Counties pivot as federal substance use funding shifts

Key Takeaways

Federal changes to substance use disorder (SUD) funding and policy will have significant implications for how counties deliver prevention, treatment and recovery services, Blaire Bryant, NACo legislative director for health policy, told members of the NACo Opioid Solutions Leadership Network Nov. 6 in Washington, D.C.

Forthcoming federal funding reforms are expected to place additional pressure on resources counties rely on for SUD services. These include H.R. 1 reductions to Medicaid — the nation’s largest payer for behavioral health services — and recissions of certain discretionary funds that have supported SUD programs.  A recent White House Executive Order on homelessness and behavioral health has prompted new restrictions on the use of future Substance Use Prevention, Treatment and Recovery Services Block Grants funds for harm reduction initiatives. 

Opioid settlement dollars are the only direct source of funding that counties receive for substance use disorder programs, totaling about $55 billion distributed across states, localities and tribal nations over 18 years.

While the changes outlined in H.R. 1 and the “Ending Crime and Disorder on America’s Streets” Executive Order don’t revoke or directly impact opioid settlement dollars, they will likely shift how counties spend the funding, because they limit how federal funding is spent, Bryant said. 

“I think the biggest implication of some of the changes that we’re seeing at the federal level is doing more with less, and so that has implications on how you’re able to use and what you’re funding with your settlement dollars,” Bryant said. Which can mean “if you were planning to do one thing with your settlement dollars, you may have to reallocate it to something else that [now] gets less funding.”

There remains flexibility with Medicaid waivers, and the Centers for Medicare and Medicaid Services (CMS) continues to work with states to implement them, but it is unclear if waivers will be affected down the line, according to Bryant. Notably, even if a waiver remains approved at the federal level, the process of implementing it may be stalled and not feasible from a cost perspective because of state and localities’ concerns around other funding cuts and limitations.

“All of the flexibilities you currently have with regard to health-related social needs, re-entry, the IMD waivers, all of that still exists,” Bryant said. But “just because the flexibility is still there with the waiver, doesn’t mean that the finances are, so thinking specifically about work requirements, that is going to be probably one of the biggest financial lifts for states under H.R. 1.”

Oregon recently stepped back from implementing re-entry waivers, even though it was federally approved to do so, to account for some of the other state and local costs that are set to rise through the changes in federal funding, Bryant noted. 

The state of Georgia implemented work requirements for Medicaid recipients in 2023, and just to get the program started, it cost an estimated $80 million between the state and federal government, according to a U.S. Government Accountability Office report. 

In response to the July Executive Order, the Substance Abuse and Mental Health Services Administration (SAMHSA) released a “Dear Colleague” letter to states, localities and grant recipients, outlining which harm reduction initiatives it is no longer eligible to fund, including syringe services and safer smoking kits.

“If you’re looking to utilize the settlement dollars to fill some of those harm reduction gaps, that’s going to give you a pretty clear outline of where those gaps are going to be,” a peer exchange ambassador said. 

State associations can work with counties to identify r funding gaps and plot how they can be supplemented with opioid settlement dollars, but it will have to be a balancing act in making sure the county is not then expected to fund the services long-term, said peer exchange participant Sydney Blodgett, member engagement manager for the Kentucky Association of Counties. 

NACo is encouraging counties to create an independent council or board for their opioid trusts, said Annie Qing, NACo substance use disorder senior program manager.

“The counties that have created a process or a council are much more safe, I think, for making reactive decisions,” Qing said. “… If you have these funds protected in that way, then you’re a little bit less subject to the idea of it getting pulled in multiple directions. 

“A lot of the county commissioners that we’ve talked to or the people who manage opioid settlement funds have said, ‘Suddenly a lot of agencies are knocking on my door,’ because they’re feeling the depth of the cuts too.”