Article

Should Behavioral Health Fear Medicaid Cuts or Find Opportunity in the Uncertainty?

Carolyn Bradfield, April 2025

Yuvo CEO Cesear Herrera and David Gross of the Sachs Policy Group held an open forum to explore what programs might expect from potential cuts to Medicaid. The bottom line is that nobody seems to be able to read the tea leaves of what the federal government night do, but it’s clear the talk of federal Medicaid reductions is gaining traction and “something will happen.”

More than 92 million Americans are enrolled in Medicaid — the largest payer for behavioral health and addiction treatment in the U.S.


And it’s not just what will happen in Washington but according to David Gross, people need to pay attention to what their state might do in response. When federal Medicaid funding shrinks, states will face tough decisions because they operate on tight budgets and don’t have the flexibility to absorb the shortfall so they will likely:

  • Reduce eligibility or enrollment
  • Cut reimbursement rates
  • Limit covered behavioral health services

Some states will find creative ways to sustain coverage. Others may slash benefits quickly, especially in non-expansion states or those with a history of lean behavioral health support. That’s why it’s critical to track your state’s posture now, not later.

Twelve states have enacted "trigger laws" that mandate reevaluation or termination of Medicaid expansion if the federal matching rate (FMAP) falls below a certain threshold including Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah, Virginia, New Mexico, Iowa, and Idaho.


For behavioral health providers, the prospect of federal or state Medicaid cuts triggers a familiar reaction: worry. With budget proposals threatening to slash billions from behavioral health and addiction programs, and signals from policymakers hinting at a return to fiscal tightening, it's easy to default to panic. But what if fear isn’t the most productive response?

The Opportunity: Rethink, Reinvent, and Prepare

Behavioral health programs have weathered opioid waves, workforce shortages, and COVID. Here's the opportunity: those that adapt before the inevitable Medicaid cuts come will emerge stronger, more resilient, and more fundable.

Diversify Your Revenue

Don't rely solely on Medicaid! Explore commercial contracts, private pay services or grant funding.  Here are some ideas to become more sustainable.

  • Direct-to-consumer subscriptions for recovery, family support, and education
  • Employer contracts for workforce mental health and addiction recovery
  • Justice & child welfare services through local agency contracts
  • Licensing your programs or content to other centers, sober homes, or schools
  • White-labeled tech partnerships for organizations that lack digital infrastructure
Shift to Value-Based Outcomes

Start tracking what matters: reduction in relapse, ER avoidance, medication adherence, family involvement. Funders want proof, not anecdotes.

Extend Your Reach Without Increasing Overhead

Use technology to offer post-treatment support, track outcomes, engage families, and keep patients connected without adding staff.

Partner Smarter, Not Harder

Tap into peer networks, housing providers, MAT partners, and digital tools to round out services. You don’t have to build it all — you just have to connect it well.

Prepare Your Message for Policymakers and Payers

TGather your data. Tell your story. Make the case for why your program saves lives and saves the system money.

What Should You Be Watching Right Now?

  • Your state’s Medicaid budget hearings
  • Any proposed waivers or coverage changes
  • Rate adjustments for behavioral health services
  • Political and policy signals from the administration
  • Private funders beginning to shift toward outcomes-based pilots.

Final Thought: Prepare, Don’t Panic

Medication-Assisted Treatment (MAT) remains one of the most evidence-based interventions for opioid use disorder saving both lives and money.

About the Author

Carolyn Bradfield is the CEO of Pathroot Health, where she helps treatment providers adopt value-based care and tech-enabled recovery support. A seasoned entrepreneur, she has founded four successful technology companies in conferencing, collaboration, and cloud-based platforms. Her passion for long-term recovery solutions is deeply personal—shaped by the struggles of her husband and daughter, which led her to create Phoenix Outdoor, a pioneering treatment program for adolescents and families. Today, she’s focused on equipping providers with tools to track outcomes, engage alumni and families, and use data-driven insights to strengthen recovery and reduce relapse.

See how Pathroot Health can help you shift to a value-based care solution.  Get in touch ».