D.C. Taps Opioid Settlement Money for Medicaid, Igniting Budget Fight

Washington, D.C., plans to redirect roughly $2.3 million in opioid settlement money to cover part of the city's Medicaid contribution next year, along with at least $5.5 million to sustain addiction treatment centers that the general budget previously paid for — a maneuver that recovery advocates, and the commission created to advise the city on the settlement cash, say violates the district's own opioid litigation law.

The line items, embedded in the district's fiscal 2027 budget and first reported by KFF Health News, which obtained a budget document detailing them, would keep overall spending on addiction treatment flat rather than expanding it. That is precisely the outcome the settlement agreements were designed to prevent. The district's share of the national settlements with opioid manufacturers and distributors is expected to exceed $100 million over the coming years, part of more than $50 billion flowing to state and local governments nationwide over nearly two decades.

A law that says "supplement, not supplant"

The dispute turns on a budgeting term of art: supplantation, the practice of shifting an existing government obligation onto a new revenue source to free up general funds. The district's opioid litigation statute states that money in the opioid abatement fund "shall supplement, and not supplant" — language that Shelly Weizman, associate director of the Center on Addiction and Public Policy at Georgetown Law's O'Neill Institute, described as unambiguous.

"It's a pretty tightly written law where the intent is very clear: Do not supplant," Weizman told KFF Health News. "Opioid settlement dollars are not meant to be a rainy-day fund for existing government obligations."

Chad Jackson, who chairs the district's Opioid Abatement Advisory Commission and is himself in recovery, reached the same conclusion. "If the opioid settlement funds were not there, I feel pretty confident that these things would have been funded, because they have to be funded," Jackson said. In his reading, the budget move runs directly against the statute.

Advocates mobilize against the plan

Opposition has organized quickly. More than 80 individuals and 30 city organizations signed a letter protesting the spending plan, accusing the Department of Behavioral Health of using settlement cash to "pay off its own debts." The letter went to DBH Director Barbara Bazron, D.C. Council health committee chair Christina Henderson, and Attorney General Brian Schwalb.

Queen Adesuyi, a partner at Reframe Health and Justice, a consulting group for community-based organizations, called the approach a "slap in the face" and argued the funds carry a specific mandate: "to remediate issues related to the opioid crisis in new and innovative ways." Speaking at a heated July 15 meeting of the advisory commission, Adesuyi said the department is falling short at a moment when the drug supply demands agility. "The drug supply is getting a lot more unpredictable, which calls for some nimbleness, and it calls for interventions that are more courageous," Adesuyi said. "It's frustrating, it's disappointing, and it's enraging because people are dying unnecessarily in the district to overdose."

Henderson and Schwalb added their own pressure in a July 17 letter to the department, writing that they were "concerned that DBH may be using the settlement monies for other unauthorized purposes" and demanding an explanation by July 31 of how the $2.3 million Medicaid allocation could be legal. Whether the department met that deadline remains unclear; DBH, Henderson's office, and the attorney general's office all declined to answer that question directly.

The city's defense

DBH spokesperson Denise Reed said in a statement that the department is "committed to compliance with all statutory requirements governing opioid settlement funds." The department's broader position is that the council approved the budget lawfully, and that the money supports work countering opioid addiction. Reed noted that the council in June "passed a legally-certified budget for the next fiscal year that makes the best use of all local resources, including the opioid settlement fund," pointing to grants awarded to 17 community-based providers that last year served nearly 9,800 residents, including 3,500 in medication-assisted treatment for opioid addiction.

The district's budget now sits in a 30-day congressional review period, the final step in its annual process, leaving a narrow window for the dispute to force changes.

A temptation far beyond the capital

What is unfolding in Washington echoes a tension playing out across the country. Settlement agreements were structured to fund new and expanded services — more opioid use disorder treatment capacity, harm reduction, prevention — but many jurisdictions face mounting fiscal pressure from inflation, rising costs, and federal funding cuts, making a pile of restricted cash an inviting target for budget writers. Watchdog groups have documented similar fights from Louisville to Massachusetts, where lawmakers have eyed settlement money to patch holes rather than build new programs.

The district's fight is distinctive in one respect: its own law anticipated the temptation and forbade it in plain terms. Whether that statutory language has teeth — and whether the council, the attorney general, or Congress during its review will enforce it — will determine if the settlement delivers the expansion of services it promised, or simply relieves the general budget of obligations it already carried. For the advocates who crowded the July commission meeting, the difference between those two outcomes is measured in overdose deaths the money was meant to prevent.