The One Big Beautiful Bill Act (OBBBA)—also known as H.R.1—and its sweeping budget cuts have quickly become the biggest news in healthcare since the Affordable Care Act (ACA), and for good reason.
With mounting funding uncertainty and millions of Americans expected to lose coverage, the entire healthcare system is bracing for impact. In a recent Eleos poll, 30% of behavioral health providers reported that funding uncertainty was keeping them up at night. Another 27% said they were losing sleep over workforce management, a challenge deeply connected to funding pressures and persistent staffing shortages.
This post focuses on what leaders need to know about H.R.1 now, laying out clear funding facts to help bring clarity and prepare the behavioral health community for what’s next.
Note: The terms “H.R.1” and “OBBBA” are used interchangeably throughout this article. Both names refer to the same legislation.
Healthcare Funding Under H.R.1 in a Nutshell
The new law introduces changes that will make it harder—not easier—for many people to access affordable care. H.R.1 increases administrative complexity, raises barriers to maintaining coverage, and is projected to leave millions without insurance in the years ahead.
“It’s a sweeping budget law that contains tax cuts, border security, and spending policy. And although it wasn’t aimed at healthcare specifically, there’s a ton of implications for healthcare,” said Dominic Miller, LCSW, MPA, Founder and Principal of boutique consulting firm Sotoro LLC and former COO of Southwest Behavioral & Health Services.
Analysts estimate that the law will:
- Reduce federal healthcare spending by about $1 trillion over a decade;
- Cut Medicaid funding by roughly 15%;
- Result in more than 11.8 million Americans becoming uninsured by 2034; and
- Shift more financial responsibility to states, providers, and consumers.
The Scale of Medicaid Cuts
Medicaid cuts in 2025 and 2026 mark the start of a decade-long restructuring of the program.
Key estimates from OPEN MINDS and the Congressional Budget Office show:
- $911 billion in Medicaid funding reductions between 2025 and 2034;
- Loss of Medicaid eligibility for over 10.3 million people;
- The majority (76%) of cuts taking effect between 2030 and 2034; and
- $526 billion in reductions being absorbed by Medicaid expansion states.
All of this comes as Medicaid continues to fund more than one-quarter of all behavioral healthcare in the United States—making these changes especially significant for organizations providing mental health and substance use disorder (SUD) treatment.
Where the Spending Cuts are Coming From
OBBBA will cut Medicaid spending by nearly $1 trillion over the next ten years through three primary mechanisms.
1. Tighter Eligibility Criteria
The bill adds several new administrative hurdles that make it more challenging for people to enroll in Medicaid and keep their coverage.
These changes include:
- $122 billion in projected cuts resulting from a block on states using simplified eligibility and renewal processes implemented by the Biden Administration; and
- $63 billion in projected cuts due to more frequent eligibility redeterminations for the Medicaid expansion population.
Together, these policies increase the complexity of applying for and maintaining Medicaid coverage, which is expected to drive disenrollment—even among individuals who continue to meet eligibility requirements.
2. New Work Requirements
H.R.1 also adds a federal work requirement for Medicaid. Adults ages 19–64 in the Medicaid expansion group must complete at least 80 hours of work or qualifying community engagement per month to enroll in—or maintain—coverage.
This accounts for:
- $326 billion in federal spending cuts due to disenrollment when beneficiaries cannot meet the new work requirements or fail to report their hours on time.
This could disproportionately impact people with behavioral health conditions, who often face significant barriers to employment.
3. Limits on State Financing Tools
The bill further reduces Medicaid spending by restricting the ways states traditionally fund and stabilize their Medicaid programs.
These changes include:
- $191 billion in projected cuts from a moratorium on provider tax increases, a mechanism that states frequently use to finance Medicaid; and
- $149 billion in projected cuts through revisions to state-directed payment limits, which many states use to increase reimbursement for specific provider types.
Together, these provisions narrow the financial levers states have relied on to sustain Medicaid—and by extension, the behavioral health systems that depend on it.
Additional Federal Actions Affecting Behavioral Health
Even before H.R.1 was signed into law on July 4, 2025, the new administration was already making changes that greatly affected behavioral health.
The Termination of Behavioral Health Block Grant Funds
In March 2025, the Trump administration withdrew $1.3 billion in unspent Mental Health Block Grant and Substance Abuse Prevention and Treatment Block Grant funds, dollars many states expected to use through year-end.
Agency Consolidation: Creation of the Administration for a Healthy America (AHA)
Also in March, the Department of Health and Human Services (HHS) announced the merger of the Substance Abuse and Mental Health Services Administration (SAMHSA) and the Health Resources and Services Administration (HRSA) into a single entity called the Administration for a Healthy America (AHA). While presented as an integration effort, behavioral health leaders have voiced concerns about reduced visibility for mental health.
