The $1 Trillion Crisis That Just Hit Every DSP Organization in America

The holiday weekend that traditionally celebrates American independence has become a date that will reshape the landscape of disability services across the nation. While families gathered for Fourth of July barbecues, a seismic shift was occurring in Washington that will fundamentally alter how Direct Support Professional organizations operate, fund their services, and retain their workforce.

The magnitude of this change cannot be overstated: nearly $1 trillion in Medicaid cuts over the next decade, affecting the very foundation of services for people with intellectual and developmental disabilities. For DSP organizations that have struggled with workforce shortages, low wages, and funding constraints, this represents not just another challenge—it's an existential threat to the community-based care model that has taken decades to build.

The Numbers That Changed Everything

The U.S. House of Representatives narrowly voted to approve almost $1 trillion in cuts to Medicaid just before the Fourth of July holiday as part of a sweeping bill designed to make good on many of President Donald Trump's domestic priorities. The Senate followed suit on July 1, and by Independence Day, the legislation was law.

These aren't abstract federal budget numbers—they represent a direct assault on the infrastructure that keeps people with disabilities living in their communities. 86% of optional Medicaid spending is used for services and supports for people with disabilities and older adults, more than half of which is for home and community-based services. When those funds disappear, the immediate impact falls on the shoulders of DSP organizations and the professionals they employ.

The Economic Domino Effect

The Commonwealth Fund's analysis reveals the staggering scope of economic damage these cuts will inflict. In 2029, cuts to Medicaid and SNAP would result in the loss of 1.22 million jobs nationwide, equivalent to a 0.8-percentage-point increase in the unemployment rate. This isn't just a healthcare story—it's an economic catastrophe that will ripple through every community in America.

More than 1 million jobs could be lost due to Medicaid and SNAP cuts in 2026, including 477,000 roles in the healthcare sector. For DSP organizations, this means not just reduced funding, but a shrinking ecosystem of related healthcare services that support their clients. When hospitals close, when pharmacies reduce staff, when therapy providers shut down—the entire network of care that people with disabilities depend on begins to unravel.

The State Budget Crisis

Perhaps most concerning for DSP organizations is how states will respond to these federal cuts. Cuts to Medicaid and SNAP would cause state gross domestic products to fall by $154 billion, 18 percent more than the $131 billion they would save the federal government. States will face an impossible choice: raise taxes dramatically or cut services even deeper than the federal reductions require.

History provides a troubling preview of what's coming. When federal Medicaid funding declined between 2010 and 2012, every state cut home and community-based services to some degree and waiting lists grew substantially. This time, the cuts are five times larger and the safety net is already stretched thin.

What This Means for Your Organization Right Now

The Medicaid cuts will take effect at the end of 2026 and roll out over 10 years, according to disability advocacy groups. This gives DSP organizations roughly 18 months to prepare for the most significant funding reduction in the history of community-based disability services.

The Waiting List Explosion

The current service gap will become a chasm. More than 700,000 people are on waiting lists for Medicaid waivers, which provide these services, according to KFF research. Meanwhile, a survey late last year of almost 500 community-based services providers across the country found that nearly all had experienced moderate or severe staffing shortages.

When funding cuts force service reductions, these waiting lists will explode. Families who have waited years for services will see their timelines extend indefinitely. New referrals may face waits of a decade or more. For DSP organizations, this means serving only the most acute cases while watching demand for services continue to grow.

The Path Forward: Survival Strategies for DSP Organizations

While the legislative landscape has shifted dramatically, successful DSP organizations are already adapting their strategies to survive in this new reality. The organizations that thrive in the coming years will be those that maximize efficiency, demonstrate clear value, and build resilience into their operational models.

Operational Efficiency as a Lifeline

Over half of all DSPs utilize public benefits (e.g., childcare assistance, housing assistance, energy assistance, etc.) because they cannot meet their basic expenses. This reality means that every efficiency gain in training, scheduling, and service delivery directly impacts both organizational sustainability and workforce retention.

Organizations that have invested in comprehensive training systems report lower turnover rates and higher client satisfaction scores—metrics that become crucial when competing for limited funding. When reimbursement rates are cut, the organizations with the most efficient operations and highest-quality outcomes will be prioritized for remaining contracts.

Building Strategic Partnerships

The organizations that will weather this crisis are those that understand they cannot operate in isolation. Strategic partnerships with healthcare systems, educational institutions, and other social service providers create economies of scale and shared resources that individual organizations cannot achieve alone.

Collaborative training programs, shared technology platforms, and coordinated service delivery models all reduce per-capita costs while maintaining quality. In an environment where every dollar matters, these partnerships become survival mechanisms rather than nice-to-have enhancements.

The Advocacy Imperative

"This is a devastating day for disabled Americans," said Maria Town, the group's president and CEO. "The catastrophic effects of this bill will reverberate for generations to come." The disability advocacy community is mobilizing, but their voices need to be joined by the professionals who provide direct care.

DSP organizations must become advocates not just for their clients, but for the entire community-based care model. This means engaging with state legislators, participating in advocacy campaigns, and most importantly, documenting and sharing the real-world impact of these cuts on the people you serve.

"Because states are not required to provide these services to everyone who needs them, states faced with a huge loss of federal funding for Medicaid will cut HCBS first. This will lead to disabled people going without lifeline services like assistance with eating, dressing, using the bathroom, going to work, etc." — Zoe Gross, Autistic Self Advocacy Network

The Next 18 Months: A Critical Window

The period between now and the end of 2026 represents a critical window for DSP organizations to prepare, adapt, and position themselves for survival in this new landscape. The organizations that use this time wisely—investing in efficiency, building partnerships, strengthening their workforce, and documenting their impact—will be the ones that continue serving their communities when the dust settles.

This isn't just about surviving budget cuts. It's about preserving the fundamental principle that people with disabilities deserve to live, work, and contribute in their communities rather than being warehoused in institutions. The stakes could not be higher, and the time to act is now.

The Fourth of July 2025 will be remembered as a turning point in American disability services. Whether that turning point leads to the dismantling of community-based care or sparks innovation and resilience in the face of adversity depends on how DSP organizations respond to this unprecedented challenge. The choice is ours, and the time is now.