California Governor Newsom Signs SB 165, Extending Medi-Cal Funding for Nursing Facilities

California Governor Gavin Newsom has signed into law Senate Bill 165, extending crucial funding and reimbursement rules for specialized nursing facilities that serve Medi-Cal beneficiaries. The legislation, officially enacted on July 6, 2026, ensures the continuation of the state's financing scheme for these centers, preventing disruptions in care for elderly and disabled residents.

The bill's primary effect is to prolong the "quality assurance fee" mechanism until December 31, 2027. This fee is applied to certain specialized nursing facilities and helps fund the Medi-Cal program. While the fee collection will cease after this date, the state retains the authority to collect any outstanding payments, including interest and penalties, even after the program's ordinary application period concludes.

SB 165 also introduces modifications to Medi-Cal reimbursement procedures for these facilities. The Legislature's stated goal is to maintain a funding model that aligns increasing healthcare costs with the program's fiscal stability. Medi-Cal expenses have been rising due to escalating healthcare costs and an expanding beneficiary base, particularly during economic downturns.

Despite the fee's expiration in 2027, the state's legal power to audit, penalize, and recover any unpaid amounts remains. The legislation aims to adjust reimbursement levels within federal limits to avoid more severe cuts to coverage or benefits, acknowledging the financial pressures on both providers and the state's healthcare system.