As Dr. Denny Morrison, Eleos Chief Clinical Officer, put it, “In the past, when we’ve merged behavioral healthcare into other general healthcare systems, we lose visibility.”
SAMHSA funds community mental health centers, crisis services, and substance use treatment, while HRSA supports the behavioral health workforce and expands care in underserved areas. The proposed restructuring cuts these programs by $1 billion, putting essential services at risk for millions.
That said, these changes still require congressional approval before they take effect.
Reduced Support for Crisis and School-Based Behavioral Health
According to the American Psychological Association, additional federal actions are impacting access to mental health care, including:
- Reduced funding for LGBTQ+ crisis services within the 988 Suicide & Crisis Lifeline program;
- Halting $1 billion in school mental health professional grants; and
- Return-to-office mandates for VA mental health providers.
These changes limit early-intervention pathways at a time when demand for behavioral health services continues to rise.
Growing Demand Meets Shrinking Resources
The irony of the reduced funding for behavioral health programs is that the need for services continues to rise.
In fact, according to Becker’s Behavioral Health:
- The U.S. behavioral health market is projected to grow from $89 billion in 2024 to $165.4 billion in 2034.
- 36% of people experience a mental health condition during their lifetime.
- 1 in 4 individuals has a substance use disorder.
- Suicide rates increased 35% between 1999 and 2018.
- Suicide is the tenth-leading cause of death in the U.S.
This rising demand puts additional pressure on a system already strained by workforce shortages, administrative burden, and increasing financial uncertainty.
“When you cut funding, you’re also cutting services,” said Gulf Coast Center CEO Felicia Jeffery. “So we had to find ways to keep services on the ground without breaking our people.”
Jeffery’s perspective reflects a broader reality: As resources tighten and patient needs grow, organizations must work harder to maintain access, protect their workforce, and sustain care quality. The mismatch between need and resources underscores why leaders are closely tracking the status of healthcare funding, Medicaid cuts, and the long-term implications of H.R.1.
What It All Means
So, what does all of this mean for behavioral health and post-acute care organizations? Here’s a quick summary of the expected impacts.
Loss of Coverage and Access
- Millions of Americans are expected to lose Medicaid coverage.
- Medicaid cuts will disproportionately reduce access to behavioral healthcare because a quarter of all services are paid for by the program.
- Increased documentation and shorter retroactive coverage windows raise the risk of disenrollment—even for people who remain eligible.
- Funding cuts and coverage restrictions will hit vulnerable groups hardest (including people with serious mental illnesses or substance use disorders, as well as marginalized communities).
- Higher ACA Marketplace premiums may prompt healthier individuals to drop coverage and delay care.
Operational and Administrative Burden
- New verification workflows for eligibility, work requirements, income documentation, immigration status, and renewal will significantly increase administrative load.
- Coverage churn will create more complex payer mixes, complicating eligibility checks, billing, claims management, and patient financial communications.
- Providers may need to invest in new systems or processes to track coverage status in real time and educate patients on new reporting obligations.
- Reduced state flexibility—through limits on provider taxes and state-directed payments—will force states to find new ways to manage costs more effectively.
Financial Pressure Across the System
- States will shoulder more financial responsibility as federal funding declines, forcing difficult decisions about investments in behavioral health programs.
- Behavioral health reimbursement rates, already 22% lower than medical and surgical rates, may fall even further as states absorb federal reductions.
- New eligibility requirements are expected to increase the uninsured population by over 10 million people, further raising uncompensated care costs—with rural providers facing disproportionate strain.
- Consumers will face higher out-of-pocket costs, causing many—particularly those with mental health or SUD needs—to delay or forgo care.
- Organizations may face increased turnover costs due to added administrative burdens (or perhaps freeze hiring altogether due to budget pressure).
- Cuts to grants and federal behavioral health support reduce dedicated funding streams and long-term visibility for behavioral health priorities.
If you’re looking for actionable ways to stay resilient amid these financial pressures, read how organizations like Gulf Coast Center are finding ways to adapt.
Where to Go From Here
While H.R.1 will inevitably create new challenges for healthcare in general—and behavioral health in particular—it can also be used as an opportunity.
“While these changes may be painful in the short term, they can position organizations for long-term sustainability and enhanced community impact,” said Dr. Denny Morrison, Eleos Chief Clinical Officer.
Organizations that are able to rethink care delivery, modernize operations, and adopt new technology to reduce administrative burdens will be best positioned to weather the next decade of change.
If you’re exploring what those next steps look like, we’ve created some great resources to help you better understand OBBBA and position your org for the future. Happy reading!
