As the United States enters 2026, behavioral health policies are undergoing one of the most consequential transformations in decades. A convergence of federal legislation, administrative actions, reimbursement reforms, and state-level innovation is redefining how mental health and substance use disorder services are financed, regulated, and delivered. While some developments point toward modernization and integration, others raise serious concerns about access, equity, and system sustainability at a time of unprecedented need. Here’s a deeper look at some of the biggest changes that were enacted in 2025 and coming in 2026.
A New Federal Policy Landscape
The most significant catalyst for change is the enactment of the One Big Beautiful Bill Act, signed into law in July 2025. The legislation implements the largest reductions to Medicaid and the Children’s Health Insurance Program (CHIP) in U.S. history. It cuts federal Medicaid funding by approximately $1 trillion, or 15 percent, over the next decade. New work and reporting requirements for enrollees, coupled with the expiration of enhanced Affordable Care Act premium tax credits, are expected to dramatically reduce coverage.
Medicaid is the single largest payer for behavioral health care, accounting for roughly one-quarter of all U.S. spending on mental health and substance use disorder treatment. The Congressional Budget Office estimates that nearly 12 million people will lose Medicaid coverage by 2034, with millions more losing subsidized marketplace coverage. Research already suggests that loss of Medicaid coverage is associated with higher rates of anxiety, depression, food insecurity, and functional impairment, underscoring the likely downstream mental health consequences of these policy changes.
The effects will extend beyond individual patients. Hospitals, community mental health centers, and training programs, many of which rely heavily on Medicaid reimbursement, face growing financial strain. Rural systems are particularly vulnerable: estimates suggest Medicaid reimbursement for rural hospitals could decline by more than 20 percent, placing hundreds of facilities at risk of closure and further limiting access to behavioral health services in already underserved areas.
During the first Trump administration, legislation such as the SUPPORT Act expanded access to opioid treatment and overdose prevention, and the 988 Suicide & Crisis Lifeline was established. The Biden administration built on this foundation by expanding coverage, improving access to evidence-based care, and strengthening federal agencies like the Substance Abuse and Mental Health Services Administration (SAMHSA). Recent data suggests that some opioid-related and mental health indicators have begun to stabilize or improve.
Beginning in 2025, the second Trump administration marked a shift in federal mental health and substance use policy. The administration has emphasized a more law-and-order approach while reducing the scope of federal leadership and capacity in mental health services. At the same time, it has continued certain treatment-focused initiatives, including reauthorization of the SUPPORT Act. These policy directions align with themes outlined in the administration’s campaign platform and proposals associated with Project 2025.
KFF, a leading health policy organization, is tracking key mental health and substance use policies. The group’s tracker can be viewed in the order that each mental health or substance use policy action was implemented. Alternatively, the tracker can be filtered by category (Mental Health; Opioids/Substance Use Disorder; Federal Infrastructure/ Data/Guidance; and Gun Violence).
Disruption to Behavioral Health Infrastructure
Compounding these coverage losses are proposed structural changes at the federal agency level. The President’s FY26 budget calls for dissolving the Substance Abuse and Mental Health Services Administration and the Health Resources and Services Administration, consolidating them into a new Administration for a Healthy America. The proposal includes approximately $1 billion in funding reductions to programs that currently support community mental health centers, suicide prevention initiatives, substance use treatment, and behavioral health workforce training. While congressional approval is required, the proposal has generated widespread concern about the loss of specialized expertise and fragmentation of services.
Additional federal actions have raised alarms across the behavioral health field. These include reduced funding for LGBTQ+ crisis services within the 988 Suicide & Crisis Lifeline, the halting of school-based mental health workforce grants, and return-to-office mandates for Department of Veterans Affairs mental health providers that have disrupted confidential care delivery in some facilities.
Professional organizations such as the American Psychological Association have warned that the cumulative effect of these actions represents a significant deprioritization of mental health infrastructure, disproportionately affecting individuals with serious mental illness, substance use disorders, and communities that already face systemic barriers to care.
