophic, rolling back more than a decade of progress and leaving our health care system overrun with uncompensated care.

The Trump administration’s budget cuts are part of a broader strategy: weaken states’ ability to protect their residents, forcing leadership into politically impossible trade-offs. Without the provider fee mechanism, California faces a grim choice: make even deeper cuts to an already strained state budget, or raise new revenue.

With a $12 billion budget deficit, the temptation will be to further slash services, a move that would hit low-income communities, people of color and rural Californians hardest.

Luckily, California has the capacity and resources to not only withstand these attacks, but to backfill current cuts and strengthen our health care system even further. The answer lies in progressive revenue.

Over the last decade, federal tax policy has delivered massive windfalls to millionaires and billionaires. California can — and must — reclaim a portion of those giveaways to the rich.

By modestly increasing taxes on the wealthiest Californians’ investments, the state could easily generate tens of billions — far more than our current deficit. This funding could be reinvested to maintain subsidies, keep Covered California strong, save Medi-Cal for the millions of Californians who depend on it and expand access to care.

The infrastructure and solution exists. Now, what’s needed is the political will. In doing so, California would not only preserve our near-universal coverage, we could also send a powerful message: we will not allow President Donald Trump’s austerity agenda to dictate the health and future of our communities.

Gov. Gavin Newsom and state legislators have shown that they are willing to take bold action to protect elections. Now it’s time to summon that same courage to protect health care.

Jim Mangia is president and CEO of St. John’s Community Health.

This story was originally published September 27, 2025 at 6:00 AM with the headline "Can California avoid catastrophic health care cuts by taxing the rich? | Opinion."