The ANCO Advocate

Medi-Cal in the 2026–27 May Revision:
What California Oncologists Need to Know

Governor Gavin Newsom has released his May Revision budget proposal for 2026–27, which proposes a number of changes to the Medi-Cal program while making investments to hospitals and balancing current and projected fiscal conditions. For oncology practices, the proposal extends payment support powered by the Managed Care Organization (MCO) tax and proposes changes to eligibility for the Medi-Cal program as well covered benefits. The Legislature must pass a budget by the 15^th of June, per the California Constitution.

Proposed Policy Changes in the May Revision for Patients in the Medi-Cal Program:

Eligibility and Coverage

• Eligibility: Reinstate Medi-Cal Asset Test Limit

• • Proposal: Reintroduces an asset test for certain Medi-Cal eligibility groups that previously benefited from asset test elimination. The proposal would limit individuals to $2000 and couples to $3000. As a result, many individuals currently enrolled in Medi-Cal would lose coverage for having assets, such as money in a bank account that exceeds the above amounts.

  • Oncology impact: Reinstating an asset test can increase churn for adults in active treatment if resources push them over the threshold, even when income remains low.

  • What to do if the proposal passes: If the proposal passes, practices that serve the Medi-Cal population should strengthen coverage‑navigation workflows and flag patients on active chemo/radiation whose renewals land in the next 90 days to start outreach and coordinate with plan case managers.

• Coverage: Eliminate Optional Adult Acupuncture Benefit

• • Proposal: Discontinues the optional Medi-Cal acupuncture benefit for adults.

  • Oncology impact: A subset of patients use acupuncture for chemotherapy‑induced nausea/vomiting, neuropathy, arthralgias, and cancer‑related fatigue. Eliminating coverage may shift patients to self‑pay, reduce utilization, or increase demand for covered alternatives (e.g., pharmacologic antiemetics, pain management, behavioral interventions).

  • What to do if the proposal passes: If passed, practices should be ready to counsel patients on covered options and document medical necessity for substitute therapies.

Big-picture Medi-Cal funding and the MCO tax

• The Department of Health Care Services budget remains substantial, anchored by multi‑year MCO tax revenues of $4.5 billion in 2025-2026 and $2.5 billion in 2026-2027 used to offset costs and fund payment enhancements into 2027. The existing MCO tax expires on December 31, 2026, because it is not in compliance with recently passed federal law, HR 1. The May Revision proposes to seek a new MCO tax effective January 1, 2027, to bring the tax in compliance with HR 1.

• Why it matters: The MCO tax remains the primary lever to sustain rates and directed payments inside Medi-Cal managed care.

Payment enhancements tied to the MCO tax continue into 2026–27. Oncology effects typically flow through plan‑negotiated rates, directed payments, and shared‑savings or pay‑for‑performance models.

What’s still evolving

• The Legislature will set final agreed-upon solutions in budget bills and budget trailer bills that will pass by June 15^th and then begin the process of negotiating with the Governor on the final budget, which is usually passed prior to the beginning of the new fiscal year- July 1.

What ANCO and MOASC members can do next?  If there are specific proposals that you would like ANCO and MOASC to oppose or support, please reach out to our contract counsel (Cher Gonzalez, Esq.) via email at cher@gonzalezconsult.com.

On March 17th, the Department of Health Care Services (DHCS) issued a reminder to providers regarding the Center for Medicare & Medicaid Services (CMS) mandate that providers that bill for goods and/or services are required to list the National Provider Identifier of the provider who ordered, referred or prescribed (ORP) the goods or services for a Medi-Cal patient. Under this new mandate, the ORP provider must be enrolled as a participating provider in Medi-Cal, even if that ORP provider does not send claims directly to Medi-Cal for the goods or services they furnish. If the Medi-Cal claim is not accompanied by an ORP NPI upon enforcement, the claim may be denied.

DHCS plans to begin enforcing this mandate using a phased approach but has not yet released information about the enforcement timeline. However, DHCS is urging Medi-Cal providers to work now with their unenrolled providers to submit a provider enrollment application through the Department of Health Care Services’ (DHCS’) Provider Application and Validation for Enrollment portal to enroll with their Type 1 (Individual) NPI. Providers and billers can check the Profile of Enrolled Medi-Cal Fee-for-Service (FFS) Providers web page on the California Health and Human Services Open Data Portal website to verify enrollment.

California's nonpartisan fiscal analyst to the California Legislature, known as the Legislative Analyst’s Office (LAO), has released a February report highlighting the anticipated fiscal effects of H.R. 1 to California's Medi-Cal program, which currently provides health care coverage to more than 14 million low-income people (around one-third of all Californians). H.R. 1, also known as the One Big Beautiful Bill Act, was signed by the President in July 2025 and introduces multiple significant changes to Medi-Cal generally aimed at reducing the federal government’s costs in these programs, but will increase costs for California.

