California voters overwhelmingly approved Proposition 35 last November, directing the state to boost Medi-Cal reimbursement rates for doctors treating low-income patients. But a missed federal deadline on March 31 has stalled the plan’s rollout—leaving millions in federal matching dollars unclaimed and frustrating lawmakers and clinicians alike.

The measure, passed by 68% of voters, dedicates funding from a special tax on health insurance plans to increase payments for care delivered through Medi-Cal, California’s Medicaid program. However, the state first needed to seek federal approval—a step it failed to complete in time.

Because of the delay, health care providers will not receive the promised rate increases for the first quarter of 2025. The lapse also prevents California from collecting federal funds that would have amplified the state’s investment in Medi-Cal.

A Slow Start and Unanswered Questions

The Department of Health Care Services (DHCS), which manages Medi-Cal, did not respond to media inquiries about the delay. At recent hearings, DHCS Director Michelle Baass attributed the missed deadline to delays in filling positions on the advisory committee that oversees Prop. 35 spending. Although a quorum was met, one appointment remains unfilled.

Gov. Gavin Newsom’s office has not explained the holdup, though the advisory panel is finally scheduled to meet on April 14.

A DHCS official previously told lawmakers that meeting the March deadline was never seen as realistic, which caught many legislators off guard. Assemblymember Dawn Addis (D-Morro Bay) criticized the delay, pointing out that she had supported Prop. 35 under the impression rate hikes would begin quickly.

“Ninety-four percent of Californians have health insurance, but many still can’t access care,” Addis said. “In rural areas, providers simply can’t afford to stay open with reimbursement rates this low.”

Legislative Frustration and Lost Access

Senator Akilah Weber Pierson (D-San Diego), a physician herself, emphasized that the committee could have met with a quorum in place. “This was something the voters were very, very clear about,” she said. “It’s extremely unfortunate that we are leaving funds on the table.”

The missed deadline compounds existing pressures on Medi-Cal. Enrollment has expanded rapidly, now covering one in three Californians, while provider payment rates have largely stagnated for two decades.

Budget Woes and Finger-Pointing

The delay also comes amid rising budget concerns. California is seeking a $6 billion state loan to keep Medi-Cal running through the end of the year, raising questions about the sustainability of the program.

Republican lawmakers argue that part of the financial strain comes from California’s decision to extend Medi-Cal to income-eligible undocumented immigrants. The Newsom administration, while defending the expansion, admits this policy accounts for about half the projected Medi-Cal deficit.

Governor Newsom has also pointed to Prop. 35 itself as a cost driver, stating that while voters made a clear choice, the added expenses must be accounted for. “Prop. 35 placed a lot of cost burdens as it relates to rates, and that’s happening now,” he said.

Health Industry Urges Swift Action

Prop. 35 was backed by major players in California’s health care system, including doctors, hospitals, clinics, and ambulance companies. Supporters had long expressed frustration with the state’s failure to deliver past promises on Medi-Cal rate increases.

The measure earmarks about $4 billion annually, with half designated for the state general fund and half for provider payments. At a recent hearing, Stuart Thompson of the California Medical Association urged the state to act quickly and ensure implementation stays on track.

“We want to make sure Prop. 35 enhances care for those who need it most,” Thompson said. “It’s time to deliver on what voters overwhelmingly supported.”