Setting a Vision for Sustainable Transformation
In 2026, California’s Medi-Cal program will simultaneously implement multiple state reforms and adjust to major federal developments. The launch of Medi-Cal Managed Care Plan (MCP) Community Reinvestment requirements, the implementation of two new behavioral health initiatives, and the renewal of the CalAIM waiver will require MCPs and County health agencies to strategically assess how to sustain the momentum of the past few years under CalAIM while building new initiatives. At the same time, the federal reconciliation bill H.R. 1 (“One Big Beautiful Bill Act”) is projected to drive significant health care coverage losses, with an estimated 3 million Californians at risk of losing health care, creating urgent implementation challenges for MCPs, Counties, and providers.
As California health care stakeholders prepare for these changes, they will be doing so amid tighter budgetary resources, necessitating innovation, careful planning, and proactive collaboration. Here are a few initiatives to watch as we kick off the New Year.
Community Reinvestment Funds
Starting in 2026, Medi-Cal Managed Care Plans will be required by APL 25-004 to allocate a portion of their net income to Community Reinvestment. Investments must go towards non-contract services and programs that support social drivers of health. Areas of investment should be aligned with the county Community Health Improvement Plan (CHIP). Funding may be allocated to Neighborhoods and Built Environment, Health Care Workforce, Well-Being for Priority Populations, Local Communities, and Improved Health. Community Reinvestment is an opportunity for MCPs to assess the ongoing work in their communities that improves the health of their members, and allocate funds to support and bolster those efforts even while other funding sources may be dwindling for these programs.
BH-CONNECT
BH-CONNECT is a new Medi-Cal initiative including a Medicaid 1115 waiver approved by CMS in December 2024. It is a five-year demonstration that is designed to transform California’s behavioral health delivery system through implementation of Evidence Based Practices, a workforce program, and Transitional Rent. MCPs and County Behavioral Health Plans will collaborate to launch these programs. BH-CONNECT’s Access, Reform and Outcomes Incentive Program is an opportunity for Counties to draw down additional funding to support these efforts through demonstrating progress in improving access to services, improving outcomes for Medi-Cal members with behavioral health conditions, and implementing behavioral health delivery system reforms.
BHSA
In 2024, California voters approved, through Proposition 1, a plan to replace the Mental Health Services Act (MHSA) with the Behavioral Health Services Act (BHSA). BHSA directs tax revenue to counties to fund behavioral health services, emphasizing meeting the needs of individuals most at risk of adverse outcomes through a focus on housing. Funding allocations include 30% for housing interventions, 35% for Full Service Partnership (FSP) Programs, and 35% for Behavioral Health Services and Supports. Counties must develop a comprehensive Integrated Plan detailing how they will utilize the required allocations to meet the needs of their communities.
CalAIM Waiver Renewal
Over the last few years, CalAIM has reshaped the relationship between Medi-Cal and the state’s network of Community-Based Organizations. Through Enhanced Care Management (ECM) and Community Supports, MCPs have established networks of providers who are embedded in the community and have strong relationships with the most vulnerable members. Short-term funding opportunities, including PATH CITED and the TA Marketplace, have offered a significant statewide boost to the capacity and technical capabilities of CBOs. As the original CalAIM waiver approaches expiration and DHCS seeks a new 5-year waiver approval from the federal government, the state will shift focus from initiating to sustaining programs. DHCS plans to continue ECM and Community Supports beyond the CalAIM waiver period through existing authority as well as renew other CalAIM programs through another waiver. As funding sources to support the launch of CalAIM wind down, providers will look for other sources to maintain services and continue growth during this next phase.
Recommendations for Managed Care Plans, Counties, and Health System Leaders
As Medi-Cal undergoes major changes in 2026, counties, Managed Care Plans, and health system leaders should work collaboratively to maximize existing programs and new initiatives to best serve their local communities.
Continue to invest in local ECM and Community Supports provider networks
Locally-based, community-based organizations providing ECM and Community Supports have built trusted relationships with Medi-Cal members. These organizations are well-positioned to support community-based behavioral health services and implement targeted Community Reinvestment initiatives. Additionally, these community-based organizations will be critical in supporting Medi-Cal members impacted by H.R. 1 changes, such as eligibility redeterminations and work requirements. Even with the continuation of ECM and some Community Supports, these organizations will no longer receive PATH Initiative support (CITED grants, Technical Assistance Marketplace, Collaborative Planning and Implementation regional groups). CBOs will need the support of MCPs to continue providing the highest need Medi-Cal members with critical, life-saving services.
Develop a county-wide, multi-MCP strategy to align the BHSA Integrated Plan (IP), CHIP, and Community Reinvestment
Per state guidance, both the IP and Community Reinvestment plan must be informed by county CHA and CHIP development, which MCPs are also now required to meaningfully engage in the development of. With overlapping requirements and strategic plans intended to be informed by the same assessments, local stakeholders should ensure there is one unified strategy driving alignment across these initiatives. In the face of coverage losses and funding reductions driven by H.R. 1, close coordination is essential to ensuring limited resources are targeted to maximize impact.
Leverage New Programs through BH-CONNECT
Leaders should proactively identify eligible initiatives and partners to engage in BH-CONNECT planning efforts to take advantage of funding opportunities to strengthen behavioral health care delivery locally. With counties, MCPs, and health systems facing constrained resources, this is a concrete opportunity to bolster services and avoid leaving critical funding unclaimed.
By identifying collaboration opportunities that foster innovation in a changing budgetary landscape, California health care stakeholders will be able to weather changes and continue to provide the best support for Californians.