Are Opioid Settlement Funds Being Used to Plug Medicaid Gaps? What That Means for Treatment Access

Are opioid settlement funds being used to plug Medicaid gaps? Why that matters for treatment access in 2026

Hook: As state budgets tighten in 2026, families, clinicians, and advocates are asking a sharp question: are one-time opioid settlement dollars meant to expand addiction care being diverted to cover shortfalls in Medicaid and other general programs? If the answer is yes, the result could be fewer long-term treatment options for people with opioid use disorder and a faster return to crisis-level overdose rates.

Top line — the situation right now

More than $50 billion from opioid litigation is slated to flow to state and local governments. Those funds were intended to remediate the fallout from the opioid epidemic — expanding treatment, harm reduction, prevention, and recovery supports. But reporting rules have been weak, and in many places there is little clarity on what is permissible spending. That gap creates a policy risk: cash-strapped states may treat settlement receipts as fungible revenue and use them to plug budget holes, including Medicaid shortfalls.

Why that risk matters

Medicaid is the single largest payer of addiction treatment services in the United States. Cuts or constraints in Medicaid eligibility, benefits, or provider payments directly reduce access to medications for opioid use disorder (MOUD), counseling, inpatient care, and community supports. Settlement money is finite; it is not a sustainable substitute for ongoing federal and state Medicaid funding. When these funds are used to backfill general budgets, the long-term scale-up of evidence-based addiction care stalls.

Survivors of the overdose crisis and families who lost loved ones are calling for stricter rules to govern how the payout can be used, warning that lax oversight risks wasting this rare public health resource on short-term budget fixes.

How settlement dollars are currently being spent — and tracked

Local and state officials have broad discretion in many jurisdictions, and that has produced a patchwork of spending decisions. Some communities have invested in expanded treatment capacity, naloxone distribution, syringe services, and recovery housing. Others have directed settlement money toward law enforcement purchases, infrastructure projects, or general operating costs.

Tracking efforts from independent groups, including a joint tool from KFF Health News, Johns Hopkins Bloomberg School of Public Health, and Shatterproof, aim to bring transparency to these flows. These trackers show considerable variation in allocation categories, timing, and reporting quality. Where transparency is thin, accountability suffers and the risk of diversion grows.

Budget plugging: What does it look like in practice?

“Budget plugging” can take several forms. Policymakers under fiscal pressure may:

• Move settlement receipts into a general fund and use them to cover Medicaid program shortfalls or other mandatory expenditures.
• Replace planned state appropriations for addiction services with settlement funds, freeing up state dollars for non-health purposes.
• Employ settlement money for one-time expenses that do not contribute to sustainable treatment capacity, such as short-lived capital projects without service commitments.

Each approach trades long-term system building for short-term fiscal relief. For an epidemic that has unfolded over decades, short-term fixes carry outsized public health consequences.

Evidence-based risks to treatment access

There are four interlocking risks policymakers and advocates should watch:

1. Finite funds, infinite need: Settlement dollars are large but limited. Using them as a recurring subsidy for Medicaid or other programs creates a funding cliff when the money runs out.
2. Policy distortion: Programs that expand evidence-based interventions like MOUD, contingency management, and integrated behavioral health require ongoing operational support. One-time capital outlays or short grants do not sustain those services.
3. Equity erosion: When settlements are diverted to general uses, marginalized communities that bear the highest overdose burden may lose prioritized investments that were intended to reduce disparities.
4. Accountability gaps: Weak reporting rules make it difficult for advocates and health systems to know whether funds are improving outcomes or simply masking budgetary failures.

Cases and signals to monitor in 2026

In 2026, several trends amplify the policy risk:

• Many state budget cycles remain tight after pandemic-era relief ended, driving pressure to find flexible revenue.
• Inflation uncertainty and economic shifts in late 2025 and early 2026 have made revenue forecasts less predictable, increasing temptation to use one-time settlements for ongoing obligations.
• Political turnover in statehouses has produced diverse approaches to public health funding, with some administrations prioritizing expansion and others favoring fiscal consolidation.

These signals suggest the coming 24 months will be decisive for how settlement funds shape long-term addiction care capacity.

Policy safeguards to protect treatment access

Several policies can reduce the risk that opioid settlement funds are used to plug Medicaid or other budget gaps. Below are vetted strategies that balance flexibility with accountability.

1. Statutory earmarks and protected trust funds

State legislatures can place settlement receipts into dedicated trusts with explicit permitted uses tied to prevention, treatment, recovery, and harm reduction. Trust language should restrict transfers to general funds and require a clear plan for how money will be spent over multiple years.

2. Federal guardrails and incentive grants

Congress and federal agencies can set minimum standards for reporting and allowable activities, or offer incentive grants that reward states for meeting evidence-based benchmarks. Federal guidance does not currently standardize usage nationwide; creating a federal framework would reduce interstate variation and discourage diversion.

3. Performance-based allocations

Linking portions of settlement disbursements to measurable outcomes — treatment initiation rates, MOUD retention at 6 months, reductions in overdose deaths — aligns spending with impact. Performance mechanisms encourage investment in sustained services rather than one-off purchases.

