By Ashleigh Hollowell | Behavioral Health Business | October 1, 2025
Addiction treatment providers are already stretched thin. Burnout and stress rates for the profession skyrocketed after the pandemic and haven’t subsided.
Providers are now facing a new challenge: trying to untangle what the substance use disorder (SUD) Medicaid work requirement exemptions mean for their patients – a complex task that could strain resources and impact care delivery.
Under the One Big Beautiful Bill Act, Americans who have been diagnosed with an SUD or are actively in treatment are exempt from the new Medicaid work requirements. Some providers say it is a win for patients who need to focus on recovery.
However, in practice, there is still much uncertainty about how they will qualify and what kind of burden this may add to SUD providers’ already strained resources and time.
“It’s a win for not only patients, but for providers,” Citizen Advocates CEO James Button told Behavioral Health Business. “It gives an indication of where the federal government sits in terms of addiction treatment. It’s supportive. The exemption suggests that they understand that folks who are seeking addiction treatment need to focus on their recovery so that they can get back on their feet. If we’re to help folks, we need to create as many convenient access points as possible and eliminate the barriers.”
What’s still in question for addiction treatment providers like Malone, New York-based Citizen Advocates is how provider involvement will help patients qualify for the exemptions, what documentation needs to look like and how the implementation of this carve-out will be finalized.
Citizen Advocates has eight clinic locations across the state of New York and oversees 124 treatment programs.
Staying agile amid policy uncertainty
Medicaid work requirements and exemptions will not take effect until January 2027, but providers are already preparing to adjust workflows and documentation practices.
Crossroads Treatment Centers CEO Rupert McCormac told BHB, that as one of the largest SUD treatment providers in the U.S., the company is paying close attention to what the exemption details will stipulate.
“We just want to make sure that we understand how that works administratively and be as effective as possible at supporting our patients and in that pursuit as well,” McCormac said.
Crossroads Treatment Centers operates more than 100 treatment facilities across nine states.
Similarly, Carter Paine, CEO and co-founder of Nashville, Tennessee-based addiction treatment company Wayspring, told BHB earlier this summer that the company was closely watching how the Medicaid exemptions for SUD patients would unfold.
“Will members potentially lose coverage and then not be able to ultimately pay for the services they’re getting now?” Paine said. “Substance use disorder is an exception from the work requirements, but [the details] are still to be determined. … I think it’s something that all providers in this space are keeping a pulse on.”
Wayspring partners with health plans to manage care for patients with SUDs.
How SUD exemptions might play out
Clarification on how patients with SUDs will be documented and qualified for the exemption is something that no one has answers to right now.
Even with few details about how that process may play out, Button thinks that whatever is needed administratively or for documentation purposes will be a lift, but less of one than it would be without any exemption for these patients.
“A lot of addiction treatment providers are stretched thin, and there is an administrative burden with each policy decision,” Button said. “But it’s incumbent upon us to figure that out, because many addiction treatment providers are safety net providers. If those providers were to cease to exist or not be able to figure it out, that would be a setback. … We have to figure this out. We have to make this work.”
More of the burden around the qualification process may actually be placed on states rather than providers, Matthew Wolfe, co-chair of the behavioral health initiative at the health law firm Baker Donelson, explained.
“I think a lot of additional work is going to have to go into complying with those requirements while still being able to take advantage of what is intended to be a helpful exemption for Medicaid beneficiaries receiving addiction treatment,” Wolfe told BHB.
Between state Medicaid specifics and places that may choose to delegate the compliance responsibility down to local governments, processes must also account for areas like California, for instance, that have even more robust privacy protections for SUD patients. The implementation will be a complex task to untangle, even after the federal government solidifies details.
One layer that might make it harder for providers and patients, Wolfe said, is the fact that many health care systems are fragmented and lack significant overlap or intercommunication.
“There may be an assumption that Medicaid is going to know that a patient is receiving substance use disorder treatment because they’re paying for the substance use disorder treatment,” Wolfe said. “But I don’t think that the exemption will likely work that way, because those are really two different systems. The eligibility system and the reimbursement or claims system don’t often talk with each other.”
Additionally, providers may face challenges in determining whether a patient is engaged in SUD care and thus qualifies for the exemptions.
“Another piece that I would add to the puzzle is that this is not an exemption for all substance use disorders and treatment. This is an exemption for participation in a ‘qualifying’ substance use disorder treatment program,” Wolfe said. “So, how a program is deemed ‘qualifying’, I think, is going to matter a great deal. There may be certain services or programs that providers operate or provide that are not going to be subject to this exemption.”
Without clarity on these items, it’s hard to recommend how providers can be savvy when navigating these new caveats. Still, Wolfe said there are a few things they should keep in mind in the meantime:
- Have upfront conversations with patients to verify their current Medicaid benefits and discuss their likelihood of continued coverage.
- Continue to monitor patient eligibility throughout treatment and don’t make assumptions that initial coverage will remain stable.
- If a patient’s eligibility appears to be expiring for any reason, work with them to challenge the termination.
- Develop an “off-ramp” for patients, whether it is a marketplace plan, private pay or something else entirely.
“Even today, there’s a risk that a Medicaid client or beneficiary loses their benefits or loses eligibility during the course of treatment,” Wolfe said. “I would recommend that providers consider what they do currently to address those scenarios, because I think those scenarios are going to happen with more frequency.”
Market dynamics and provider risk
The SUD sector has had an active year of dealmaking. While that may not immediately slow down, federal uncertainties like these could cause a slump soon, Jonathan Bluth, managing director at middle market investment bank Brown Gibbons Lang and Company, told BHB.
“This is a great signal that there is long-term support for addiction treatment services and that the market’s long-term potential is robust,” Bluth said. “But a typical private equity investor who may have backed an addiction treatment platform as part of its growth strategy to acquire assets in certain core markets – they may have a hard time making acquisitions over the next 12 months. I’m not saying that they’re going to pull back on acquisitions long term, but in this interim period, there’s uncertainty, because we do not know the degree of disruption that the documentation processes will yield.”
Brown Gibbons Lang and Company is a middle-market health care and life sciences investment banking and financial advisory firm.
Private equity investors considering entering the SUD treatment sector are also unlikely to do so until the eligibility and work requirement exemption processes are clarified due to the associated risk, he added.
“This period of interruption and uncertain consistency could lead many businesses, for a short period of time, to have significant cash flow issues,” Bluth said. “Theoretically, if all SUD patients are carved out from the work requirement, they should all eventually have their eligibility stated or reinstated. Eventually, it should all settle itself out and there should be continued strong interest in the sector. There’s just this window of uncertainty where some people are pencils down.”
But the greatest risk providers face is different from that of investors. To maintain an edge, combat new requirements and overcome any administrative burdens that may introduced, SUD providers need to be ready to approach care and documentation with tight guardrails, according to Button.
“I think that the greatest risk is failure to recognize that the landscape has changed,” Button said. “There are new expectations. There’s new rigor required. … I believe that everybody should approach their care with clinical rigor, really tight documentation and compelling, persuasive reasons why this person needs the care, because that is going to come under scrutiny whether you’re a small provider or a large provider.”