As federal lawmakers consider deep cuts to Medicaid, health officials in Michigan are raising urgent alarms about the impact on the state’s behavioral health system. Hospitals, mental health providers, and policy advocates warn that proposed funding changes — including block grants and cuts to federal cost-sharing — could dismantle vital services. These cuts would especially harm people living in poverty or struggling with mental illness and substance use disorders, who already face difficulty accessing timely and affordable care.
More than 140 groups across Michigan, including the Michigan League for Public Policy (MLPP), the Community Mental Health Association of Michigan (CMHA), and the Michigan Health and Hospital Association (MHA), have joined Protect MI Care. This coalition is working to educate the public, raise awareness, and pressure lawmakers to stop the cuts.
Monique Stanton, president and CEO of MLPP, says, “Medicaid is crucial to the health and well-being of Michiganders. Instead of making cuts, we should focus on improving the system.”
Medicaid: The Foundation of Behavioral Health Care in Michigan
Medicaid is not just a safety net; it is the main source of funding for behavioral health care in Michigan. Stanton explains, “Medicaid pays for the majority of mental health services in the U.S., including Michigan. Cutting Medicaid funding will lead to many people losing access to these essential services.”
Currently, Medicaid covers more than 2.6 million Michiganders. This includes half of all children, half of all births, and most people with serious mental health conditions, developmental disabilities, or substance use disorders. Medicaid also pays for important services such as residential treatment, outpatient therapy, case management, and peer support.
“These cuts don’t just affect Medicaid recipients,” Stanton says. “They threaten the whole behavioral health care system.”
Cuts would also strain the behavioral health workforce. Stanton warns, “If we lose workers who provide these services, people won’t get care when they need it.”
A reduction in federal funding would impact emergency rooms, community health centers, and crisis teams. This would lead to longer wait times, fewer available services, and less care for patients of all incomes. It could undo years of progress in tackling Michigan’s worsening behavioral health crisis, which has grown since the COVID-19 pandemic, with rising rates of anxiety, depression, and substance use.
The Impact on Vulnerable Populations
Robert Sheehan, CEO of CMHA, points out that Medicaid covers people with the most severe mental illnesses, such as schizophrenia, bipolar disorder, and opioid addiction. He says, “The largest Medicaid cuts will hit these vulnerable people first.”
Sheehan adds that poverty and mental illness often go hand in hand. “Almost all our clients live in poverty. Living in poverty raises anxiety and depression because people struggle to make ends meet every day.”
The Michigan Health and Hospital Association (MHA) warns that cuts would reverse key health improvements made since the Affordable Care Act. These gains include fewer unpaid hospital bills and better access to mental health and addiction services.
Lauren LaPine, MHA senior director for legislative and public policy, says, “Cuts to Medicaid will force hospitals to close services or even shut down. When Medicaid funding drops, services disappear for all patients, not just those on Medicaid.”
Medicaid is the largest payer for long-term care, maternity care, and mental health services in Michigan. LaPine calls it “a cornerstone of our health system that keeps people healthy at every stage of life.”
A Ripple Effect Across the Health System
Sheehan warns that if Medicaid funding dries up, hospitals and providers don’t stop giving care — instead, they pass costs to others. “Rural hospitals could go out of business,” he says. “And care for people with private insurance will become much more expensive because providers have to cover these costs.”
MHA estimates that changes like block grants, spending caps, and lower federal matching rates could create a $1.73 billion funding gap in Michigan. This would put enormous pressure on hospitals, especially in rural areas, and might force more closures. The cuts would undo progress made since Medicaid expansion, including reductions in unpaid care and improvements in behavioral health access.
State Response
In response, Governor Gretchen Whitmer issued Executive Directive 2025-3 on April 17. It orders the Michigan Department of Health and Human Services (MDHHS) to produce a detailed report within 30 days. The report must show how Medicaid cuts would affect coverage, hospital operations (especially in rural areas), and the state budget.
Whitmer said, “We will send a clear message to anyone trying to trade your health for tax cuts. Medicaid is not for sale.”
Why Everyone Should Care
Some see Medicaid as only for low-income people, but Sheehan stresses that cuts affect everyone. “Hospitals, doctors, and labs still provide care for uninsured people, but they have to pay for it somehow,” he says. “That cost gets passed to private insurance.”
For many, this means higher insurance premiums, fewer services, or even hospital closures. “If rural hospitals are already shutting down, Medicaid cuts will speed that up,” Sheehan warns.
LaPine agrees: “Cutting Medicaid funding means cutting care. It will become harder for all Michiganders to get mental health services.”
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