SACRAMENTO (April 24, 2025) – The Steinberg Institute today released a new policy brief, “In Jeopardy: Prop 36 and Federal Cuts Put Californians with Addiction Challenges at Severe Risk,” outlining how recent policy shifts and federal budget threats could undo two decades of progress in California’s approach to substance use disorder (SUD) treatment.
The brief traces California’s shift from incarceration to treatment, marked most notably by the implementation of the Drug Medi-Cal Organized Delivery System (DMC-ODS). This program now provides over 80 percent of Medi-Cal-funded SUD services and has significantly expanded access to evidence-based care.
Proposition 36, recently passed by voters, mandates treatment for individuals charged with certain drug offenses but fails to provide any new funding — despite projecting over 56,000 new treatment referrals. The brief warns this could overwhelm a system already strained by a shortage of treatment facilities and provider capacity.
At the same time, proposed federal cuts to Medicaid — California’s largest funder of behavioral health services — threaten the DMC-ODS program itself. Should these cuts move forward or if the federal waiver is not renewed, the state’s SUD treatment infrastructure could face catastrophic shortfalls.
“California cannot afford to reverse the progress we’ve made in treating addiction as a behavioral health issue, not a crime,” said Karen Larsen, CEO of the Steinberg Institute. “We must protect the DMC-ODS waiver and ensure treatment is funded.”
The brief highlights the importance of safeguarding California’s treatment-first approach and ensuring the long-term sustainability of behavioral health reforms central to the Steinberg Institute’s Vision 2030 initiative.
Download the full brief at steinberginstitute.org/public-policy-research/.
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About the Steinberg Institute
Founded in 2015 by former Sacramento Mayor and State Senate Pro Tem Emeritus Darrell Steinberg, the Steinberg Institute has been the driving force behind sweeping improvements in California behavioral health policy. The Institute is dedicated to transforming California’s mental health and substance use care systems through our Vision 2030 Initiative. Our Vision: California sets the standards for the nation in prevention, treatment and recovery, where all people receive quality care and support when, where, and for as long as they need it. Visit us at www.steinberginstitute.org.