Parity Enforcement and Coverage Uncertainty
At the same time that Medicaid funding is being reduced, federal enforcement of mental health parity protections is in flux. In May 2025, the administration announced it would not enforce strengthened mental health parity regulations finalized in late 2024. Those rules were designed to require insurers to demonstrate that mental health benefits are comparable to medical benefits in practice, not just on paper, using outcomes data and independent medical standards. Their suspension, following legal challenges from employer groups, has created uncertainty around coverage standards just as demand for behavioral health services continues to rise.
Paradoxically, regulators are also signaling more aggressive parity audits heading into 2026, particularly around non-quantitative treatment limitations such as prior authorization, network adequacy, and medical necessity criteria. For providers, this means both heightened scrutiny and potential new opportunities to challenge inappropriate denials, provided they have strong documentation and utilization review processes in place.
Reimbursement and Delivery System Shifts
Beyond coverage policy, the behavioral health financing landscape is evolving rapidly. Insurers are tightening utilization management across all levels of care, with shorter authorization cycles, increased peer-to-peer reviews, and higher documentation expectations. At the same time, economic pressures are pushing patients and payers toward outpatient, intensive outpatient (IOP), and telehealth-based models, often at the expense of higher-cost residential and inpatient care.
Value-based payment models are also gaining traction. A growing share of behavioral health providers expect to participate in arrangements tied to outcomes, readmissions, and care coordination by 2026. These models favor organizations with robust data infrastructure, interoperable systems, and integrated care capabilities, while posing challenges for smaller or under-resourced providers.
Telehealth remains a central component of access, with utilization far above pre-pandemic levels, but payers are implementing stricter billing, verification, and auditing requirements. Virtual care is stabilizing rather than expanding, and reimbursement for certain services is declining.
State-Level Innovation Amid Federal Retrenchment
Against this challenging federal backdrop, states continue to play a critical role in shaping behavioral health policy. In 2025 alone, at least 13 states considered legislation to strengthen behavioral health crisis services. Washington enacted legislation requiring managed care organizations to expand crisis service arrangements for Medicaid enrollees, reinforcing the role of coordinated crisis systems.
States are also exploring emerging and controversial treatment areas. Several legislatures have advanced bills to study or regulate substances such as psilocybin and ibogaine, with multiple states authorizing clinical research and contingent prescribing pathways if federal approval is granted. These efforts reflect growing interest in alternative and adjunctive treatments for conditions such as PTSD and opioid use disorder, even as federal policy remains cautious.
Looking Ahead
Taken together, these developments paint a complex picture. Behavioral health policy in 2026 is defined by tension: between innovation and retrenchment, integration and fragmentation, rising demand and constrained resources. Medicaid cuts and agency restructuring threaten access and stability, while state-level initiatives, parity enforcement efforts, and care integration models offer potential pathways forward.
For behavioral health providers, hospitals, and health systems, understanding and adapting to these shifts is no longer optional. Success will depend on strengthening administrative and clinical infrastructure, investing in documentation and outcomes tracking, and engaging actively in policy advocacy to ensure that mental health and substance use care remain accessible, evidence-based, and equitable in the years ahead.
Stronger Support for Integrated Behavioral Health Care
Medicare is also encouraging more “whole-person” care by supporting integrated behavioral health services within primary care.
In practical terms, this means:
- Primary care providers can be reimbursed for coordinating behavioral health care
- Collaborative care models—where medical and mental health providers work together—are being reinforced
- Digital mental health tools, including some ADHD treatment devices, are being recognized
This change supports a growing understanding that mental health and physical health are deeply connected and should be treated together.
Telehealth Is Officially Here to Stay
One of the most significant updates is that Medicare is making several telehealth flexibilities permanent.
These include:
- No frequency limits on certain telehealth visits
- Allowing providers to supervise care virtually using real-time audio and video
- Continued support for virtual care in behavioral health and chronic disease management
This signals that virtual care is no longer temporary or pandemic-driven—it is now a standard part of health care delivery. Private insurers are expected to follow suit, which could expand access to mental health services, especially in rural or underserved areas.
