D.C. Opioid Settlement Funds Diverted to Medicaid, Sparking Budget Battle

Washington, D.C. is facing a budget battle over opioid settlement funds after the city proposed using millions of dollars intended for addiction remediation to pay for existing Medicaid costs and treatment centers previously funded through the general budget. The move has triggered fierce opposition from recovery advocates, people affected by the crisis, and the district's own Opioid Abatement Advisory Commission.

The controversy centers on the city's fiscal year 2027 budget, which would direct approximately $2.3 million in opioid settlement dollars toward the city's Medicaid contribution and at least $5.5 million to support addiction treatment centers that have historically been funded through general budget revenues. By substituting settlement funds for general funding, the city keeps overall spending on treatment flat rather than expanding services.

Advocates cry foul over "supplantation"

The opioid settlement money comes from pharmaceutical companies that manufactured or distributed prescription painkillers and were accused of fueling the overdose crisis. State and local governments nationwide are set to receive more than $50 billion over nearly two decades, with Washington, D.C. expected to collect more than $100 million.

The funds are explicitly meant to remediate the addiction crisis by increasing services or funding new programs—not to replace existing budget allocations. Yet many states are facing increasing fiscal pressures from inflation, federal funding cuts, and rising costs, tempting officials to turn to opioid settlement cash as a budget stopgap.

"These funds were awarded to D.C. for very specific reasons and with a specific mandate, which are to remediate issues related to the opioid crisis in new and innovative ways," said Queen Adesuyi, a partner at Reframe Health and Justice, a consulting group for community-based organizations. "Opioid settlement dollars are not meant to be a rainy-day fund for existing government obligations."

Legal challenge to the budget maneuver

Chad Jackson, who chairs the district's Opioid Abatement Advisory Commission and is himself in recovery, called the proposed funding shift "supplantation"—a budgeting tactic that moves money from one fund to another to free up general budget dollars. Jackson argues the move violates D.C.'s opioid litigation law, which states that money from the opioid abatement fund "shall supplement, and not supplant" existing funding.

"It's a pretty tightly written law where the intent is very clear: Do not supplant," said Shelly Weizman, associate director of the Center on Addiction and Public Policy at Georgetown Law's O'Neill Institute.

More than 80 individuals and 30 city organizations signed a letter protesting the use of settlement dollars, saying the district's Department of Behavioral Health planned to spend opioid cash to "pay off its own debts." The letter was sent to DBH Director Barbara Bazron, D.C. Council Committee on Health Chair Christina Henderson, and Attorney General Brian Schwalb.

Council and attorney general demand answers

Councilmember Henderson and Attorney General Schwalb weighed in with their own concerns, sending a July 17 letter to the Department of Behavioral Health highlighting the $2.3 million proposed for Medicaid and asking the department to explain by July 31 how it determined that use was legal.

"We are also concerned that DBH may be using the settlement monies for other unauthorized purposes," they wrote. It remains unclear whether the department met that deadline, as DBH, Henderson's office, and the attorney general's office did not respond to questions about the deadline.

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 position has been that its budget was approved by the council and that the funding supports efforts that counter opioid addiction. In June, the council "passed a legally-certified budget for the next fiscal year that makes the best use of all local resources, including the opioid settlement fund, to award grants to 17 community-based providers who last year served nearly 9,800 residents including 3,500 in medication-assisted treatment for opioid addiction," Reed told KFF Health News.

Pending congressional review

The district's budget is currently pending a 30-day "congressional review," the last step in its annual budgeting process. Advocates are pushing for changes before the review period ends, arguing that the district should be expanding addiction services rather than using settlement funds to maintain the status quo.

"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. "Unfortunately, DBH is not meeting the mark when it comes to that. It's frustrating, it's disappointing, and it's enraging because people are dying unnecessarily in the district to overdose."

The controversy in Washington reflects a broader national tension as communities grapple with how to deploy opioid settlement funds. While some jurisdictions have created transparent processes for allocating dollars to treatment, prevention, and harm reduction programs, others have faced criticism for using the windfall to fill budget gaps or fund unrelated initiatives. For people seeking help with opioid addiction, medication-assisted treatment programs remain available nationwide regardless of how individual jurisdictions allocate their settlement funds.