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The short answer for operators
The One Big Beautiful Bill Act (OBBBA, H.R.1), signed in July 2025, imposes Medicaid work requirements on expansion adults, forces states to redetermine expansion eligibility every six months, and layers on new cost-sharing of up to $35 per service. For substance use disorder treatment centers, that combination creates mid-episode coverage loss, longer days in AR, and payer-mix erosion that operators need to model now, not after the January 2027 rulemaking dust settles.
ASTHO’s summary of the enacted bill notes that the Congressional Budget Office (CBO) estimates the bill’s health provisions will result in 11.8 million people losing health coverage by 2034, and CBO estimates 16.9 million people could lose coverage once the marketplace rule and expiring premium tax credits are counted alongside it. Medicaid is not a small piece of SUD financing. A peer-reviewed county-level analysis in The Journal of Clinical Psychiatry found that Medicaid (52.7%) and private insurance (32.3%) financed 85.0% of annual average SUD service expenditures examined. When Medicaid moves, SUD revenue moves with it.
Operators in Texas, Florida, and other high-disenrollment states should treat OBBBA as a census risk event with a 12 to 18 month runway. The response is not a memo. It is a contracting checklist, an eligibility-tracking SOP, and a pro forma that assumes a percentage of admitted patients will lose coverage mid-episode.
What OBBBA actually changes, and the numbers that matter
Four provisions drive the revenue exposure. First, work requirements. KFF’s July 2025 analysis reports that earlier CBO analysis of the House-passed version of the reconciliation bill estimated 18.5 million people will be subject to the requirements each year and by 2034 federal Medicaid coverage will decrease by an estimated 5.2 million adults, with work requirements ultimately increasing the number of people without health insurance by 4.8 million in 2034. Second, six-month redeterminations. RWJF modeling puts the range at between 4.9 and 10.1 million people will lose Medicaid coverage in 2028 due to work requirements and more frequent eligibility checks under high and low mitigation scenarios, respectively. Between 2 and 3.1 million will lose coverage due to their eligibility being redetermined more frequently.
Third, cost-sharing. The law requires states to impose cost-sharing of up to $35 per health care service for Medicaid expansion recipients. This means that for every medical service they seek, Medicaid expansion recipients, who are in the program due to their low-income status and are often chronically ill or disabled, will need to pay up to $35. For an SUD patient in ASAM Level 2.1 outpatient with multiple weekly encounters, that is a real access barrier and a real bad-debt line on the operator’s P&L. Fourth, provider tax restrictions and marketplace verification rules that will hit state Medicaid budgets and downstream MCO rate sheets.
The unwinding gave operators a preview. KFF’s end-of-unwinding report found that at the end of the unwinding of the Medicaid continuous enrollment provision in most states, over 56 million people had their coverage renewed and over 25 million people have been disenrolled. Although some cases remain pending across states, the overall disenrollment rate during the unwinding was 31%. And five states, Montana, Utah, Idaho, Oklahoma, and Texas, have disenrollment rates over 50%, with Montana the highest at 57%. Most of those exits were paperwork problems, not ineligibility. As KFF has documented, as states unwind the Medicaid continuous enrollment provision, data show that large shares of people are being disenrolled for paperwork or procedural reasons as opposed to being determined ineligible. Under OBBBA’s six-month clock, that churn compounds.
The operator financial model: where the revenue actually leaks
Here is what happens on the ground. A 60-bed residential SUD facility in Texas admits a Medicaid expansion adult for ASAM Level 3.5 clinically managed high-intensity residential care. Average length of stay runs 28 to 45 days. The patient steps down to Level 2.1 intensive outpatient for 8 to 12 weeks. Somewhere in that continuum, the six-month redetermination hits. If the notice goes to a stale address (which the unwinding showed happens constantly), the patient is procedurally disenrolled while sitting in your IOP group. The claim denies. Your utilization review team catches it 30 days later. Now the AR is 90+ days out and you are chasing a single-case agreement retroactively.
Model three lines on the pro forma:
- Mid-episode disenrollment rate. Assume 8 to 15% of Medicaid admits will experience a coverage event during the episode of care. That is conservative given a 31% national unwinding disenrollment rate.
- Denial rate lift. Expect a 3 to 6 percentage point increase in the Medicaid denial rate through 2027 as MCOs adjust to new eligibility file cadences.
- Days in AR. Plan for a 10 to 20 day increase in Medicaid days in AR during the first two quarters after work requirements go live in your state.
Operators in Ohio, Arizona, Georgia, and Tennessee should pay particular attention to how their state Medicaid agencies structure the six-month renewal, because ex parte automation rates vary wildly. KFF found the ex parte renewal rates range from a high of 90% or more in Arizona, North Carolina, and Rhode Island to a low of 11% or less in Pennsylvania and Texas. Your census risk in Texas is not the same as your census risk in Arizona. Your pro forma should not pretend otherwise.
The 90-day operator response plan
Stop treating this as a policy story and start treating it as a contracting and workflow project. Here is the sequence AHS is running with clients across three states right now.
