What Actually Changed Between Newsom's January Budget and the May Revision: A Line-by-Line Read for FQHCs

The Headline Numbers — Where the $5B Lands

The May Revision proposes approximately $5 billion in new General Fund Medi-Cal solutions. Most of that total comes from a small number of large policy levers. Total Medi-Cal General Fund spending in the May Revision: $49 billion General Fund / $222 billion total funds in FY 2026-27 — an all-time high, per the LAO Medi-Cal Analysis.

• Forced FFS transition for ~2M undocumented adults: $471.6M GF savings 2026-27, $1.2B/yr ongoing — Cal Budget Center
• UIS PPS elimination (state-only services): $452.5M GF 2026-27, full year $1.1B ongoing — DHCS UIS Fact Sheet
• Asset limit reinstatement at $2K/$3K (Jan 1, 2027): $278.3M GF savings 2026-27 — Justice in Aging
• Premium increase $30 → $50/month (July 1, 2027): $427.3M GF in 2027-28 declining to $314.3M annually — LAO May Revision Comments
• Prop 56 supplemental payments eliminated: $504M (FY25-26) / $550M ongoing — DHCS APL-25-011
• Federal match drop 90% → 50% for emergency UIS services (Oct 1, 2026): +$669M GF cost — CAFP
• Dental elimination for undocumented 19+: $308M (FY26-27 partial) / $336M ongoing — DHCS Medi-Cal Changes

These levers stack and compound. The same patient who loses managed-care continuity under the FFS transition may also face the new asset limit, the higher premium, the lost dental coverage, and a state-imposed work requirement. The compound effect on enrollment retention is larger than any single number in the table.

What Was Already in the January Proposal (and Carried Through)

These provisions Governor Newsom included in his January 9, 2026 budget per WCLP analysis survived to the May Revision unchanged. None of these are new — they're confirmation that the cuts are advancing.

**UIS PPS Elimination — July 1, 2026.** The single biggest revenue lever for FQHCs. Effective July 1, FQHCs and Rural Health Clinics will no longer receive Prospective Payment System rates for state-only-funded services provided to Medi-Cal members with Unsatisfactory Immigration Status. Instead, payment shifts to the applicable Medi-Cal Fee Schedule rate in fee-for-service, or the negotiated rate in managed care. This applies to all clinical service lines — medical, dental, vision/optometry, and pharmacy — rendered under state-only funding to undocumented patients. Santa Cruz Community Health publicly disclosed a $2.3M annual revenue loss affecting ~2,000 patients and ~12,000 visits.

**Full-Scope Dental Elimination — July 1, 2026.** Full-scope dental benefits eliminated for Medi-Cal members 19+ with UIS. Restricted-scope emergency dental remains. Estimated savings: $308M in 2026-27, $336M ongoing. Per DHCS Medi-Cal Changes 2026-2028.

**Enrollment Freeze — In Effect January 1, 2026.** Undocumented adults 19+ cannot newly enroll in full-scope Medi-Cal. Those enrolled before January 1, 2026 retain coverage. Projected savings: $78M in 2025-26, growing to $3.3B by 2028-29.

**Medi-Cal Rx Step Therapy + End of Continuing Care — In Effect January 1, 2026.** Medi-Cal Rx eliminated 'continuing care' status — patients are no longer grandfathered for non-Contract Drug List medications. Step therapy now requires non-PA-required CDL drugs to be tried first. Continuation of therapy alone is no longer sufficient justification for approval. Per DHCS official guidance. The May Revision did not roll this back.

**Coverage Terminations for ~200K Immigrants — October 1, 2026.** The January proposal terminated Medi-Cal for refugees, asylees, DV survivors, trafficking survivors, and Special Immigrant Visa holders from Afghanistan and Iraq — moving them to restricted-scope. The May Revision did not reverse this.

What Genuinely Changed in the May Revision

These are the provisions that were NOT in the January proposal, or were materially modified in May.

**Forced Transition: ~2M Undocumented Adults from Managed Care to FFS (NEW).** Effective January 1, 2027, the May Revision proposes transitioning approximately 2 million Medi-Cal members with UIS out of risk-based managed care into fee-for-service — in response to new federal requirements under H.R. 1 limiting managed-care coverage of UIS members. Reduces $583.8M total funds ($471.6M GF) in 2026-27, $1.5B total funds ($1.2B GF) ongoing. FQHC impact: capitation payments from MCO partners drop for this population; FFS billing reconciles differently and on different cycles. Per Cal Budget Center.

