Last month, someone told us they appreciated our optimism. And truly, we’re still holding onto it. But we also promised to keep it real. 

So yes, we’re still talking about Medicaid cuts and federal shakeups. But this time, it’s not just talk. Some of these changes are here, and they’re starting to take effect. 

Let’s unpack what happened on April 1, what it means for programs like Medicaid, SAMHSA, and community services. And what to watch next. 

April Fools: HHS Cuts Were Very Real 

On April 1, the Department of Health and Human Services (HHS) announced a massive downsizing: 

• 20,000 jobs eliminated, reducing the agency’s workforce from 82,000 to 62,000 

• Entire departments dissolved within CMS, including: 

• Office of Minority Health 

• Office of Equal Opportunity and Civil Rights 

• Office of Program Operations & Local Engagement 

This isn’t trimming the fat. This is a full structural overhaul, including the creation of a new agency, the Administration for a Healthy America, led by Secretary Kennedy and wrapped in the slogan “Make America Healthy Again.” 

The cuts will allegedly save $1.8 billion per year, but the true cost may be much higher if this signals a shrinking federal commitment to the health and well-being of vulnerable communities. 

SAMHSA: From Expansion to Retrenchment 

One of the most visible casualties in this round of cuts is SAMHSA, the Substance Abuse and Mental Health Services Administration. 

Why does that matter? Because this agency: 

• Oversees the national opioid treatment infrastructure 

• Funds and supports the 988 suicide and crisis line 

• Is largely responsible for pushing trauma-informed care into the mainstream 

• Was a champion of CCBHCs—Certified Community Behavioral Health Clinics that integrate physical and mental healthcare 

Funding for SAMHSA nearly doubled between 2019 and 2025, and with that investment, we started to see real progress: overdose deaths declined for the first time in years. 

Now, it’s all being reversed. 

• 10% of SAMHSA staff were laid off earlier this year 

• Regional 988 offices may be shutting down 

• Leadership with institutional knowledge has vanished 

• Remaining teams are left scrambling without direction 

ACL: Targeting Support for Independent Living 

Another major agency impacted: the Administration for Community Living (ACL), the federal office responsible for helping older adults and people with disabilities live independently. 

As of April 1, the administration has been shut down and split across other HHS divisions. Nearly 40% of staff received layoff notices, including many in coordination and program leadership roles. 

ACL funds and oversees more than 2,500 community-based programs, including: 

• Centers for Independent Living 

• Protection and Advocacy Systems 

• Developmental Disabilities Councils 

• Home and Community-Based Services (HCBS) that help people avoid institutionalization 

The closure also affects programs like LIHEAP, which helps low-income families pay heating and cooling bills, an often overlooked part of safe housing. 

Advocacy groups called the move “a betrayal”, especially for individuals with intellectual and developmental disabilities (I/DD), who have fought for decades for the right to live in community, not in institutions. 

While Secretary Kennedy insists this won’t impact Medicaid services, many advocates, and providers, are bracing for disruption. 

COVID Claw Backs: States on the Hook 

In late March, HHS quietly announced plans to reclaim $12 billion in unspent COVID-era public health funds, much of which had already been allocated to states and written into budgets. 

This includes: 

• Approximately $1 billion from SAMHSA targeting addiction recovery, mental health, and suicide prevention programs 

• $314 million in school-based mental health funding in California 

• Significant fund reductions in  states like New York, Illinois, New Jersey, and Pennsylvania 

States were originally told they could repurpose these funds after the public health emergency ended in 2023. Many used the flexibility to invest in community-based behavioral health, crisis response infrastructure, and workforce development. 

Now, those dollars are being pulled back, with little notice and no clear process. 

Some states even received phone calls just days before funds were rescinded. Others were given retroactive notices, essentially punishing them for already spending the money. 

This has created widespread confusion and panic: 

• Vendors are asking to be prepaid before funds are withdrawn 

• State agencies are freezing reimbursements 

• Providers are caught in limbo, unsure if they’ll be on the hook for funds they’ve already used 

And the legal pushback is underway. 23 states are now suing HHS, arguing the federal government is reneging on prior guidance and destabilizing mental health and public health infrastructure at the worst possible time. 

For organizations on the ground, this feels like the rug is being pulled out from under them, again. 

1115 Waivers: The Door Has Closed 

1115 Medicaid waivers are a key tool for states to innovate, especially around social determinants of health—things like housing, nutrition, and transportation. 

These waivers have funded some of the most promising whole-person care models, like: 

• Housing support services 

• Food access programs tied to Medicaid eligibility 

• Non-medical in-home care, which helps people live independently 

Now, CMS has announced it will no longer accept new or renewal applications for two specific funding mechanisms under the 1115 waiver umbrella: 

• Designated State Health Programs (DSHPs) 

• Designated State Investment Programs (DSIPs) 

According to CMS, these programs relied on “creative interpretations” to receive federal matching dollars—funding services that otherwise wouldn’t qualify under Medicaid. The agency cited a need for “greater transparency and accountability” in how states use Medicaid funds. 

While CMS has not eliminated 1115 waivers entirely, this move shuts down a major pathway that allowed states to invest in housing, food security, and community health infrastructure. 

For states like New York, New Jersey, and California—where these programs have already shown promise—there is now uncertainty around renewal, sustainability, and future planning. 

If your state already has a waiver, it’s probably safe, for now. But if it’s up for renewal under the current administration 

Unfortunately, these cuts hit right as data is starting to show that 1115 waiver programs improve outcomes and lower long-term costs. 

States Are Budgeting in the Dark 

It’s state budget season, and many legislatures are negotiating without knowing how much federal support they’ll receive. 

Take New York, for example: 

• Faces a $2.3 billion shortfall for FY 2026 

• Relies on $90 billion in federal funding, including 15% of all national Medicaid dollars 

To their credit, the state’s current proposal includes increases for behavioral health, housing, and developmental disability services. But how sustainable is that if federal funding is no longer reliable? 

According to the Commonwealth Fund, if the proposed federal cuts move forward, states will lose: 

• $95 billion in 2026 alone 

• $1.1 trillion over a decade 

And remember, those aren’t just program cuts, they’re local economic hits that impact jobs, taxes, and small businesses in every community. 

So… What Happens Now? 

The federal budget deadline came and went on April 15 with no resolution. 

With a temporary extension in place through September 30, we’re now in budget limbo, waiting to see if Congress will reach an agreement or push us into yet another continuing resolution or more cuts.

And in the meantime, programs are shrinking, funds are being rescinded, and Medicaid’s future remains uncertain. 

What You Can Do 

If you’re worried about how these shifts might affect your funding, let’s talk. We’re tracking every update and can help you plan for different scenarios. 

Now is the time to stay informed, stay flexible, and stay connected. 

We’ll be back next month with the latest. Until then, hold tight. Keep an eye on your state budget, and don’t hesitate to reach out. 

In the meantime, contact your congressional representatives to let them know how you feel about these cuts and how they’ll impact your organization. Every message counts!

Intel by Juliette Palmer, Regulatory Intelligence Analyst