As states prepare to implement the new Medicaid community engagement requirements (often called work requirements), behavioral health and addiction treatment organizations have a narrow window to protect continuity of care for vulnerable clients. The Centers for Medicare & Medicaid Services (CMS) issued the interim final rule on June 1, 2026, with most states required to implement the policy by January 1, 2027.
Organizations that begin preparing now can reduce the risk of clients losing coverage and falling out of care.
Step 1: Understand Your Population’s Coverage Risk
The first and most important step is internal visibility. Behavioral health leaders should identify:
- Which current clients are covered by Medicaid (particularly the adult expansion group).
- Which clients may be subject to the 80-hour monthly community engagement requirement.
- Who qualifies for exemptions (e.g., pregnant or postpartum individuals, medically frail or disabled individuals, parents/caretakers of children under 14 or with disabilities, American Indian/Alaska Native individuals, and others).
For people in recovery from substance use disorder or managing serious mental illness, losing coverage can quickly lead to missed therapy sessions, interrupted medication-assisted treatment, unpaid balances, increased crisis episodes, or full disengagement from services.
Review and strengthen your intake, care coordination, and discharge processes to flag at-risk clients early. Partnering with benefits navigators or eligibility specialists can help clients understand reporting requirements and gather documentation before renewal periods or deadlines hit.
Step 2: Build Bridges for Coverage Gaps
Not every behavioral health provider needs to become a Medicaid billing entity. Many can focus on what they do best—delivering care—while creating safety nets for those affected by changes in coverage.
Consider developing or partnering with a nonprofit arm, charitable fund, or community organization. These structures can support:
- Care navigation and benefits assistance
- Emergency therapy or recovery coaching
- Short-term medication or treatment scholarships
- Transportation and technology access
- Stabilization services during coverage transitions
This approach allows organizations to maintain continuity without relying solely on Medicaid reimbursement.
Step 3: Leverage Opioid Settlement and Other Funding Streams
For programs serving individuals with opioid use disorder (OUD), opioid settlement funds represent a meaningful preparation tool. These funds are designated for treatment, recovery support, harm reduction, and care connection activities.
In Pennsylvania, counties have flexibility in allocating funds for approved uses under Exhibit E of the national settlement agreements. Explore opportunities through:
- County opioid settlement distributions
- Single County Authorities (SCAs) via the Department of Drug and Alcohol Programs
- Partnerships with organizations already receiving these funds
These resources can help sustain recovery housing, peer support, continuity of medication-assisted treatment, and post-treatment support during Medicaid disruptions.
What the Research Shows So Far
The strongest real-world example comes from Arkansas. When Arkansas implemented Medicaid work requirements, research found that the policy caused people to lose coverage but did not increase employment. This is important because it shows that the issue is not simply whether people are willing to work. In many cases, people lost coverage because they could not successfully report their hours, prove an exemption, or navigate the state’s reporting process.
KFF reported that about 70 percent of people required to actively report their work hours or exemption status did not successfully complete the process. As a result, more than 18,000 people lost Medicaid coverage. Later research also found that the Arkansas work requirement did not increase employment, which raises serious concerns about whether these policies achieve their stated goal.
The potential impact could be much larger under a national policy. The Urban Institute projects that Medicaid work requirements could cause between 3.0 million and 7.0 million Medicaid expansion enrollees to lose coverage due to the work requirements alone. When combined with six-month renewals, the projected coverage loss rises to between 4.9 million and 10.1 million fewer people enrolled in Medicaid expansion coverage in 2028.
People with mental health and substance use disorders may be especially exposed. Medicaid is a major source of coverage for behavioral health care. KFF reports that Medicaid covers nearly one-third of adults with mental illness and nearly one-quarter of adults with substance use disorders. Medicaid expansion is also a primary coverage pathway for many adults with behavioral health needs.
Brookings has also raised concerns about people with substance use disorders. Millions of people with substance use disorders could be at risk of losing Medicaid if they do not meet the requirement or cannot document that they qualify for an exemption. The concern is not only that people may lose current treatment. It is also that people may lose access to future Medicaid-covered substance use disorder care before they are ever connected to treatment.
Hospitals and communities may also feel the effects. When people lose coverage, hospitals and safety-net providers may see more uncompensated care, lower revenue, and more financial strain. This is especially concerning for rural hospitals, community clinics, and behavioral health organizations that already operate with limited resources.
For Pennsylvania, the stakes are significant. Medicaid covers about 3 million Pennsylvanians, including roughly 750,000–822,000 people through Medicaid expansion. Any major disruption to Medicaid coverage could affect access to behavioral health care, recovery supports, hospitals, families, and communities across rural, suburban, and urban areas of the state.
A Blended, Forward-Thinking Strategy
The most effective organizations will use a multi-layered approach:
- Map Medicaid-covered clients and coverage risks.
- Integrate eligibility support into clinical workflows.
- Build nonprofit and community partnerships to cover gaps.
- Pursue targeted funding (opioid settlements, grants, charitable dollars).
- Train staff on how to discuss these changes with clients compassionately.
Policy changes like this often begin as administrative hurdles but rapidly become clinical ones. A missed renewal notice can become a missed prescription. A coverage gap can become a relapse or overdose. Behavioral health care must address not only what happens in the session, but also the systems that keep people in care long enough for treatment to work.
Leaders who prepare proactively will be better positioned to minimize harm, maintain client trust, and sustain their organizations through this period of change. Recovery depends on more than clinical excellence—it depends on protecting access to care itself.
Legal Disclaimer
This article is provided for informational and educational purposes only and does not constitute legal, regulatory, compliance, financial, or clinical advice. The information reflects the author’s understanding of the CMS interim final rule as of June 2026 and is subject to change as regulations are finalized, interpreted, or implemented by federal and state agencies.
Behavioral health organizations should consult with qualified legal counsel, compliance experts, Medicaid specialists, and their own regulatory advisors before making any operational, financial, or policy decisions based on this content. Rules regarding Medicaid eligibility, exemptions, reporting requirements, and funding uses can vary by state and may be updated or challenged over time.
The following chart is a high-level summary of key provisions in the Interim Final Rule. For more information on all provisions, see https://www.federalregister.gov.
