Indianapolis, Indiana — Indiana just became one of the first states to pull a specific class of nursing home residents out of the Medicaid managed care system entirely. Gov. Mike Braun signed House Bill 1277 into law last week, setting in motion a sweeping change to how the state pays for long-term nursing care — and it’s a shift that could reshape how Indiana’s facilities operate starting in 2027.
At the center of the law is a single, targeted provision: beginning July 1, 2027, any Medicaid recipient who has been living in a nursing facility for 100 consecutive days or more will no longer fall under Indiana’s managed care program, PathWays for Aging. Instead, their services will be paid through traditional fee-for-service Medicaid.
The bill passed the General Assembly with overwhelming bipartisan support — the House approved it 96-0 and the Senate followed 46-4 the same day. That kind of near-unanimous vote reflects just how frustrated providers and lawmakers had become with the current system.
The Problem With Managed Care for Nursing Home Lifers
PathWays for Aging launched in 2024, moving most long-term services and supports for older Hoosiers into managed care. For short-term rehab patients — people who cycle in and out of nursing facilities — managed care can make sense. But for residents who live there permanently, critics say the model adds layers of administrative burden without meaningful benefit.
“If the nursing home is their residence, there is no care for the managed-care entity to manage,” said Nick Goodwin, director of government affairs for the Indiana Health Care Association. “We are intentionally being very targeted by looking at that population of people and not trying to unwind the entire PathWays program.”
Industry representatives argued the law could save more than $100 million annually by cutting managed-care overhead and aligning payment more closely with how long-term care is actually delivered. The state’s Family and Social Services Administration, however, pushed back on those projections. FSSA Secretary Mitch Roob argued the change would shift costs rather than eliminate them, and the official fiscal note acknowledged the budget impact remains indeterminate — depending on how many residents hit the 100-day threshold and how capitation rates adjust over time.
More Changes on the Way
The law does more than just move long-stay residents off managed care. It also requires Indiana’s FSSA to apply — by September 1, 2026 — for a new federal Medicaid waiver aimed at expanding access to assisted living for people aged 60 and older who qualify for nursing facility-level care. If approved, Indiana would be required t shift relevant waiver slots into the new assisted living program.
That provision matters because more than 17,000 Hoosiers currently sit on a waiting list for home- and community-based Medicaid services. Supporters say the bill could finally start moving some of those people into lower-cost assisted living settings instead of nursing facilities — a win for both access and state budgets.
Other provisions in the law include new transparency requirements for providers under home- and community-based waivers — including the right to request itemized billing statements and service-delivery records up to twice per year — and a shorter public notice window for reimbursement cuts, dropping from one year to six months.
For nursing home operators already navigating the pressures of managed care denials and documentation demands, the shift toward fee-for-service for long-stay residents is a welcome change. Whether it delivers the savings advocates promise — or simply reshuffles the financial burden — will depend on how Indiana negotiates capitation rates going forward. The industry is watching closely. So are 17,000 Hoosiers still waiting for a spot.
The fight over how to balance managed care efficiency with the real-world needs of nursing home residents is one that operators across the country are tracking closely. As nursing home operators continue to push back on Medicare Advantage burdens, Indiana’s new law may offer a model for other states looking to rethink managed care for their most vulnerable long-term residents.