**Premium Increase: $30 → $50/Month (NEW — January was $30).** The January proposal set the monthly premium for undocumented adults 19+ at $30/month effective January 2027. The May Revision raises that to $50/month effective July 1, 2027 — savings of $427.3M GF in 2027-28, declining to $314.3M annually by 2029-30. Premium increases drive disenrollment; even modest disenrollment translates to PPS revenue loss per visit and capitation loss per member.

**Asset Limit Reinstatement at $2,000 / $3,000 (NEW).** The Governor proposes drastically reducing the Medi-Cal asset limit to $2,000 for individuals and $3,000 for couples, effective January 1, 2027. The interim reinstatement at $130,000/individual took effect January 1, 2026. Projected savings: $278.3M in 2026-27. Coverage loss: ~25,000 older adults and people with disabilities in year one; ~37,000 in year two; ~62,000 cumulative over the first two years per Justice in Aging. FQHC impact: particularly hits Aged/Blind/Disabled patient mix, dual-eligible patients, and long-term care patients.

**State-Imposed Work Requirements for State-Only Medi-Cal (NEW).** California is choosing to apply work and community engagement requirements to undocumented adults receiving state-only-funded Medi-Cal — a population not subject to federal H.R. 1 work requirements. This is a discretionary state policy choice, not a federal mandate. Per Western Center on Law & Poverty. FQHC impact: enrollment desk workload compounds; CHWs and care managers absorb the administrative load.

**Proposition 56 Supplemental Payments Eliminated (NEW).** $504M (FY25-26) / $550M ongoing. Last supplemental payments cover services through June 30, 2026, with a one-year claims runout window through June 30, 2027. The DHCS APL is already published — APL-25-011. Important nuance: Prop 56 supplemental payments to dental providers operated alongside FQHC PPS rates, not within them. Direct FQHC PPS-rate impact is limited. The real exposure is for contracted dental partners, affiliated dental practices billing separately under Denti-Cal, and family planning subgrantees.

Side-by-Side — January vs. May Revision

For boards and CFOs who need the comparison in one read:

• UIS PPS elimination (all services) — January: proposed July 1, 2026. May: confirmed. UNCHANGED.
• Full-scope dental for undocumented 19+ — January: eliminate July 1, 2026. May: confirmed. UNCHANGED.
• Enrollment freeze, undocumented 19+ — January: in effect Jan 1, 2026. May: confirmed. UNCHANGED.
• State-only LTC for undocumented — January: eliminated Jan 1, 2026. May: confirmed. UNCHANGED.
• Medi-Cal Rx step therapy — January: effective Jan 1, 2026. May: confirmed. UNCHANGED.
• Coverage termination ~200K refugees/asylees/DV/trafficking/SIV — January: Oct 1, 2026. May: confirmed. UNCHANGED.
• Federal match drop 90→50% (UIS emergency) — January: Oct 1, 2026. May: confirmed. UNCHANGED.
• Premium for undocumented adults — January: $30/month Jan 1, 2027. May: $50/month July 1, 2027. CHANGED (+$20, later date).
• Asset limit — January: $130K interim reinstatement. May: $2K/$3K effective Jan 1, 2027. NEW (deeper).
• FFS transition ~2M undocumented adults — January: not in proposal. May: effective Jan 1, 2027. NEW.
• State-imposed work requirements (state-only) — January: not in proposal. May: proposed. NEW.
• Prop 56 supplemental payments — January: continued. May: eliminated June 30, 2026. NEW.

The pattern: everything from January advanced; May added four new cuts and deepened one existing one. The June 15 legislative deadline is where these proposals become budget law.

FQHC Impact by Service Line

**Medical (Primary Care).** UIS PPS elimination applies to all medical visits rendered under state-only funding. Loss of MCO capitation for ~2M undocumented adults transitioning to FFS. Premium-driven disenrollment from both federal H.R. 1 ($30/mo ACA expansion) and state ($50/mo undocumented adults from July 2027). What to model: PPS revenue → Fee Schedule revenue ratio per UIS visit. Most FQHCs will see 40-60% revenue loss on affected visits.

