"The world has radicallychanged," Newsom said this month, as he prepared California for amid-May surge in COVID-19 hospitalizations. (Photo:Bloomberg)

This was supposed to be a big health care year forCalifornia.

Democratic Gov. Gavin Newsom in January unveiled ambitious proposals to help him achieve his goal of gettingevery Californian health care coverage. Though it was far less thanthe single-payer promise Newsom had made on the gubernatorialcampaign trail, his plans, if adopted, would have expanded thehealth care system as no other state has.

His $47 billion health care agenda, fueled by a once-boomingeconomy and pressure from legislative Democrats, sought to expandthe pool of undocumented immigrants covered by Medicaid, enableCalifornia to manufacture its own generic drugs, pour billions into the Medicaid program to address chronichomelessness and dramatically increase mental health and addictiontreatment statewide.

Related: Lowering drug prices: Can California make ithappen?

Then, the novel coronavirus swept in, decimating thoseambitions.

"The world has radically changed," Newsom said this month, as heprepared California for a mid-May surge in COVID-19hospitalizations.

Once buoyed by record economic growth and a $21 billionrainy-day fund to protect California from a major downturn, Newsomwarned of a "budgetary crisis that is starting to manifest,"suggesting he can no longer follow through on his health carepromises.

"All of that is being recalibrated," he said.

But Democratic lawmakers who control both houses of the statelegislature — and will negotiate with Newsom over the scope of the2020-21 state budget — aren't necessarily convinced they have toabandon their plans.

"If those workers providing the products, the services, the foodthat we eat don't have health care, we're all in danger," saidstate Sen. Maria Elena Durazo (D-Los Angeles), who has pressedNewsom to expand Medicaid coverage to unauthorized immigrants ages65 and up. "Our reasoning is a lot stronger now because if theydon't have health care, it weakens our ability to stop the spreadof COVID-19."

Newsom says he has no choice but to scale back his initial$222billion state budget proposal.

The state may be able to fund only existing programs andcoronavirus response and recovery, said state Finance DirectorKeely Bosler. There could even be cuts, she warned.

Exactly how much money will be available to keep the staterunning will not be known until mid-May. The legislature, whichrecessed in mid-March in the midst of the pandemic, isn't scheduledto reconvene until May 4 and may conduct business remotely for theremainder of the session.

Staggering stock market and job losses have thrown the state'sfiscal outlook into turmoil, with California receiving more than2million unemployment claims since mid-March. Medi-Cal,California's Medicaid program for the poor, already covers about 13million Californians, and state budget analysts expect caseloads toexplode.

"It is going to be bad, but we have not yet been able todetermine how bad because of the fluid and dynamic nature of thispandemic," said H.D. Palmer, spokesperson for the state Departmentof Finance. "Clearly what we are in the midst of is much moresevere than a midpoint recession."

Meanwhile, the state has already begun draining its rainy-dayreserves and spending from its general fund to respond to thecrisis.

Newsom has spent more than $850 million in response to thepandemic, such as boosting California's supply of ventilators andother protective gear needed for a projected surge in COVID-19cases. On Tuesday night, he announced the state had inked a $1 billion deal to get 200million masks per month — enough for California and possibly toshare with other states.

Newsom is also funding food and senior assistance programs,sending money to counties to house more jail inmates while stateprisons temporarily pause intake, and paying for hotel and motelrooms for homeless people. And the state will help pay nearly40,000 health care workers it is recruiting for the surge.

Some of the costs will be reimbursed by the federal government,Newsom said, but it's not clear how much.

Not long ago, Newsom and the legislature were in a verydifferent place, enacting policies that made California a nationaltesting ground for expanding health coverage.

Last year, they approved a $100 million-per-year expansion ofMedi-Cal to low-income undocumented immigrants ages 19 to 25,earning praise from national party leaders and ire from PresidentDonald Trump. And they approved $1.5 billion over the next threeyears to fund new subsidies for some low- and middle-income Californianspurchasing health coverage on the state health insurance exchange,Covered California.

This year would have been even bigger.

"We have a unique responsibility to show the way," Newsom saidin January.

Newsom sought to funnel state and federal Medicaid dollars intoemergency rental programs to help homeless people get housing, andto bolster treatment for substance use disorders and mental healthfor homeless people, at-risk youth and incarcerated people.

He threatened steeper fines against health insurers that didn'tprovide adequate access to behavioral health treatment, vowed tostop surprise medical billing, promised to lower prescription drugcosts and hatched a sweeping plan to cut overall health carespending by going after the health care industry for jacking upprices.

Democratic leaders and even Republicans embraced his focus.

"California is certainly the most aggressive at trying to pushtowards universal coverage," said Larry Levitt, executive vicepresident for health policy at the Kaiser Family Foundation.(Kaiser Health News, which produces California Healthline, is aneditorially independent program of the foundation.)

"Typically, you find states focusing on either cost or universalcoverage, but what sets California apart is a drive to deal withboth."

Some Democratic lawmakers acknowledge they must reimagine theirhealth care agenda, including state Assembly member Phil Ting(D-San Francisco), chair of the Assembly Budget Committee.

"We're going to have to be very disciplined," Ting said. "Idon't think we're going to spend money on much else other thancoronavirus and economic recovery."

But others argue that proposals to expand coverage and accessare even more pressing because of COVID-19.

"Every person who can't get health care and gets sick couldpotentially spread the disease to more people. We need to take careof that," said state Sen. Richard Pan (D-Sacramento), who chairsthe Senate Health Committee and leads the state Senate budgetprocess for health-related expenditures.

Advocates and lobbyists also are flooding Newsom with budget request letters asking him not only to stick withexisting proposals, such as protecting people from getting hit withsurprise medical bills, but also to expand coverage even more andincrease state subsidies for insurance. Doctor groups are askingthe governor to provide relief for health care providers who havelost income due to declines in patient revenue, while organizedlabor is asking him to assist businesses so they don't cut healthemployee health benefits.

County behavioral health directors argue the state must fundmore mental health and substance use disorder treatment because theneed is greater today, especially for students who can't attendschool and for those who have lost homes and work.

"We need to marshal additional attention and resources forlifesaving behavioral health treatment and services, unless weintend to deepen inequality," said Michelle Doty Cabrera, executivedirector of the County Behavioral Health Directors Association."This year, right now."

Although Newsom has sought to quell the spending push by healthadvocates, he said Saturday that health care remains a top priorityand he's "committed" to adopting reforms within California'sbudgetary constraints — even if it might not happen this year.

"We will do everything in our power to lean into the futuredespite these circumstances," he said. "Reforms can happen on agood day or a bad day."

California Healthline correspondent Rachel Bluth contributedto this report. KaiserHealth News is a nonprofit news service coveringhealth issues. It is an editorially independent program of theKaiser Family Foundation, which is not affiliated with KaiserPermanente.

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