Melt butter in a large skillet or saucepan over medium heat cook sausage and bacon in the hot butter, stirring to break the sausage up into small pieces, until sausage is browned and bacon is almost crisp, about 10 minutes. Mix 1/2 cup green onion into sausage mixture and saute until onions are soft, about 3 more minutes.
Stir flour into meat mixture, 1 to 2 tablespoons at a time, until thoroughly combined and mixture is pasty. Cook, stirring often, 2 to 3 minutes to remove raw taste of flour.
Whisk milk into meat mixture, about 1 cup at a time, until combined. Continue to whisk until gravy begins to thicken, about 5 minutes. Turn heat to medium-high, bring gravy to a simmer, and season with a pinch of cayenne pepper, salt, and black pepper. Reduce heat to medium-low.
Continue to simmer gravy until flavors have blended and gravy is thick, 10 to 15 minutes, stirring occasionally. Sprinkle with 1 tablespoon green onion and a pinch of cayenne pepper for garnish.