- Contract audit against MCO agreements. Pull every Medicaid MCO contract. Look for continuity-of-care clauses, retroactive coverage language, single-case agreement (SCA) triggers, and prompt-pay provisions. Add or renegotiate language that guarantees payment for authorized services delivered during a lapse in eligibility when the patient is subsequently redetermined eligible. Anchor the ask in MHPAEA obligations and 42 CFR Part 2 continuity-of-care standards.
- Eligibility-tracking SOP. Run 270/271 eligibility checks at admission, at day 15, at day 30, and weekly through discharge for any Medicaid patient. Build a flag in the EMR for redetermination-due-within-60-days. Assign a named human being (not a queue) to outreach that patient’s caseworker before the paperwork lapses.
- Work-requirement exemption documentation. Under OBBBA, active SUD treatment is expected to be an exemption category in most state implementations, but the documentation burden falls on the patient and, practically, on your case management team. Build a treatment-verification letter template now. Log it in the chart. Send it to the state Medicaid agency proactively.
- Payer mix stress test. Rebuild your 2026 and 2027 pro forma with a Medicaid census haircut of 10 to 20% and model the commercial and self-pay backfill you would actually need. If the pro forma breaks, your contracting priority for the next 12 months is commercial payer diversification, not another Medicaid MCO.
- Rate sheet review. State Medicaid rate cuts are coming as federal match tightens. Track your fee schedule against ASAM levels 1.0, 2.1, 2.5, 3.1, 3.5, and 3.7 residential withdrawal management. Push MCOs on rate adequacy under parity, and document every denial pattern for a future OIG or state DOI complaint file.
On the durability of the Medicaid share of SUD financing, the National Academy for State Health Policy is direct: funding from the Medicaid program and the Substance Abuse and Mental Health Services Administration (SAMHSA) comprise the majority of spending on SUD treatment but may be supplemented by opioid settlement funds, state funding, and other federal grant programs that serve populations with SUD. Losing 10 to 15 points of Medicaid census is not something opioid settlement dollars will fill. It has to be solved in your contract portfolio.
A quick note on execution. Our team just closed a Joint Commission accreditation cycle covering five facilities across three states and three levels of care, all approved for three-year terms. The clients that navigate OBBBA well are the ones already running tight compliance programs. Accreditation readiness, clean claim rates above 95%, and documented UM workflows are the same muscles you need to survive redetermination churn.
Frequently asked questions
Which OBBBA Medicaid provisions have the most direct revenue impact on SUD treatment centers?
The six-month redetermination cycle for expansion adults and the work-requirement verification process are the two biggest census risks. Cost-sharing of up to $35 per service creates a bad-debt line on the outpatient side. Provider tax restrictions will pressure state Medicaid budgets and, indirectly, MCO rate sheets over the next three to five years.
How should operators model census and AR risk under 6-month redetermination cycles?
Build a mid-episode disenrollment assumption of 8 to 15% into the Medicaid line of your pro forma. Add 10 to 20 days to Medicaid days in AR for the first two quarters after your state goes live. Layer in a 3 to 6 point denial rate lift. Stress-test EBITDA against a 10 to 20% Medicaid census haircut in 2027.
What contracting language should we add to MCO agreements to protect mid-episode reimbursement?
Push for a continuity-of-care clause that guarantees payment for authorized services delivered during a coverage lapse when the patient is later redetermined eligible. Add prompt-pay language tied to state DOI standards. Require the MCO to accept retroactive eligibility for at least 90 days. Negotiate single-case agreement triggers for patients who lose coverage mid-episode.
Are SUD patients exempt from Medicaid work requirements, and how do we document exemptions?
Under OBBBA and expected CMS guidance, patients in active SUD treatment are anticipated to qualify for medical frailty or serious health condition exemptions in most state implementations, but each state will define documentation standards. Operators should build a standardized treatment-verification letter, log it in the chart, and submit it directly to the state Medicaid agency at admission and at each redetermination. Do not rely on the patient to self-report.
How do we build an eligibility-tracking workflow that catches procedural disenrollments before they hit AR?
Run 270/271 eligibility checks at admission, at day 15, at day 30, and weekly through discharge. Flag any Medicaid patient with a redetermination date within 60 days. Assign a named case manager to that patient’s Medicaid caseworker. Track a monthly KPI for procedural disenrollments caught pre-denial versus post-denial. That single metric will predict most of your 2027 AR performance.
References
- ASTHO, One Big Beautiful Bill Law Summary (2025)
- KFF, A Closer Look at the Work Requirement Provisions in the 2025 Federal Budget Reconciliation Law
- KFF, An Examination of Medicaid Renewal Outcomes and Enrollment Changes at the End of the Unwinding
- KFF, Understanding Medicaid Procedural Disenrollment Rates
- Robert Wood Johnson Foundation, Millions Could Lose Medicaid Coverage Due to New Rules (2026)
- Journal of Clinical Psychiatry, County-Level Variation in SUD Service Utilization by Insurance Payers
- NASHP, Federal and State Funding Sources for Substance Use Disorder Treatment
- American Medical Association, Changes to Medicaid, the ACA and Other Key Provisions of the OBBBA