The Centers for Medicare and Medicaid Services (CMS) recently announced a new option for states that could dramatically change Medicaid funding—and it’s raising serious concerns across the behavioral health industry. The proposal, known as the “Healthy Adult Opportunity,” would allow states to receive their federal Medicaid expansion funding as a capped lump sum, or “block grant,” instead of through the traditional open-ended federal match.
While CMS is promoting this option as a way for states to stabilize budgets and gain flexibility in administering Medicaid, behavioral health providers warn that it could put millions of vulnerable people at risk, particularly those relying on mental health and substance use disorder services.
The Healthy Adult Opportunity: A Major Shift in Medicaid Funding
At the core of this controversy is the CMS’s proposal to introduce a new funding model for states that have expanded Medicaid under the Affordable Care Act (ACA). Traditionally, Medicaid operates through a shared funding arrangement in which the federal government matches a percentage of state Medicaid spending based on need. This ensures that as more people enroll in Medicaid, federal funding rises accordingly to meet demand.
However, under the new “Healthy Adult Opportunity,” states would have the option to receive a fixed amount of Medicaid funding for nondisabled adults under age 65. This group includes the millions of low-income adults who became eligible for Medicaid under the ACA’s Medicaid expansion provision, which allows coverage for individuals earning up to 138% of the federal poverty level.
CMS Administrator Seema Verma described the proposal as a necessary step toward protecting the financial stability of Medicaid in the long term. Verma cited audits showing lax eligibility verification practices in some states and argued that the Medicaid program wasn’t originally designed to serve the expanded population under the ACA.
“The program was not originally designed for this group. Spending growth rates in this population are forecast to be higher than in others, and our most recent round of audits demonstrated that many states’ practices for verifying eligibility are far too lax,” Verma said.
She also noted that the block grant would give states more flexibility to design innovative care models under Medicaid, potentially including cost-sharing or benefit limitations not currently allowed under the traditional program.
Behavioral Health Stakeholders Raise Red Flags
While CMS presents this proposal as a means of improving efficiency and offering states more flexibility, behavioral health advocates strongly oppose the block grant approach. They warn that shifting to capped funding could have devastating effects on safety-net providers and the low-income populations they serve.
Chuck Ingoglia, President and CEO of the National Council for Behavioral Health, which represents more than 3,300 community-based behavioral health providers across the U.S., condemned the proposal in a statement.
“The troublesome proposal unveiled today is tragically flawed because it will undermine the health and welfare of vulnerable populations, including individuals with behavioral health and substance use disorders, who depend on Medicaid,” Ingoglia said.
Ingoglia warned that under a block grant system, states would likely be forced to limit Medicaid enrollment, reduce covered services, and increase premiums and copays for beneficiaries. Such changes would make it far more difficult for people to access mental health or addiction treatment services, particularly for low-income adults with few alternative options.
He also noted that the Medicaid expansion under the ACA has been a lifeline for millions of individuals who previously had no insurance or access to behavioral health care.
Medicaid’s Role in Behavioral Health Care
Medicaid is the largest payer for behavioral health services in the United States. In many states, community mental health centers, addiction treatment providers, and crisis intervention programs rely on Medicaid funding to serve uninsured and low-income patients.
Medicaid expansion has been particularly crucial in increasing access to behavioral health care. By extending coverage to adults earning up to 138% of the federal poverty level, states have been able to offer treatment to millions of people who previously fell through the cracks.
Without that coverage, behavioral health leaders fear many individuals with mental illnesses or substance use disorders could end up without necessary treatment, exacerbating issues like homelessness, unemployment, and criminal justice involvement.
No Immediate Changes—But Concerns Remain
Despite the intense pushback, the Healthy Adult Opportunity proposal would not result in immediate changes to Medicaid programs. It is an optional program, meaning no state is required to adopt it. Furthermore, it faces significant legal and regulatory hurdles before it could be implemented.
“Although we are deeply concerned about the onerous CMS guidance outlined today, it’s important to remember the proposal won’t result in immediate changes to the program,” Ingoglia noted. “Medicaid continues to operate as usual.”
However, advocates are still worried about the long-term implications. If even a few states adopt the block grant approach, it could set a precedent that gradually undermines the core structure of Medicaid nationwide.
Industry Groups Continue to Monitor Proposal
Other national behavioral health organizations are also keeping a close eye on the situation. The National Association for Behavioral Healthcare (NABH), which represents specialty behavioral health providers, is reviewing the CMS proposal and analyzing its potential impact.
“NABH is reviewing the behavioral healthcare-related proposals in the letter to state Medicaid directors and analyzing how this will affect our members,” NABH President and CEO Shawn Coughlin said in a statement.
Industry observers expect many legal challenges if the block grant proposal advances, particularly since similar Medicaid caps have been struck down by courts in the past. Still, the proposal is fueling renewed debate about the future of Medicaid and its role in funding behavioral health care.
What’s at Stake for Behavioral Health Providers
Ultimately, behavioral health providers are sounding the alarm because they know what’s at stake. Cuts to Medicaid funding, particularly through capped block grants, could severely limit access to services like:
- Outpatient therapy and counseling
- Medication-assisted treatment (MAT) for opioid addiction
- Residential addiction recovery programs
- Crisis stabilization services
- Integrated primary and behavioral health care
Many of these services are already under strain, especially in rural and underserved areas. A reduction in funding could further destabilize an already fragile safety net and worsen public health outcomes in vulnerable populations.
Conclusion: A High-Stakes Battle for Medicaid’s Future
The CMS block grant proposal, while not yet implemented, has already reignited a fierce debate about Medicaid’s future and its critical role in behavioral health care.
Behavioral health leaders argue that this proposal risks unraveling decades of progress in expanding access to care for people with mental health and substance use disorders. While CMS claims the Healthy Adult Opportunity would offer flexibility and cost control, providers see it as a potential path toward restricted benefits, higher costs for low-income patients, and increased barriers to treatment.
As the debate unfolds, all eyes will remain on whether any states attempt to adopt the block grant model—and how courts, policymakers, and health care advocates respond in the months ahead. One thing is clear: the outcome of this proposal could have lasting consequences for the nation’s most vulnerable populations.
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