Arizona Spent $582 Million on SUD Treatment Last Year. Federal Policy Is About to Test Whether That Investment Survives.

On April 28, 2026, AHCCCS director Carmen Heredia submitted the agency’s annual substance use disorder treatment report to Governor Katie Hobbs. The number at the center of that report is $582,342,402 — the total amount Arizona spent on SUD treatment services through its Medicaid program in State Fiscal Year 2025.

That is not a line item in the Medicaid budget. That is the Medicaid budget for SUD treatment in Arizona. Medicaid was the largest source of funding for every clinical service the report covers: outpatient counseling, residential treatment, medication-assisted treatment for opioid use disorder, crisis stabilization, peer support, and case management. The Substance Use Block Grant and a handful of federal discretionary grants supplemented that spending, but Medicaid is the foundation. Without it, the treatment system the report describes does not exist in anything close to its current form.

The population that system served was primarily adults between 25 and 44 — the core working-age cohort, the demographic most likely to be both in active SUD recovery and in the workforce, or trying to get back to it. They are also the demographic that the new federal Medicaid work requirements, going live by December 31, 2026, are designed to screen.

This is the policy collision that the SFY2025 report describes without yet acknowledging: a state that just documented half a billion dollars in Medicaid-funded SUD treatment is about to implement a law that conditions that coverage on documentation of work, school, or approved activity — with a treatment enrollment exemption that, as detailed in today’s featured piece, has a proven history of failing the people it was designed to protect.

Arizona has not announced early implementation of the work requirements. That’s a relative grace period — Nebraska started May 1, Montana starts July 1. But the December 31 deadline is not optional, and the outreach window CMS mandated runs through August 31. The 90-day gap between when outreach ends and when enforcement begins is not much runway for an agency serving tens of thousands of people with active SUDs who may not have stable contact information, regular mail access, or the cognitive bandwidth to navigate a new eligibility process.

Arizona has $1.2 billion in opioid settlement funds arriving over 18 years under the One Arizona Agreement — a uniquely large public investment in the treatment infrastructure that the SFY2025 report documents. Settlement funds cannot substitute for Medicaid coverage. They fund specific programs and capital investments. They do not pay for the per-member, per-month cost of keeping someone enrolled in treatment. That’s what Medicaid does.

What the SFY2025 report describes, and what the next annual report will have to measure, is whether Arizona’s treatment system can absorb a reduction in the insured population it serves — or whether the work requirements create a gap between who needs treatment and who has the coverage to pay for it. More Arizonans die from opioid overdoses than five per day. The investment described in the SFY2025 report is designed to close that gap. Whether that investment survives what’s coming out of Washington in the next six months is the most consequential question in Arizona behavioral health right now.