First, the good news: Medicare is operational, and both the Children’s Health Insurance Program (CHIP) and Medicaid are funded through Q1 2026. (Join us in exhaling.)

With that said, some important activities are not happening during shutdown, which could lead to delays and confusion, depending on your organization’s roadmap and funding streams.

Here’s the breakdown of what’s happening at Centers for Medicare and Medicaid Services (CMS) and Substance Abuse and Mental Health Services Administration (SAMHSA):

CMS

Open ✅	Closed ⛔
Medicare	Survey and certification activities e.g. renewing program licenses
Health Care Fraud and Abuse Control and Center (HCFAC)	Contract oversight
Federal Marketplace activities e.g. eligibility verification	Beneficiary casework
Children’s Health Insurance Program (Funded through Q1 2026)
Medicaid (Funded through Q1 2026)

SAMHSA

Open ✅	Closed ⛔
Disaster behavioral health response teams	Program implementation support and evaluation
24/7 365 day-a-year Disaster Distress Helpline	Grantmaking activities
Treatment Services Locator program	FY 2026 grants could be delayed throughout the agency
Treatment Referral Line
Suicide and Crisis Line (988)  SAMHSA grants awarded in the prior year will have funds that remain available to be spent by the grantee

Despite “mission-critical activities” continuing for now, December 31 and March 31 are not as far away as they might seem. After all, it took a full fiscal year of budgetary skip-hop to get to the edge of the last cliff.

What minds will change within the next few months, and what new compromises will emerge? And…how did we get here, again? 

Republicans’ Issues with ACA Subsidies

Republicans never supported ACA subsidies, or the ACA itself. When the law passed in 2010, every Republican voted “nay,” with the lone exception of Jim Bunning (R-KY), who was absent. The pattern held in 2021 when the American Rescue Plan Act, which expanded premium tax credits, passed without a single GOP vote. 

Despite years of opposition, Republicans have never had an alternative or clear replacement strategy. They went from “repeal without replacement” back in 2017 to a more gradual rollback approach. 

So, where do they stand on the issue now?

Opponents of the subsidies and tax credits argue that they’re available to people who don’t really need them, or worse, that they create fraud. Most Republicans want to see one or more of the following restrictions:

• Income caps 

• Tighter eligibility checks (to reduce fraud) 

• Sunset dates 

These demands will likely complicate negotiations. But with the public following closely and deadlines looming, Congress can’t stall forever.

People Want to Keep Benefits and Reps Are Listening

The reality is, Americans simply have too much skin in the game to ignore what’s coming.

Since the ACA subsidies were enhanced in 2021, ACA enrollment has nearly doubled. The most recent count? 24 million people, nearly 7% of the U.S. population, is enrolled. 

And despite years of partisan debate, worries about an ACA tax credit lapse cut across party lines. According to a recent KFF Health Tracking Poll: 

• 95% of Democrats 

• 85% of Independents 

• 78% of Republicans

Said they’d be “very” or “somewhat” concerned if Congress let the subsidies expire.

Representatives are paying attention.

In response to the clear majority sentiment, 10 House Republicans have introduced legislation that would extend the funding for another year. Senator Lisa Murkowski (R-Alaska) proposed a two-year extension. Rep. Marjorie Taylor Greene underscored the stakes: 

“… when the tax credits expire this year my own adult children’s insurance premiums for 2026 are going to DOUBLE, along with all the wonderful families and hard-working people in my district.”

— Rep. Marjorie Taylor Greene.

What January 1 Could Mean for Provider Stability 

Let’s walk through some scenario planning. Should ACA benefits expire, and premiums skyrocket overnight, providers will walk through the doors to a very different operational reality on January 1, 2026.

A recent analysis from the Robert Wood Johnson Foundation outlines the potential 1-year fallout in 2026 of an ACA tax credit expiration:

• More than $32.1 billion in lost provider revenue 

• A sharp decline in healthcare spending: 

• • ~$14.2 billion less on hospital services 

• • $5.1 billion less on office-based care

• • $5.8 billion less on prescription drugs 

• • $6.9 billion less on other healthcare services 

 One of the most immediate impacts? A surge in uncompensated care, projected to jump by $7.7 billion. But the effects of the fallout won’t be felt evenly. States with expanded Medicaid would fare better, and local policy responses could help soften the blow.

What Are States Doing in Response to Medicaid Cuts? 

Beyond ACA uncertainty, we’re closely tracking how states are responding to OBBBA-related Medicaid cuts and eligibility changes. 

Some states are dipping into reserves or deferring repayments. Others are considering tax increases. A few are even expanding Medicaid and related programs to help offset the impact of federal withdrawal of support.

At the same time, uncertainty around ACA subsidies comes as we also face reductions in Medicaid coverage. To help providers stay ahead, we’ve created tailored resources for the following states.

See what’s happening in:

• Arizona 

• California 

• Utah 

• Wisconsin 

• Illinois 

• New York 

• New Jersey 

But let’s be clear; none of these state-level plans offer a long-term solution. As policy continues to shift in Washington, providers need their own scenario plans and flexible systems in place now to avoid financial instability and protect service continuity later. 

What Happens If We Enter a Medicaid Freeze?

If we were to go over the second cliff in March and enter a Medicaid freeze, here’s what could be at stake for providers: 

• Delays in processing claims and reimbursements 

• Cuts to non-essential services (like transportation, or waiver services) 

• Disruptions in authorization timelines or coverage updates 

• Payments potentially held in limbo, awaiting congressional action 

While recent moves from Congress have been short-sighted, we remain hopeful they won’t let it come to this.

