Policy Watch: Key Medicaid and Behavioral Health Developments Ahead

Since my last update, several healthcare policy issues have moved from debate into implementation, while others remain unsettled as Congress, the Centers for Medicare & Medicaid Services (CMS), and state policymakers work through the remainder of 2026. This update focuses on what has changed, what remains unresolved, and what healthcare and behavioral health organizations should be preparing for next.

Federal Policy Update

Medicaid community engagement requirements have entered a more concrete implementation phase. CMS issued Interim Final Rule CMS-2454-IFC on June 1 establishing the federal framework. For certain adults subject to the requirement, the standard is generally 80 hours per month of qualifying activities such as employment, education, participation in a work program, or community service. The public comment period closed July 31 and the rule became effective that day. States are generally expected to implement the requirement by January 1, 2027, although CMS can continue to clarify implementation through guidance and future rulemaking.

Prior authorization reform is also moving toward implementation. Beginning in 2026, impacted Medicare Advantage, Medicaid, the Children’s Health Insurance Program, (CHIP), and federally facilitated Marketplace payers face requirements that include specific reasons for denials and, for many medical items and services, decisions within 72 hours for expedited requests and seven calendar days for standard requests. Electronic prior authorization API requirements are scheduled for 2027, while proposed expansion to prescription drugs remains an issue to watch.

Federal funding remains unresolved. FY2027 appropriations will determine funding for Health and Human Services (HHS), Substance Abuse and Mental Health Services Administration (SAMHSA), Health Resources and Services Administration (HRSA), behavioral health grants, workforce programs, and other healthcare priorities. Artificial intelligence, cybersecurity, healthcare data governance, and responsible use of AI also remain active federal policy issues. Through year end, healthcare organizations should watch for additional agency guidance, congressional action, and final funding decisions.

Ohio Policy Update

In Ohio, Medicaid program integrity has moved from legislative discussion toward implementation. Senate Bill 315 strengthens oversight and enforcement related to Medicaid fraud and program integrity. For providers, the broader direction is clear: documentation, billing practices, compliance, provider oversight, and program integrity will continue receiving increased attention.

At the same time, Ohio must prepare for the federal Medicaid community engagement requirements. For behavioral health and recovery organizations, the practical concern is continuity of coverage. Individuals with serious mental illness, substance use disorders, housing instability, or other complex circumstances may need additional help understanding eligibility requirements and documenting exemptions or qualifying activities. WellLink Health Alliance will continue monitoring Ohio's implementation approach and translating those decisions into practical information for members.

The executive order is effective for 120 days while the state pursues a longer-term regulatory framework, signaling that stronger certification and oversight requirements for recovery housing are likely to remain a policy priority.

Mid-Atlantic Region

The federal policy changes have important implications across The Healthcare Council's Mid-Atlantic footprint, but Maryland, Virginia, and the District of Columbia are entering the remainder of 2026 from very different starting points. Understanding those differences is increasingly important for health systems and providers operating across jurisdictional lines.

Maryland

Maryland continues its transition into the federal AHEAD model, building on the state's longstanding all-payer and Total Cost of Care experience. AHEAD, Achieving Healthcare Efficiency through Accountable Design, continues Maryland's use of hospital global budgets while expanding the focus on primary care, population health, prevention, and behavioral health integration. For Maryland members, the key question is how federal financing changes, Medicaid policy, and AHEAD implementation interact with a delivery system already operating under a unique statewide cost and quality framework. Through the remainder of 2026, hospital and health system leaders should continue watching AHEAD implementation, population health requirements, Medicaid coverage changes, and their implications for behavioral health integration and community partnerships.

Virginia

Virginia is preparing for the federal Medicaid work requirement beginning January 1, 2027, while simultaneously making significant changes to Medicaid behavioral health services. The Commonwealth's redesign of Community Mental Health Rehabilitative Services has been delayed from its originally planned July 1, 2026, start as the Department of Medical Assistance Services (DMAS) works through changes tied to the state budget. The redesign is expected to replace several legacy services with Community Psychiatric Support and Treatment, Coordinated Specialty Care for first episode psychosis, Mental Health Clubhouse Services, and related changes to case management. DMAS continues provider readiness work and office hours through the remainder of 2026. Virginia has also announced federal eligibility changes affecting some noncitizen adults beginning October 1, 2026. For Virginia members, this creates a particularly active period of Medicaid operational change involving eligibility, behavioral health service design, provider readiness, and coverage continuity.

District of Columbia

The District is managing its own set of Medicaid operational changes. DC Medicaid is transitioning fiscal agent services to Gainwell, with provider registration, training, billing changes, and portal transition activities underway. The District has also published information on federal Medicaid eligibility changes affecting certain adult noncitizens beginning October 1, 2026. For hospitals, behavioral health providers, community organizations, and other District members, these changes make provider readiness, beneficiary communication, billing operations, and continuity of coverage important areas to monitor through year end.

A Regional Perspective

Taken together, Maryland, Virginia, and the District illustrate why a regional policy lens matters. Patients cross jurisdictional lines for treatment, health systems operate in multiple markets, and workforce shortages, behavioral health capacity, Medicaid policy, and federal financing changes do not stop at state borders. The Healthcare Council can play an important role by helping members understand where implementation differs, sharing lessons across jurisdictions, and identifying opportunities for coordinated education and advocacy.

Behavioral Health: From Policy Watch to Action

Across the federal, Ohio, and Mid-Atlantic landscape, the common thread is that behavioral health organizations are increasingly being asked to prepare for implementation rather than simply monitor legislation. The remainder of 2026 should be used to identify patients who may be vulnerable to coverage disruption, strengthen eligibility and benefits navigation, review documentation and compliance practices, prepare staff for Medicaid changes, and assess how state-specific behavioral health reforms may affect service delivery.

Behavioral health leaders should also remain engaged in the policy process. Maryland's AHEAD model explicitly incorporates behavioral health and population health into broader delivery system transformation. Virginia is redesigning core Medicaid behavioral health services. The District is managing Medicaid eligibility and operational changes of its own. Ohio is preparing for community engagement requirements while strengthening Medicaid program integrity.

Also in Ohio, recovery housing is coming under increased state oversight. On Aug. 10, Gov. Mike DeWine signed an emergency executive order giving the Ohio Department of Behavioral Health authority to directly certify recovery residences, shifting the state away from relying solely on outside accrediting organizations. The move comes as the number of recovery homes in Ohio has grown rapidly, from 356 in 2022 to more than 1,700 in 2026, raising concerns about unregulated operators and the safety and quality of some facilities.

These are different policy environments, but each raises the same fundamental question: how do we protect access to behavioral healthcare while healthcare financing and eligibility systems change around it?

Our call to action is to prepare now, educate the people we serve, identify where coverage or administrative barriers may emerge, and share what providers are seeing on the ground. WellLink Health Alliance and The Healthcare Council can help connect those experiences across states, elevate member perspectives with policymakers, and identify solutions that support both responsible program stewardship and continuity of care. The decisions being implemented over the coming months will shape behavioral health access in 2027, and our collective preparation and engagement can help shape how those changes affect our communities.