Some new options created for state Medicaid programs under Title VI of the Deficit Reduction Act (DRA) could have grave consequences for people with mental illness. Some provisions allow states to limit coverage, increase copayments, impose new premiums, and cap benefits. More positive DRA provisions would make it easier for states to provide home- and community-based services. A ten-state demonstration program will expand coverage for children. The author concludes that a state's adoption of the DRA's mental health-friendly provisions may not offset the damage done by its other provisions.