On July 4, 2025, the “One Big Beautiful Bill Act” (H.R. 1) was signed into law, implementing significant cuts to Medicaid funding and imposing new restrictions on coverage that will reshape access to behavioral health services. The legislation cuts federal Medicaid funding by 15%, or $1 trillion, over 10 years, according to the Congressional Budget Office. The CBO estimates these cuts will result in 11.8 million individuals directly losing Medicaid coverage, and an additional 3.1 million losing coverage under marketplace plans. Another 4.2 million people could become uninsured with the expiration of expanded premium tax credits.
Timeline of Restrictions and Eligibility Changes
The law implements cuts over several years, with some taking effect immediately and others phased in through 2028. Several major provisions became effective upon enactment, including restrictions blocking recently adopted enrollment simplification rules. Starting January 1, 2026, the enhanced Federal Medical Assistance Percentage that had incentivized states to expand Medicaid coverage will sunset. On October 1, 2026, Medicaid eligibility narrows for certain non-U.S. citizens, and states must conduct eligibility redeterminations at least every six months, a requirement expected to push more people off the rolls. Beginning January 2027, most Medicaid recipients must meet work requirements of 80 hours per month through employment, training, or volunteer activities to maintain coverage. Exemptions include individuals under 19 or over 64, tribal members, parents caring for children under 14, and those considered medically frail. This work requirement represents the largest funding reduction, cutting $325.8 billion over ten years.
Impact on Behavioral Health Services
Medicaid accounts for a quarter of all spending on mental health and substance use treatment, making it the largest single payer of behavioral health services in the United States. The American Psychological Association expresses deep concern that behavioral health services, classified as optional under Medicaid, are frequently among the first to be reduced when states face budget constraints. This could result in significantly reduced access to mental health and substance use disorder treatment for those who need it. Community-based providers, especially those in underserved or rural areas, rely heavily on Medicaid reimbursement to remain operational. The significant decrease in federal funding may challenge the financial viability of many providers and reduce access to care. Prior implementation efforts suggest challenges: Arkansas’s work requirement initiative led to 18,000 people losing coverage before a court order stopped it; in Georgia, only a small fraction met paperwork requirements, with implementation costs nearly five times higher than health care service spending.
Protections Negotiated and Ongoing Advocacy
Cost-sharing requirements begin October 1, 2028, though exemptions apply for primary care, mental health, and substance use disorder treatment, as well as services through federally qualified health centers and certified community behavioral health clinics. Psychologists and psychology professionals sent more than 90,000 messages to Congress urging rejection of the cuts. While the legislation remains concerning, provisions were added seeking to mitigate effects on Medicaid recipients with mental health and substance use disorders.
This article is an AI-assisted summary. All facts and figures are drawn from the original report: https://updates.apaservices.org/update-on-proposed-cuts-to-medicaid-funding