This week’s PUC breaks down Michigan’s $76B FY 26 budget, highlighting new investments in CCBHCs, direct care wages, and school mental health, but noting the absence of key provider protections. It also covers an audit of the state’s psychiatric hospitals, raising new oversight questions. The takeaway: funding moved forward, but fairness and accountability for providers remain unfinished business. Pull Up Your Chair & Let’s Start the Conversation.

Budget

State Budget Passes

The Michigan Legislature approved a $75.95 billion state budget for Fiscal Year 2025–2026 (FY 26). The agreement came two days after the start of the fiscal year, following a stop-gap funding bill signed by Governor Whitmer to keep state operations running while negotiations continued. The final budget is split between the $51.8 billion General Omnibus budget (House Bill 4706) and the $24.12 billion School Aid budget (Senate Bill 166), with savings realized through program lapses, targeted reductions, and the elimination of 2,000 unfilled positions.

For providers, the most notable pieces of the FY 26 budget are embedded in the Health and Human Services appropriation, which totals $30 billion Gross ($7.1 billion GF/GP), a $7.62 billion reduction from FY 25. The budget includes $39.3 million Gross for utilization and cost adjustments for Certified Community Behavioral Health Clinics (CCBHCs), continuing the state’s significant reliance on this model to expand access to services. Medicaid mental health services are funded at $1.05 billion, with an additional $33.7 million dedicated to Medicaid substance use disorder services and $1.8 million for SUD services within the state disability assistance program. Beyond Medicaid, $125.5 million supports community mental health non-Medicaid services, while $8.7 million is directed toward community-based SUD prevention, education, and treatment, and $2.39 million is appropriated for opioid response activities.

The budget also retains a series of reporting and oversight requirements. DHHS must continue to submit annual outcomes reports for CCBHCs, including Medicaid and non-Medicaid utilization, service volumes, and site-specific performance. Health homes for behavioral health and SUD are preserved at current levels, with semiannual utilization reports required. The department must also notify the Community Mental Health Association of Michigan of policy changes impacting PIHPs or CMHSPs, and any rebasing of funding formulas must be reported to the Legislature with detailed impacts before implementation.

On direct care workforce (DCW), the FY 26 budget retains the $3.40 minimum wage increase established in previous years. Section 231 maintains the wage, and a supplemental appropriation of $138.6 million (state and federal) is included specifically to sustain the increase. In addition, Section 354 establishes the ARP Home- and Community-Based Services Projects Fund at $160.96 million, dedicated to DCW training, credentialing, recruitment, support, and retention. These investments reflect a clear recognition that stabilizing the workforce is essential to maintaining service access.

At the same time, it’s worth noting what the budget does not include. Upon review, none of the provider protection boilerplate language advanced during negotiations appears in the final version. Proposals that would have limited the state’s ability to provide direct Medicaid services at higher costs than nonprofits, imposed a moratorium on state service expansion, required DHHS to fully implement uniform credentialing under P.A. 282 of 2020, prohibited retaliation against providers, or required fair contracting, transition oversight, or uniform standards across PIHP and CMHSP contracts were not adopted. These omissions underscore the importance of continued advocacy to ensure providers have the protections and fair contracting environment they need during ongoing system redesign.

The School Aid budget also carries behavioral health implications, allocating $321 million for school safety and mental health grants, a $62.5 million increase from FY 25. This is paired with expanded investment in GSRP, special education, and universal meals, reflecting the Legislature’s commitment to holistic supports for children and families.

As always, the passage of the budget is not the end of the conversation, it is the beginning of a new phase of oversight and implementation. Providers should be prepared for increased reporting obligations tied to CCBHCs and health homes, ongoing scrutiny of funding formulas, and the need to continue raising concerns about fair contracting and retaliation protections that were left on the cutting-room floor.

Passed alongside the FY 26 budget includes legislation to provide new revenue streams for the state, most notably to fund the state’s road plan. Some of the bills passed include:

The final FY 26 budget totals $75.95 billion. The General Omnibus budget, House Bill 4706, appropriates $51.8 billion ($12.5 GF/GP). Savings to the state were realized through programmatic lapses from FY 25, programmatic reductions and eliminations, as well as the reduction of 2,000 unfilled full-time employee positions. For the School Aid budget, Senate Bill 166, it appropriates $24.12 billion ($1.56 GF/GP) for K-12 schools, community colleges, and higher education. The K-12 portion of the budget saw a 2.5% increase in funding from FY 25.

Michigan lawmakers approve 2026 budget, including 24% marijuana tax, Detroit Free Press - 10/03/2025

House Fiscal Analysis (MDHHS starts on page 84)

The Rebid

Locally Managed mental health substance use services best for Macomb residents, Macomb Daily

MDHHS

State Psychiatric Hospitals Faulted for Delayed, Incomplete Oversight 

An audit released today found Michigan’s Office of Recipient Rights is failing to protect patients in the state’s psychiatric hospitals, with investigations into abuse, neglect, and even deaths often delayed for weeks or months beyond legal deadlines. The Auditor General reported that in nearly a third of cases, officials took longer than 24 hours to begin inquiries, with some investigations stretching up to 14 months instead of the required 90 days. Missing date stamps, broken surveillance equipment, and a lack of monitoring systems further hampered accountability. Sen. Michael Webber (R-Rochester Hills), who requested the review after hearing from families of former patients, called the findings “very clear evidence” of systemic failures under MDHHS leadership. The audit follows multimillion-dollar lawsuits and settlements tied to past hospital incidents, adding new urgency to legislative efforts aimed at tightening oversight and safeguarding vulnerable patients.

Read further,

Children

Advocates hope child mental health program saved as Michigan budget comes down to wire, Detroit Free Press - 10/01/2025

SUD

Purdue Opioid Settlement Local Government Sign-on Deadline Extended to October 30, Attorney General Dana Nessel - 10/02/2025

Proposals

RFP Opportunity: Low-Barrier Access to Health Care & MOUD

I hope this message finds you well! I wanted to make sure you and the MIASAP members are aware that the city has released a Request for Proposals (RFP) for a program focused on low-barrier access to health care and medications for opioid use disorder.

The city is seeking implementation partners to provide both Street Medicine services to individuals experiencing unsheltered homelessness, as well operate a walk-in clinic offering health care and behavioral health services, including medications for opioid use disorder (MOUD), in the City of Detroit. The RFP number is 186154, and it can be accessed via the ‘View current bid opportunities’ link on the City of Detroit Office of Contracting and Procurement website. Proposals will be accepted through October 29^th, and interested applicants can attend a pre-proposal conference on Friday, October 10^th at 1:00 pm EST to learn more about the RFP and ask questions.