For example, beginning January 2027, H.R. 1 requires "able-bodied" childless adults in Medicaid (19-64 year olds who received coverage through the 2014 Affordable Care Act expansion) to complete at least 80 hours per month of work, education, or community service. This requirement does not apply to certain exempt groups, such as those that are medically frail. In addition, beginning January 2027, the state will have to renew eligibility for childless adults (4.9 million people estimated in 2025-26) in Medi-Cal every six months. Medi-Cal generally renews eligibility for beneficiaries every 12 months. The LAO estimates that the new work requirements and eligibility verification changes could result in disenrollments between 1 to 2 million people, both from insufficient hours of engagement, as well as from the administrative burden of the six-month verification.

Other eligibility changes in HR 1 highlighted in the LAO report include changes to federal funding for hospitals that provide emergency services. Specifically, beginning in October 2026, federal funding for emergency services provided to undocumented childless adults will fall to the share of 50 percent, down from the current 90 percent. The LAO report estimates this change to cost the state $658 million in General Fund dollars in the budget year of 2026-27.

Finally, the report highlights the need for California to restructure its current Managed Care Organization Tax, which the state utilizes to financially support the Medi-Cal program. H.R. 1 prohibits states from adopting new provider taxes or increasing existing ones. In California, the new rules will primarily lower the size of a tax on health plans the state can collect. This will increase state costs as it backfills portions of lost funding from the tax. The LAO reports states that this could cost the state around $650 million General Fund dollars in 2026-27, and in the future, they project it could cost the General Fund several billion dollars each year.

As a result of these fiscal pressures, the LAO informs the California Legislature "it will not be possible for the state to backfill all the losses created by H.R. 1 absent significant other budget actions. Doing so would require the identification of billions of dollars in increased revenues and programmatic reductions elsewhere in the state budget." We will continue to monitor the budget situation and its impact on Medi-Cal over the year. The constitutional deadline for the California Legislature to pass a budget is June 15th.

The California 2025 legislative year has adjourned and Governor Gavin Newsom's veto session ended on October 12.  Below is a snapshot of bills signed by the Governor which aim to enhance patient access to medications and streamline administrative processes for healthcare providers, as well as ANCO and MOASC’s own sponsored bill currently sitting in the California Assembly.

Addressing Abusive Practices by Pharmacy Benefit Managers

Authored by Senator Scott Wiener, and signed by the Governor, Senate Bill 41 seeks to introduce greater oversight of Pharmacy Benefit Managers (PBMs) in California and addresses many of the long-standing issues associated with PBM practices, which have been criticized for their role in rising prescription costs and hindering patient access to essential medications. Key provisions of SB 41 include:

• Increased Transparency: SB 41 requires PBMs to disclose their pricing structures, rebate agreements, and other financial arrangements that affect drug pricing. The bill would also prohibit patient cost sharing from exceeding the actual net price paid by the plan or insurer for the prescription drug.
• Accountability Measures: PBMs will be subject to stricter regulatory oversight by the state Attorney General, with provisions for penalties in cases of non-compliance.
• Patient Access to In-Network Pharmacy Provider Protections: SB 41 prohibits PBMs from requiring patients to use a PBM affiliated pharmacy, as opposed to their current in-network pharmacy. This practice is often referred to as pharmacy “steering” and is a common anti-competitive tactic among PBMs to favor pharmacies that are vertically integrated with the PBM over other in-network pharmacy providers.

While SB 41 prohibits PBMs “steering” patients away from the current in-network pharmacy providers,  the bill does not address the issue of PBMs steering patients away from their physician to receive infusions or injections towards infusion or specialty pharmacies affiliated with the PBM. However, AB 577 authored by Assembly Member Lori Wilson and sponsored by ANCO and MOASC, would prohibit PBMs from steering patients away from their physician to receive injections, infusions, or oral medication if the physician determines it is medically necessary for the patient to receive such treatments from their own physician. That bill is currently sitting in the Assembly Appropriations Committee and is eligible to move in January 2026.

Prior Authorization Reform

In a separate but equally important initiative, SB 306 authored by Senator Josh Becker and signed by the Governor in October, aims to reform the prior authorization process in California. This legislation addresses one of the most critical pain points for oncologists and their patients—delays in treatment due to cumbersome prior authorization requirements.

SB 306 will require health plans and insurers to report to the Department of Managed Health Care and the Department of Insurance services subject to prior authorization, and the percentage rate at which they are approved, by December 31, 2026. The bill requires the departments to evaluate these reports, identify the health services approved at a rate that meets or exceeds the threshold rate of 90%, and publish a list of the services on or before July 1, 2027. The bill requires a plan or insurer to cease requiring prior authorization for those listed health care services no later than January 1, 2028. If appropriately implemented, SB 306 would allow oncologists and their practices to focus more on patient care rather than navigating bureaucratic red tape. ANCO and MOASC will actively participate in the regulatory implementation process of the bill to ensure that access to oncology care is protected.

These legislative advances reflect a commitment to improving the healthcare landscape in California, particularly for oncology patients who rely on timely access to care. ANCO and MOASC strongly supports these measures and will continue to advocate for policies that prioritize patient access and equitable treatment for all. Together, we can foster a more supportive and efficient healthcare environment for Californians with cancer.