Voters Approve Proposition 35, Choosing Medi-Cal Funding Over Budget Flexibility

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In essence, Proposition 35 promised to secure Medi-Cal funding but left voters to weigh the trade-offs of budget stability and flexibility.

Californians took that deal and passed it, cementing the state’s tax on managed-care organizations and directing an estimated $7 billion to $8 billion each year exclusively to Medi-Cal.

The funds are meant to improve access to primary care, specialty care, mental health services and prescription drugs, as well as enhance provider availability and reduce patient wait times.

Lawmakers, however, are limited in reassigning these funds, and the measure remains contingent on federal approval for continued matching funds.

The Associated Press called the race at 9:28 p.m. with 67.5% of voters approving.

Proponents of the measure quickly celebrated what they called an overwhelming victory. Jodi Hicks, president and CEO of Planned Parenthood Affiliates of California and the campaign’s co-chair called it a “victory for patients across California” in a quickly emailed press release.

“Nearly 85% of patients at Planned Parenthood health centers rely on Medi-Cal for health insurance and now, with a dedicated source of funding for the program, there will be a future that provides more stability and expanded access to care for those who need it most,” she said. “Planned Parenthood is proud to have supported Prop. 35 to help achieve a more equitable health care delivery system that all Californians will benefit from.”

The No on Prop. 35 campaign released a statement that said the vote made it clear that Californians support the Medi-Cal program and “want to improve access to health care for the most vulnerable.”

“While we opposed Prop. 35 because of the details, state leaders now have a mandate to improve Medi-Cal and must fulfill that obligation,” the statement said.

Despite Proposition 35’s innocuous and seemingly straightforward title — “Provides permanent funding for Medi-Cal health care services” — the measure is one the most complex on California’s ballot. At its core is an obscure tax that most voters have never heard of. Basically, California levies a tax on managed-care organizations — otherwise known as health insurers like Anthem Blue Cross and Kaiser Permanente. The state uses the tax revenue to draw federal matching funds, effectively doubling its impact, and applies it toward Medi-Cal services.

Under the proposition, tax revenue from managed-care organizations would be strictly reserved for Medi-Cal, expanding access to services like mental health, primary care, and prescription drugs. Supporters argue this dedicated funding will improve access for the 2 in 5 Californians reliant on Medi-Cal, with funds directed to providers like hospitals and emergency services. With many patients currently facing prolonged wait times and few physicians accepting Medi-Cal’s lower reimbursement rates, proponents said it would help alleviate these pressures by increasing provider compensation.

However, critics warn that the proposition’s rigid spending mandates may constrain California’s fiscal flexibility, potentially intensifying the state’s budget challenges. The measure’s reliance on federal approval for matching funds also raises concerns, as changes to federal policy could jeopardize future funding.

Opponents argue that such budgeting restrictions should be managed by policymakers, who can adjust them as needed, rather than by voters through a ballot measure, which would be challenging to amend in future elections.

The proposition drew support from a broad coalition, including the California Democratic and Republican parties, health care associations, labor unions and Planned Parenthood.

Opposition comes from groups like the California Pan-Ethnic Health Network and the California Alliance of Retired Americans, who fear the financial risks and loss of budgetary adaptability.

Proposition 35 created unusual political devisions and its intricate funding mechanism and spending restrictions fragmented the medical community — even among those who share the same goals of improving health care access.