This is an exclusive BHB+ story

New presidents regularly shift focuses and funding streams when entering office. The Trump administration has done so in an unprecedented manner.

A slew of executive orders, including a confusing and then retracted funding freeze order, and Medicaid portal issues created chaos last week. While the funding freeze was retracted, its spirit lives on in the Trump administration’s machete-like approach to cutting federal spending, which could impact the behavioral health industry in the not-so-distant future.

Providers should not immediately despair. Behavioral health care in and of itself is not one of the new regime’s targets. But while hoping for the best, I see now as the time that providers should brace for the potential ramifications of a heavy-handed approach to the American bottom line.

I am most concerned about the impacts on providers that care for the most vulnerable populations, including providers in rural areas or safety-net providers. When speaking with experts, I learned that other providers stand to take a few hits, too.

What we saw from President Donald Trump’s first month in office can teach us valuable lessons about what behavioral health care providers can expect to see in the rest of the administration. In this week’s exclusive, members-only BHB+ Update, I explore:

– What actually happened with the Trump administration’s now-dead funding freeze and the future of Medicaid

– How the behavioral health industry could look under the Trump administration

– The steps behavioral health providers can take to limit immediate or downstream impacts from federal funding cuts

The funding freeze and the future of Medicaid

While the funding freeze is now moot, it spells out how the Trump administration approaches funding programs that directly impact the behavioral health industry.

The TLDR (too long, don’t read) of my thoughts on the funding freeze: The administration didn’t think it all the way through. This is exemplified by the circulation of a follow-up, clarifying memo shortly after the funding freeze was announced.

The memo clarifies that the pause does not impact every government program, only the ones “implicated by the President’s Executive orders,” in other words, organizations that promote “wokeness” of any kind. It also specifies that Medicaid would continue without pause.

Having to spell out these factors in an immediate follow-up shows that the Trump administration was aware of the immediate chaos after the funding freeze announcement and attempted damage control. The lack of a clear communication strategy, to me, demonstrates a wider problem that the Trump administration is A-okay with sowing confusion. This will make it difficult for behavioral health providers to strategize plans for the next four years.

To me, it seems like the administration’s original memo very easily could have said that Medicaid was safe. It specified that Medicare was safe – why not one additional word to protect Medicaid?

The explanation for this omission? The Trump administration will not prioritize protecting behavioral health funding models.

Still, it seems that direct patient care through Medicaid will continue relatively uninterrupted. The fallout from the funding freeze might have increased the chances of that.

“Hopefully they’ve heard loud and clear the importance of the Medicaid program in each of their states, and that the loss of those dollars will have a very immediate impact on communities across the country, regardless of political leanings,” Bragg Hemme, a shareholder in Polsinelli Law Firm’s Denver office in the health care practice, told me. “So hopefully there’s more thoughtfulness and more stakeholder feedback going into the next round of what things should look like.”

What else is at stake for behavioral health

The funding freeze might be dead in the water, and experts assure me that patient care through Medicaid is unlikely to directly suffer from budget cuts, the administration’s agenda to drastically cut spending lives on.

This approach could have massive implications for some behavioral health providers.

The White House press secretary confirmed that the Trump administration’s aggressive approach to spending would continue despite the death of the official funding freeze.

This is NOT a rescission of the federal funding freeze.

It is simply a rescission of the OMB memo.

Why? To end any confusion created by the court's injunction.

The President's EO's on federal funding remain in full force and effect, and will be rigorously implemented.

— Karoline Leavitt (@PressSec) January 29, 2025

Funding cuts are still very possible, Hemme said. Health care funders including the Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) will still have to audit and re-prioritize their funding.

“I don’t think anything is sort of safe, so to speak, because of the freeze,” Hemme said. “Many aspects of health care [are] federally funded, that loss is going to have a pretty traumatic impact, particularly in traditionally underserved areas.”

Behavioral health providers that accept any type of federal funds, including behavioral health providers in rural areas, safety net providers and community mental health centers, could be hit especially hard. But even providers not listed in this bucket could be impacted by the downstream effects of government funding cuts.

Even privately funded behavioral health care providers could feel a “real strain” in operations if they are integrated with federally qualified health centers (FQHCs), primary care practices or hospitals, according to Hemme. Downstream impacts could grow as integrated care models increase in popularity.

Providers should also be aware of state-level shifting regulatory trends that could implicate certain behavioral health providers amid the chaos from the Trump administration.

“The combination of this freeze and broader policy shifts signals increased federal and state scrutiny of behavioral health funding models,” Darren Patz, partner of government affairs and public policy at DLA Piper, told me in an email. “Massachusetts’ recent legislation establishing new oversight requirements for private equity investment in healthcare likely previews similar measures in other states.”

While private equity is less likely to be implicated from federal-level changes, they may be more likely to face state-level struggles in the near future.

This updated Massachusetts law, H.5159, will require more transactions involving private equity firms and REITs to be filed with the Massachusetts Health Policy Commission (HPC). Increased state oversight of these deals could “spread rapidly,” Patz said. 

Where behavioral health providers go from here

Variety abounds in the behavioral health industry. Providers have different reimbursement systems, tax brackets, target demographics and service line offerings. So, unfortunately, there’s no one-size-fits-all approach to coping with the uncertainty of the new administration.

Even so, providers need to be ready to deal with anything the Trump administration could deal out. Vigilance seems to be the key strategy.

“Successful navigation of this environment will require sophisticated government affairs capabilities at both state and federal levels,” Patz told me. “The intersection of private equity scrutiny and behavioral health service delivery creates particular compliance challenges that require proactive engagement with policymakers and regulators.”

Following the funding freeze fiasco, a major change that would impact the behavioral health industry is unlikely to come from a shocking executive order. Substantial changes are likely to come from the agency level, Hemme said. This will make important changes harder to track. Providers should watch government agencies to see if payments, grant programs or requests for proposal (RFP) are delayed.

Reading the Trump administration is like “reading a magic eight ball,” so Hemme also recommended that providers work with legal counsel.

“Every health care provider and behavioral health care provider needs to be looking at where all of their dollars come from, because they need to be ready should the funds flow from the federal government stop,” Hemme said.

Providers may be able to cope even if funding does come to a trickle. Some may be able to access alternative grants or private fundraising.

Behavioral health providers have some assurance that they won’t be the top target for cuts. Behavioral health concerns, like the opioid epidemic, are largely a bipartisan issue. 

“We haven’t seen an indication that they want to cut behavioral health care,” Henne said. “That would be really worrisome. It’s going to change, potentially, how health care is funded and behavioral health care is funded, but I don’t think we’ll see a large retraction away from behavioral health care. I think it’s still very much in their focus, it’s just [a matter of] how it will look.”