How the OBBBA Bill Could Change Medicaid Therapy Coverage: What You Need to Know

Published on July 7, 2025 by Zencare Team.

Here’s what’s happening

The OBBBA (Omnibus Budget Bill for Balanced Appropriations), also known as the “Big Beautiful Bill”, is making deep cuts to Medicaid funding at the federal level. States will now have more control but less money to run their Medicaid programs.

That shift could mean:

  • Therapy benefits are reduced or eliminated
  • Fewer therapy sessions are covered
  • Stricter rules to qualify for Medicaid
  • Fewer providers accepting Medicaid

If you’re currently in therapy or planning to start, these changes could affect your access and affordability. Let’s break it down.

What’s Changing With Medicaid Under the OBBBA Bill?

The nonpartisan Congressional Budget Office (CBO) estimated that the OBBBA will cut federal spending on Medicaid and Children’s Health Insurance Program (CHIP) benefits by $1.02 trillion.

Instead of a one-size-fits-all federal approach, states will now shoulder more financial responsibility.

What does that mean in practice?

States may start tightening their programs to save money. That could include:

  • Narrowing who qualifies for Medicaid
  • Cutting optional benefits like mental health services
  • Paying providers less, which may push therapists to stop accepting Medicaid altogether

“This is a huge blow for access to health care in America,” said APA President Theresa Miskimen Rivera, M.D. “In very real terms, this legislation will result in irreparable gaps in access to care for our country’s most vulnerable, many of whom have mental health and substance use disorders, and they will suffer as a result.”

Key takeaway: States now have to make difficult decisions. Mental health care, because it’s considered optional under Medicaid, is likely to be one of the first areas affected.

How Will Mental Health Services Be Affected by the OBBBA Bill?

Mental health services like therapy and counseling aren't mandatory under federal Medicaid law. So even though most states offer them now, there’s no guarantee they’ll continue.

Here’s what might change:

  • Therapy sessions could be capped or limited
  • Some types of therapy, like trauma-informed care or group therapy, may no longer be covered
  • Only people with severe or specific mental health diagnoses might still qualify

Key takeaway: Medicaid might still exist, but the mental health support it provides could shrink significantly.

Who Could Lose Medicaid Eligibility Under the OBBBA Bill?

The bill introduces tighter rules about who qualifies. That’s especially concerning for people who already sit on the edge of eligibility.

What’s changing:

  • You’ll need to re-verify your status more often
  • The income and asset thresholds will be stricter
  • States will have less flexibility to cover people during economic downturns or health emergencies

If you’re a gig worker, part-time employee, or low-wage earner, you could be among the first to lose coverage.

Key takeaway: Even if your state keeps therapy benefits, you may not be eligible to use them.

What If You’re Already in Therapy Through Medicaid?

Right now, you may be covered, but that could change quickly depending on how your state responds to the bill.

Here’s what could happen:

  • Your state stops covering therapy under Medicaid
  • Your therapist stops accepting Medicaid because it no longer pays enough
  • You lose eligibility for Medicaid altogether due to new income rules

Let’s look at some possible scenarios:

Situation What It Could Mean for You
Your state cuts therapy coverage You might need to pay out of pocket or stop therapy
Your therapist leaves Medicaid You may need to find a new provider with open spots
You lose Medicaid entirely All of your healthcare, including therapy, goes away

Key takeaway: The continuation of your care could depend on where you live, who you see, and how your financial situation lines up with new rules.

5. Do All States Cover Therapy Through Medicaid?

No, not all of them. Mental health services are optional under federal Medicaid guidelines. That means each state chooses whether to include therapy in their plan, and if so, what kind and how much.

Most states do offer some form of outpatient therapy. But session limits, approval processes, and qualifying conditions vary.

Here’s a full list of states and their Medicaid program names, along with whether they currently cover outpatient therapy:

State-by-State Guide to Medicaid Mental Health Coverage

State Covers Therapy? Medicaid Program Name
AlabamaYesMedicaid of Alabama
AlaskaYesDenaliCare
ArizonaYesArizona Health Care Cost Containment System (AHCCCS)
ArkansasYesArkansas Medicaid
CaliforniaYesMedi-Cal
ColoradoYesHealth First Colorado
ConnecticutYesHUSKY Health
DelawareYesDelaware Medicaid
FloridaYes (limited)Florida Medicaid
GeorgiaYesGeorgia Medicaid
HawaiiYesMed-QUEST
IdahoYesIdaho Medicaid
IllinoisYesIllinois Medicaid
IndianaYesHoosier Healthwise / Healthy Indiana Plan
IowaYesIowa Medicaid
KansasYes (limited)KanCare
KentuckyYesKentucky Medicaid
LouisianaYesLouisiana Medicaid
MaineYesMaineCare
MarylandYesMaryland Medical Assistance
MassachusettsYesMassHealth
MichiganYesMichigan Medicaid
MinnesotaYesMinnesota Medical Assistance
MississippiYes (limited)Mississippi Medicaid
MissouriYesMO HealthNet
MontanaYesMontana Medicaid
NebraskaYesHeritage Health
NevadaYesNevada Medicaid
New HampshireYesNew Hampshire Medicaid
New JerseyYesNJ FamilyCare
New MexicoYesCentennial Care
New YorkYesNY Medicaid
North CarolinaYesNC Medicaid
North DakotaYesNorth Dakota Medicaid
OhioYesOhio Medicaid
OklahomaYesSoonerCare
OregonYesOregon Health Plan
PennsylvaniaYesPennsylvania Medical Assistance
Rhode IslandYesRhode Island Medicaid
South CarolinaYesHealthy Connections
South DakotaYesSouth Dakota Medicaid
TennesseeYesTennCare
TexasYes (limited)Texas Medicaid
UtahYesUtah Medicaid
VermontYesGreen Mountain Care
VirginiaYesVirginia Medicaid
WashingtonYesApple Health
West VirginiaYesWest Virginia Medicaid
WisconsinYesBadgerCare Plus
WyomingYesWyoming Medicaid
District of ColumbiaYesDC Medicaid

Key takeaway: Most states currently offer therapy under Medicaid, but benefits can be narrow. And under the OBBBA bill, that could change quickly.

6. What Can You Do to Prepare?

You don’t need to panic, but you do need to plan. Here’s how:

If you’re on Medicaid and in therapy:

  • Ask your therapist if they expect any changes in coverage
  • Call your Medicaid plan to get ahead of upcoming changes

Look into alternatives, such as:

  • Federally Qualified Health Centers (FQHCs)
  • Sliding-scale clinics
  • Nonprofit mental health services
  • State-specific behavioral health programs

If you’re a therapist or provider:

  • Prepare for possible shifts in your Medicaid caseload
  • Apply for grant funding if you plan to serve low-income clients
  • Build referral networks with community mental health clinics

Key takeaway: The earlier you plan, the smoother your path will be if coverage changes or disappears altogether.

7. What Comes Next? Why It Depends on Your State

The OBBBA bill gives states more control but doesn’t dictate exactly what they must cut. Some states may protect therapy benefits. Others may not.

Here’s what’s likely:

  • Some states will preserve coverage, possibly using state funds
  • Others will cut therapy benefits entirely
  • Therapists may opt out of Medicaid if reimbursement becomes unsustainable
  • Waitlists could grow in areas where fewer providers accept Medicaid

Key takeaway: Your access to care will depend heavily on where you live and how your state chooses to respond.

Frequently Asked Questions (FAQs)

Is therapy covered under Medicaid in all states?

No. Mental health services like therapy are considered optional under federal Medicaid law. Most states cover outpatient therapy in some form, but the specifics, like the number of sessions or approved providers, vary.

How will I know if my Medicaid coverage changes?

Watch for official notices from your Medicaid insurer or your state’s health department. You can also ask your therapist or call your plan directly.

What if my therapist stops taking Medicaid?

You may need to find a new provider who accepts Medicaid or ask about sliding-scale rates. Community health clinics and nonprofits are also good resources.

Can I still get therapy if I lose Medicaid?

Yes, though it may be harder. Look into low-cost clinics, local mental health nonprofits, FQHCs, and peer support programs in your area.

Are there programs outside of Medicaid that cover therapy?

Some states offer behavioral health programs that operate separately from Medicaid. Nonprofits and local health departments may also offer free or reduced-cost counseling services.

Final Thoughts: Don’t Wait for the Cuts to Start Preparing

If you rely on Medicaid for mental health care, now’s the time to ask questions and explore your options. The OBBBA bill introduces uncertainty, but taking early steps can help you stay connected to the care you need.

Want help navigating your options or finding a therapist who offers sliding-scale rates? Zencare can help you explore trusted, vetted providers in your area.

Additional Resources: Stay Informed and Get Help

If you're on Medicaid or rely on it for therapy, staying informed is essential. The following resources can help you:

  • Track federal and state policy changes
  • Understand how the OBBBA bill affects you
  • Access local support services and low-cost mental health care

1. Federal Medicaid & Legislative Tracking

2. State Medicaid Offices & Portals

Each state runs its own Medicaid program and will make its own decisions about what benefits to keep or cut. Use the links below to check your eligibility, benefits, and mental health coverage.

3. Mental Health & Therapy Support

5. Advocacy & Policy Watchdogs

Need help now?
If you're in crisis or need immediate mental health assistance, call or text 988 to reach the Suicide & Crisis Lifeline, or visit 988lifeline.org.