**Dental.** Full-scope dental elimination for undocumented adults 19+ — restricted-scope emergency only effective July 1, 2026. UIS PPS elimination applies to dental services. Prop 56 supplemental payments end June 30, 2026 — affects contracted dental partners, not directly the FQHC PPS rate. Run two scenarios: (1) direct dental service line impact, UIS dental visit volume × revenue compression; (2) partner-network impact — what happens to contracted dental capacity if the partner can't sustain operations post-Prop 56.

**Vision / Optometry.** UIS PPS elimination applies to vision services rendered under state-only funding. For FQHCs using optometry as a PPS revenue lever (see our Vision Care PPS Revenue Lever briefing), the UIS portion of vision revenue gets repriced to Fee Schedule on July 1. Same modeling approach as medical.

**Pharmacy.** Medi-Cal Rx step therapy and end of continuing care — already in effect, growing in impact as refill cycles turn over. Prior authorization workflow has materially expanded since January 1. Track care-manager and pharmacist time spent on PA appeals month-over-month.

**Behavioral Health.** State-only LTC elimination affects BH continuity for undocumented adults in residential treatment. BH services within Medi-Cal Rx step therapy regime — psychotropic continuity disrupted. Compound exposure for Central Valley FQHCs taking on displaced Lodi Wellness Center patients (closes June 30, 2026).

**Care Coordination / ECM.** MCO contract risk for ECM patients in the FFS transition (Jan 1, 2027). CalAIM 1115 waiver renewal is the dominant force here — see our CalAIM Deep Dive.

**Enrollment / Front Desk.** State-imposed work requirements add a new redetermination layer. Asset limit reinstatement at $2K/$3K — eligibility complexity for ABD/dual-eligible/LTC populations. Federal H.R. 1 work requirements for ACA expansion adults — Jan 1, 2027. Staffing ratio for enrollment specialists matters — complexity load is going up faster than patient volume.

What FQHCs Should Do This Quarter

• For CFOs: Update your July 1 revenue impact model to stack all four service lines — medical, dental, vision, pharmacy — under UIS PPS elimination. Add a 2027 layer for: (a) FFS transition revenue flow, (b) asset limit eligibility impact, (c) premium-driven disenrollment. Bring the May Revision sensitivity analysis to board as a multi-year scenario.
• For Board Chairs: Brief boards that May Revision didn't reverse anything — it confirmed and added. The pre-May framework was the floor, not the ceiling.
• For HR/Operations: Hold contingency hiring plans through June 15. Final cuts may differ from May proposal at the margins. Re-pace Section 504 / WCAG 2.1AA remediation (May 11, 2027 deadline) — but don't repause.
• For Compliance Officers: The combination of UIS PPS + dental + vision + pharmacy changes creates new attestation, billing, and documentation requirements. Map every claim type that needs a workflow update by July 1.
• For Dental Directors: Map your Prop 56-exposed contracted dental partners. Audit their financial position. Be prepared for capacity loss after June 30, 2026.
• For Enrollment Leads: Build patient communication scripts in Spanish (and other top languages) explaining what changes July 1 and what stays. Patient anxiety will compound operational load if not managed proactively.
• For Advocacy / Policy Leads: File comments through CPCA, CCALAC, CAFP, and your district's State Senate/Assembly offices on the discretionary cuts (state work requirements, premium, asset limit) by June 1.

The Bottom Line

The May Revision didn't deliver the relief some FQHC executives quietly hoped for after the January proposal. Instead, it confirmed every cut and added four more.

What's structurally true: July 1, 2026 is real — UIS PPS elimination is happening for medical, dental, vision, pharmacy. The cliff isn't a single event — it's a series. July 1, 2026. October 1, 2026. December 31, 2026. January 1, 2027. July 1, 2027. Each adds a layer. CFOs running single-event models are under-counting.

Some of what's happening is federally driven (H.R. 1). Most is state-driven choice. The state-imposed work requirements, the premium increase, the asset limit, the FFS implementation timing — these are California Legislature decisions. Advocacy works on these. The legislative window between today and June 15 is real. Discretionary state cuts are the highest-leverage advocacy targets. The May Revision is the floor of where this year's budget conversation ends up — plan from the floor, not the ceiling. Pair this read with our CalAIM Deep Dive — the state and federal cliffs compound.

The May Revision is the floor of where this year's budget conversation ends up. Plan from the floor, not the ceiling.

— FQHC Talent Exchange analysis