Adolescence and young adulthood are critical times in individual development and when many substance use disorders begin. However, available research suggests unmet needs for substance use services among youth. Historically, substance use services for youth have been stigmatized and undervalued, resulting in health and education systems that ignore substance use issues or punish the individual rather than treating substance use issues effectively, and youth of color are more likely to face harsh consequences associated with substance use than are white youth. Given Medicaid’s dominant role as a payer for substance use services and insurer for a large share of adolescents and young adults, state Medicaid/Children’s Health Insurance Program agencies have a tremendous opportunity to transform substance use services to more effectively and equitably support the successful development and well-being of youth beneficiaries. Drawing on data from an environmental scan and discussions with subject matter experts, we identify several strategies and policies that can promote the provision of prevention and early intervention services, improve the capacity and quality of youth substance use services, and expand access to care in schools and the community. Importantly, broader efforts are needed to move away from punitive school discipline policies and to educate school leadership, teachers, staff, parents, and the community about health-based and therapeutic responses to substance use concerns in youth.