As Congress debates the 2026 federal budget, every industry is bracing for impact. But in behavioral health, the cuts have already started.
“During COVID, and specifically during the Biden administration, there was a large amount of money that was provided to the Mental Health Block Grant and the Substance Abuse Prevention and Treatment Block Grant,” Al Guida, longtime behavioral health policy strategist, said on a recent episode of the No Notes podcast.
“There was about $1.3 billion—with a ‘B’—in unended monies that were still available to the states,” he continued. “States had until September 30 to spend that money. And the new administration terminated all those resources on March 24.”
And that was just the beginning. As of the publish date of this blog post, the proposed budget would eliminate 42 more programs (including CCBHC grants). Key lawmakers are also pushing for deep Medicaid cuts that could force states to reduce services, lower provider rates, and/or tighten eligibility.
For behavioral health organizations that are already stretched thin, this kind of uncertainty hits hard—especially with Medicaid serving as the financial backbone of most community mental health centers.
To help behavioral health professionals make sense of it all, Guida joined Chuck Ingoglia, President and CEO of the National Council for Mental Wellbeing, and Dr. Denny Morrison, Eleos Chief Clinical Officer, for a special episode of the No Notes podcast. Together, they unpacked what’s really going on in Washington, which proposals providers should be watching, and where they still have power to act. Read on for a summary of what they discussed.
Want to hear the whole conversation? Listen to the full podcast episode here.
The Policy Shockwaves Hitting Behavioral Health
“The challenges that we’ve seen so far in these first 100 days have gone well beyond anything that we imagined or contemplated,” Ingoglia said.
It’s a painfully accurate description of the mood across the behavioral health community this spring. The first few months of the new administration have ushered in a cascade of disruptions—from sudden grant rescissions to sweeping structural overhauls and alarming budget proposals.
SAMHSA Grant Dollars Pulled Without Warning
As Guida noted above, in late March, the Trump administration rescinded more than a billion dollars in unspent mental health and substance use block grant funds that had already been allocated to states. These dollars were supposed to last through the fiscal year, and their withdrawal left many states scrambling.
“That caused a lot of anxiety, alarm, and shockwaves through the behavioral health field,” Guida shared. But this action wasn’t the only blow in store for behavioral health in 2025.
An Organizational Overhaul
Also in March, the Department of Health and Human Services announced it would merge the Substance Abuse and Mental Health Services Administration (SAMHSA)—which oversees behavioral health—with the Health Resources and Services Administration (HRSA), which oversees primary care, to create a new agency called the Administration for a Healthy America (AHA). While the move was framed as integration, leaders in the field voiced deep concerns about what could be lost.
“In the past, when we’ve merged behavioral healthcare into other general healthcare systems, we lose visibility,” Morrison commented.
Guida added that “the behavioral health community is now questioning whether or not we will have the influence we’ve historically had” in this new structure. He did, however, acknowledge that there has long been a need for better integration between primary care and behavioral health, and this structural change presents an opportunity for that.
“The substance abuse and mental health communities are constantly being preached to about the need to integrate with our primary care and medical specialty public system,” Guida said. “And so in theory, this combination should provide an opportunity for this greater integration.”
A Potentially Serious Threat to CCBHC Funding
According to a leaked draft of the administration’s 2026 budget proposal, one of the 42 SAMHSA programs on the chopping block is the CCBHC grant program. While the CCBHC Medicaid demonstration is still standing, the loss of grant dollars would have major implications.
And even though presidential budgets are often treated as suggestions rather than binding plans, this year may be different.
“This is not a normal year,” Ingoglia explained. “And I do fear that the President’s budget proposal will likely have more of an impact than it does historically—especially in the House.”
In other words, the political climate is unusually volatile, and even proposals that would normally be dismissed could gain traction—particularly in the House, where the appetite for spending cuts is high. For the behavioral health community, that makes proposed eliminations like the CCBHC grant program feel far less theoretical.
The Bigger Risk: Deep Medicaid Cuts
| Update as of May 13, 2025: The House Energy & Commerce Committee has released its official reconciliation package draft, which includes many of the Medicaid cuts and policy changes discussed in this piece. According to the policy update newsletter distributed by the National Council: – The package would impose work/community engagement requirements on certain Medicaid enrollees. States would have to conduct eligibility redeterminations every six months for expansion adults (these currently occur annually). – New mandatory cost-sharing would apply to adults just above the federal poverty line, with no exceptions for mental health or substance use disorder care. – FMAP reductions and other restrictions would further strain state Medicaid programs. – The Congressional Budget Office estimates more than 8.6 million people could lose coverage if the package becomes law. The bill is currently under committee markup and must still pass the full House and Senate. Advocacy remains critical as this package advances. |
If block grant rescissions caused panic, the looming threat to Medicaid is what keeps policy veterans up at night. Medicaid is the core financing mechanism for behavioral health services, and right now it is squarely in the crosshairs.
