[UPDATED] Federal Funding Freeze Attempt, Medicaid Portal Outage Signal ‘Systemic Risks’ for Behavioral Health Providers

Behavioral health providers have faced regulatory uncertainty regarding government funding and access to Medicaid this week.

The Trump administration issued a funding freeze on Monday only for it to be blocked by a federal judge on Tuesday. States reported outages to the Medicaid portal on Tuesday and more interruptions on Wednesday, while the White House stated that no payments were affected.  

By Wednesday afternoon, minutes after this story was published, the Trump administration rescinded its freeze. The development further reflected the newfound uncertainty and confusion related to the White House administration change.

Despite the confusion, patient care through Medicaid has and likely will continue uninterrupted, sources told Behavioral Health Business. However, issues with the online portal may portend greater problems for the behavioral health industry.

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If it returns and sticks, the funding freeze could also cause significant challenges.

“While a federal judge has temporarily blocked implementation until [Feb. 3], if the freeze goes through, it would represent a significant shift in federal funding mechanisms,” Darren Patz, partner of government affairs and public policy at DLA Piper, told Behavioral Health Business in an email. “The administration has indicated mandatory programs like Medicaid would continue, but behavioral health providers should expect increased scrutiny of grants and supplemental funding streams, particularly those related to DEI initiatives or certain types of research and training programs.”

Headquartered in London, England, DLA Piper is a law firm with offices in over 40 countries.

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Behavioral health providers may need to take action to prepare their organizations for potential changes to grants and other programs. Patz recommended that providers work closely with government affairs teams to follow regulatory developments and create contingency plans.

The funding freeze is likely to be more targeted than initial reports suggested, according to Patz. A clarifying memo issued by the Trump administration stated that programs not implicated by President Donald Trump’s executive orders would not be paused.

Specifically, the funding freeze seeks to limit Federal spending on programs and grants promoting “Marxist equity, transgenderism and green new deal social engineering policies.”

For behavioral health specifically, Patz recommends that providers watch for grant funding changes and new reporting requirements.

Anecdotally, there also seemed to be confusion around which grantees were affected by the freeze. Initially, it was believed the freeze would impact new grantees. Yet at least some current grantees on LinkedIn posted early this week about not being able to access funds previously allotted to them.

Medicaid access

The Trump administration’s clarifying memo stated that mandatory programs including Medicaid would continue without pause.

Substance use disorder (SUD) treatment Groups Recover Together has not encountered issues with Medicaid reimbursement, according to Groups’ president, Cooper Zelnick. Groups provides hybrid care including medication-assisted treatment (MAT).

The issues could have broader implications, however.

“The Medicaid portal access issues highlight broader systemic risks in the transition,” Patz said. “While the administration maintains mandatory payments will continue, providers should document any access issues and maintain detailed records. This aligns with the broader trend we’re seeing at both federal and state levels of enhanced oversight of healthcare payments and operations, particularly for private equity-backed providers.”

Burlington, Massachusetts-based Groups will continue to provide services even if patients lose access to benefits temporarily or permanently and seek access to alternative funding sources.

Zelnick does not anticipate that there will be a meaningful constriction of Medicaid eligibility criteria, but Groups is working to assure staff and patients that care will continue uninterrupted during what Zelnick called “a moment of uncertainty.”

Groups sent out email communications to its staff assuring them that no changes to Medicaid have been made.

“Today, we have no reason to believe there will be any short- or long-term disruptions ahead,” the email read. “Should any challenges arise, we will support our members—just as we did during medicaid redetermination—so that no one is left without the support they need to navigate their individual situation.”

For Medicaid-focused virtual opioid use disorder (OUD) treatment provider Boulder Care, dealing with shifting grounds, administrative complexity and regulatory challenges is nothing new, according to founder and CEO Stephanie Strong.

“It’s unfortunate that Medicaid patients so often face hardship in our complex health care system: but our tenured focus on serving Medicaid plans and their members makes Boulder very prepared for weeks like this one, when fragile patients need reassurance that they’re still covered and benefit immensely from 24/7 contact with their addiction medicine provider,” Strong told BHB in an email.

Portland, Oregon-based Boulder provides MAT for OUD and alcohol use disorder (AUD) as well as recovery support services like peer support.

Faced with regulatory uncertainty, Groups’ will implement strategies it used during Medicaid redeterminations. Namely, this includes diversifying revenue streams.

Before Medicaid redeterminations, 74% of Groups’ members received benefits through Medicaid. Due to redeterminations, that number dropped to the mid-60s. In response to this drop, Groups increasingly pursued funds from opioid settlements, state and federal grant funding, and private foundation and nonprofit dollars.

It is incumbent upon providers seeking to serve everyone with behavioral health conditions to secure funding for the uninsured, Zelnick said.

Providers with diverse revenue sources still may face challenges, according to Patz.

“The regulatory uncertainty we’re seeing is particularly challenging for behavioral health providers who often rely on multiple funding streams,” Patz said. “The incoming administration appears focused on significant restructuring of federal healthcare agencies and program “efficiency.”

“This creates both immediate operational challenges for providers managing various funding sources and longer-term strategic questions about program sustainability and compliance requirements,” he continued.

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