Still, for many human services organizations, especially those reliant on federal grant funding, the impact of the last funding cliff is already being felt. 

SAMSHA Grants: Use Them Or (Potentially) Lose Them 

The message from SAMHSA on existing grant funding has been…cryptic: 

 “SAMHSA grants awarded in the prior year will have funds that remain available to be spent by the grantee.”

Our read? ”Spend down the funds from your prior awards, because there might not be more where that came from.”

We’re already seeing some disruption in the following areas: 

• New program start-up: Many grantees might not be able to hit their programmatic goals without paid staff on the federal side to launch or evaluate programs.

• New grants or grantmaking activities: For the same reason, new awards and progress could be delayed in Fiscal Year 2026.

Of course, this issue is not limited to SAMHSA. It’s affecting all grantees across the Human Services ecosystem, including: 

• Workforce development: Agencies and local boards are waiting to see what happens with WIOA and Vocational Rehabilitation Services under RSA. 

• HUD programs: CoC, ESG, and CDBG funding is currently in limbo, leaving state and local agencies in wait-and-see mode. 

• USDA food and nutrition grants: Participants have already seen significant disruption this year and more could be on the way. 

SNAP & WIC: Uneven Funding, Not Enough Hands to Cut Checks

The USDA was already shorthanded, and recent layoffs haven’t helped. Currently, 750K people are on unpaid leave, leaving USDA without the staff it needs to process and distribute benefits.

As a result, SNAP first announced that it would not issue benefits for November 2025. Then, under judicial pressure, the Trump Administration said it would issue partial payments to recipients—amounting to roughly half of typical benefits. They are still accepting new applications, and those with previously issued benefits can continue to use them. 

Pools and Ripples: What Happens to the Insured?

If the ACA subsidies aren’t renewed, the effects will ripple across the entire healthcare system.

People will re-enroll their insurance coverage at whatever rate the market brings their way, without knowing if their subsidies will hold. And when coverage becomes uncertain, care delays follow. We know what happens next: more people end up in emergency rooms, requiring higher-cost interventions that could have been avoided.

Here’s how the dominoes fall: 

1: Young, healthy people leave the insured pool to prioritize other financial needs.

2: Risk increases for insurance companies. 

3: Premiums rise for everyone—not just for former ACA Marketplace participants, but for those insured by their employers.

An ACA marketplace insurers study forecast a 20% average cost increase due to market uncertainty, which will extend to employer-based plans too. 

The result? Even more financial pressure on state and local government to foot the bill.

And some states are more prepared than others.

Why We Should All Be Watching California

Federal policy might be making waves, but California is building its own life raft—creating a more stable, state-driven funding source for behavioral health and homelessness services that aren’t subject to Washington’s whims. 

That’s great for Californians. But why should the rest of the country care?

California Has Long Been a Pioneer in Healthcare

Here are just a few examples:

• Covered California served as an early model for an ACA health insurance marketplace.

• The Western States Consortium evolved into the National Association of Trusted Exchanges (NATE)

• California rolled out early Medicaid expansion via county-level waivers (California’s Low-Income Health Plan, LIHP)

• The state established its own premium subsidies and individual mandate to preserve coverage access. 

What’s Brewing: The California Behavioral Health Transformation 

In Spring 2024, voters passed Proposition 1, establishing a new, state-level funding pool to expand California’s behavioral health system. The resulting programs fall under the Behavioral Health Services Act (BHSA), which replaces the 2004 Mental Health Services Act (MHSA). 

The BHSA reprioritizes behavioral health funding to focus on: 

• Serving people with the most significant mental health needs 

• Integrating treatment for substance use disorders (SUD) 

• Expanding housing interventions 

• Strengthening the behavioral health workforce 

Three Ways California’s BHSA Is Responding to Federal Cuts 

Protecting Safety-Net Services 

The BHSA channels state resources to maintain behavioral health programs that are threatened by federal Medicaid and SNAP cuts, ensuring continued access to care for vulnerable populations. 

Investing in Community-Based Care 

BHSA funding supports local mental health and substance use disorder services, including crisis response and housing supports, helping to fill gaps left by reduced federal funding. 

Expanding Coverage Despite Federal Retrenchment 

California is using BHSA funds to expand Medi-Cal eligibility and services, including coverage for undocumented residents, countering federal efforts to restrict access. 

“California has led the nation in expanding access to affordable health care, but Donald Trump is ripping it away. The so-called ‘Big, Beautiful bill’ is not cost-saving. It is not smart. It is cruel, costly, and a significant encroachment on states’ rights.”

— Governor Gavin Newsom

Meanwhile, CA counties are deciding how and where to spend funds, taking into account local priorities. Many are focused on building behavioral health infrastructure and investing in services for people involved in the criminal justice system. And this new focus is being seen not just in California, but across the country.

These programs begin to go live in summer 2026 

What You Can Do Now 

Congress is in the driver’s seat as we move toward the cliffs ahead. We’ll be strapped in and ready to cover the fate of ACA premium tax credits and federal Medicaid funding every step of the way.

In the meantime, while we weather delays and disruptions from the shutdown, it’s exciting to see states like California taking behavioral health funding and planning into their own hands. We hope you’re finding ways to do the same with your organization. 

Need support navigating the uncertainty? Check out our Medicaid Toolkit. It’s built for providers who want quick explanations, a clear readiness plan, and practical resources they can actually use. 

We’ll be back soon with more Medicaid news. 

Intel by Juliette Palmer, Regulatory Intelligence Analyst