The House budget reconciliation process has sparked proposals for steep reductions to Medicaid spending over the next decade. Initial estimates placed the cuts at $880 billion, though more recent figures suggest reductions between $400 and $600 billion. If these proposals move forward, states will be forced to make hard choices.
“Every single service provided to a person with a mental illness or addiction treatment disorder in the Medicaid program is optional,” Guida explained. “The rehabilitation option, the targeted case management option, the clinic option—they’re all optional.”
Cuts of this scale would destabilize the systems that community providers rely on. “My understanding is that about a third of the entire Medicaid expansion population across those 40 states have a diagnosable mental disorder or a diagnosable substance use disorder of various shapes and patterns,” Guida said. “So our community has a huge stake in defending the Medicaid program for the health of those patients and for the health of the providers. Because it would be a financial calamity for residential treatment centers, for persons with substance use disorders, to have the uncompensated care caseload rise.”
And the pain would not be evenly distributed. States with tight budgets or those heavily dependent on federal match dollars would feel the greatest strain. “I think the concern for listeners of this podcast are Medicaid reimbursement rates for providers and uncompensated care caseloads,” Guida said. “This is what keeps Chuck up at night. This is what keeps me up.”
While much remains uncertain, one thing is clear: Medicaid may no longer be the untouchable lifeline it once was.
Action Items for Behavioral Health Leaders
For executives, directors, and system leaders, the focus now is strategy and action. Uncertainty around Medicaid and federal funding means it’s time to get proactive.
Here’s where Ingoglia and Guida recommend focusing your efforts:
1. Prepare for funding volatility.
“Any of us who run a business, when faced with these kinds of circumstances, begin to look at, ‘Okay, are there programs that are less important, less profitable, less impactful?’” Ingoglia said. Leaders need to be ready to adapt—whether that means identifying the services that are most essential, or finding opportunities to consolidate and strengthen programs.
2. Explore technology as a strategic tool.
Ingoglia encouraged leaders to ask: “Could we be using AI more in certain areas in order to reduce some of the burden on staff?” Amid growing workforce shortages and financial pressure, AI may offer a path to sustainability.
3. Keep the long-term mission in focus.
“The hard thing that all of us have to wrestle with as stewards of organizations like this is, ‘How do I make sure that this organization continues to serve its purpose and meet its mission into the future?’” Ingoglia said. That may mean making hard choices now to protect your organization’s ability to serve tomorrow.
4. Plan for different scenarios—even without exact numbers.
Leaders don’t have to wait for specifics to begin modeling the potential impact of funding reductions. Cuts may come in the form of lowered rates, benefit changes, or decreased eligibility. Organizations should start evaluating how each would affect their operations and clients.
“If you glean nothing else from this podcast, if you do nothing else after this podcast ends, here’s what we need you to do: reach out to your member of Congress. Look it up. Call them. Email them. They need to hear.”
– Al Guida, President and CEO, Guide Consulting Services
Action Items for Behavioral Health Providers
Even though this moment feels overwhelming, Guida and Ingoglia emphasized that providers are not powerless. There are clear steps you can take to help protect the people you serve.
1. Don’t panic—act.
“You’re supposed to feel helpless,” Guida said. “And we’re here to say that’s not true.” The situation is serious, but individual advocacy can make a real difference.
2. Use the National Council’s resources.
Visit the advocacy section of the National Council’s website. You’ll find tools to help you contact your members of Congress quickly and effectively.
3. Speak up—directly.
Even a simple message to your congressional leaders carries real weight.
“It doesn’t have to be any more sophisticated than that,” Guida said. “I’m a service provider for people with mental illness and addiction disorders. We depend upon Medicaid. Don’t screw around with this program—and we’ll remember next November.”
4. Be visible in your community.
Write letters, place op-eds, or talk to local media. Help people understand that Medicaid matters to real families—and that cuts to the program come with real consequences.
5. Mobilize unexpected allies.
Business groups, law enforcement, hospital leaders, and family advocates all have reasons to protect Medicaid funding. Now is the time to bring them in.
The future of behavioral health funding feels uncertain, but that doesn’t mean the fight is over.
Yes, grant dollars have disappeared. Yes, Medicaid is in the crosshairs. But as Guida reminded listeners, “There is kind of a cycle here. We’re in the down cycle now, but there will be a dawn.” If the field can weather what’s coming, there’s still a chance to make progress—and build back stronger—on the other side.
That starts now—with planning, with pressure, and with making your voice heard. As Guida put it: “Reach out to your member of Congress. Look it up. Call them. Email them. They need to hear.”
Ready to get involved? Visit the National Council’s advocacy center here, and submit a letter to your state’s legislators here.