4. Mandatory public reporting and independent audits

Annual standardized reporting, public dashboards, and third-party auditing make it harder to shift money into opaque uses. Reporting should include expenditures by category, service-level outcomes, geolocation of investments, and planned future allocations. Independent audits and cloud governance approaches like multi-cloud migration playbooks for data systems can support reliable dashboards.

5. Community oversight boards

Including survivors, clinicians, behavioral health providers, and local public health experts on oversight boards ensures community priorities guide spending decisions. These boards can vet proposals, monitor outcomes, and recommend course corrections. Tools and outreach (for example, local newsletters and subscriber briefings) help keep communities informed.

6. Clawback or reallocation provisions

Legal provisions that allow partial clawbacks or reallocation if funds are diverted to non-permitted uses provide teeth to enforcement and deter misuse.

Practical steps for clinicians, advocates, and caregivers

Whether you are a clinician managing patients with OUD, an advocate tracking local investment, or a caregiver trying to preserve treatment access, there are concrete actions you can take now.

For clinicians and health systems

• Document Demand: Aggregate local data on treatment demand, wait times for MOUD, and capacity gaps and share these with local officials and oversight boards.
• Propose Sustainable Models: Offer concrete, budget-ready plans for expanding MOUD and integrating SUD care into primary care that include multi-year cost projections.
• Engage in Monitoring: Insist on inclusion in public reporting and help define meaningful treatment outcome metrics.

For advocates and community groups

• Use tracking tools: Regularly consult independent settlement trackers and make sure local spending aligns with community needs. If reporting systems or dashboards are built on modern edge-first tooling, advocate for standardized exports and geolocation detail.
• Demand transparency: File public records requests if reporting is missing and push for publicly accessible dashboards.
• Organize oversight: Convene survivors, providers, and local officials to create community oversight mechanisms.

For caregivers and people with lived experience

• Tell your story: Personal narratives about lost access to services and the impact of Medicaid changes can influence lawmakers.
• Monitor local priorities: Attend county budget hearings and ask how settlement funds will support ongoing treatment access.
• Connect with providers: Work with treatment programs to understand risks and support continuity planning.

Advanced strategies for policymakers

Policymakers who want to protect treatment access while maintaining fiscal responsibility can pursue hybrid approaches that preserve the finite nature of settlements while leveraging them to expand sustainable capacity.

• Seed and scale: Use settlement funds to seed infrastructure and workforce training, paired with commitments to transition successful programs to Medicaid or other sustainable payers.
• Match funding: Require localities to match a percentage of settlement investments with state or philanthropic dollars for program expansion, ensuring broader buy-in.
• Medicaid waivers: Work with federal partners to align settlement-funded programs with Medicaid authorities via 1115 waivers or state plan amendments so services can become billable benefits where appropriate; legal and technical alignment (see resources on system security and governance) matter for data sharing and reporting.
• Workforce pipelines: Invest in long-term workforce development, loan repayment, and training programs that lower operating costs and improve retention in addiction care.

What to watch for in the coming year

As 2026 proceeds, three developments will test whether settlement money strengthens or undermines long-term treatment access:

1. Legislative action at the state or federal level to standardize permissible uses and reporting requirements.
2. Emerging federal incentives or penalties tied to evidence-based outcomes and public reporting.
3. Local spending decisions that either lock funds into recurring service support or use them for one-time, non-recurring expenses.

Each of these will be a bellwether for whether governments treat settlements as a public health investment or a stopgap fiscal resource.

Measuring success: What good stewardship looks like

Good stewardship of opioid settlement funds produces measurable gains across several domains:

• Increased access to MOUD with reduced wait times and higher retention at 6 and 12 months.
• Reduction in overdose deaths and nonfatal overdoses in funded jurisdictions.
• Expansion of harm reduction services, including syringe programs and naloxone distribution targeted to high-burden communities.
• Workforce expansion in addiction medicine and integrated primary care models.
• Transparent public dashboards and community oversight meetings with evidence of course corrections when programs underperform.

Final assessment and predictions for 2026

Opioid settlement funds are a rare, high-profile resource with the potential to change the trajectory of the overdose crisis. The policy choices made in 2026 will determine whether those dollars build durable systems of care or simply mask deeper fiscal shortfalls. If states adopt strong protections — statutory earmarks, performance metrics, transparent reporting, and community oversight — settlement funds can accelerate treatment access and recovery supports. If they do not, the predictable consequence will be short-term fiscal relief at the expense of long-term lives saved.

Actionable takeaways

• Watch the trackers: Use independent tools to monitor how your county and state spend settlement money.
• Demand rules: Push state legislators for statutory protections and public reporting requirements.
• Prioritize sustainability: Advocate for models that transition successful settlement-funded programs to Medicaid or other sustainable payers.
• Engage locally: Join or form community oversight boards to ensure funds support evidence-based treatment.

Call to action

If you care about maintaining and expanding access to addiction treatment, act now. Check the independent opioid settlement trackers for your jurisdiction, attend the next county or state budget hearing, and contact your elected officials to demand transparency and protections that preserve these dollars for their intended public health purpose. Subscribe to policy briefings and share local data — community pressure and clear metrics are how we turn one-time settlements into long-term lives saved.

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