Indianapolis, Indiana — Indiana’s nursing homes are getting some long-overdue relief. Governor Mike Braun signed House Enrolled Act 1277 into law on March 12, 2026, moving long-stay nursing home residents away from the state’s managed care program and back to a direct payment model — a change the industry has been pushing for since the current system launched two years ago.
The legislation targets Indiana’s “PathWays for Aging” program, which launched in 2024 with the goal of bringing all Medicaid-eligible seniors under managed care contracts held by major insurers including UnitedHealthcare, Humana, and Anthem Blue Cross and Blue Shield. The program has been a financial headache for operators from the start.
Under the new law, starting July 1, 2027, nursing home residents who have lived in a facility for 100 days or more will be shifted out of managed care and into a traditional fee-for-service Medicaid arrangement — meaning the state pays facilities directly instead of routing money through private insurance companies. The bill also directs Indiana to pursue an assisted living Medicaid waiver.
Providers Reported More Than $100 Million in Disputed Payments
The Indiana Health Care Association, which represents nursing facilities across the state, had been sounding the alarm for months. The group says PathWays has been “plagued with issues since day one,” and it estimates that more than $100 million in payments were delayed or inappropriately denied to nursing facilities from the program’s managed care contractors.
An independent analysis found that the state had been spending $91 million more per year on nursing home residents under the managed care model than it would have under fee-for-service. That’s a striking number — both because it represents real money leaving the system without reaching residents, and because it undercuts the core argument for managed care, which is supposed to control costs.
For nursing home operators, the difference between these two payment models isn’t academic. Fee-for-service means predictable, direct reimbursement from the state. Managed care means navigating prior authorizations, fighting denials, and waiting for checks that may or may not arrive on time. Those cash flow disruptions hit smaller facilities especially hard, and some operators have said PathWays has left them questioning whether they can stay open.
A Win, But Not a Complete Overhaul
The reform is meaningful, but it’s not a full retreat from managed care. Indiana is still committed to the managed care model for other Medicaid populations — the state recently put out bids for $68 billion in total managed Medicaid contracts, which includes PathWays for Aging for those who don’t qualify under the new 100-day rule. The transition period is intended to stabilize the financial environment for nursing facilities while the broader managed care strategy gets refined.
The 100-day threshold matters because it specifically protects the most vulnerable, long-stay residents — people who are overwhelmingly dependent on Medicaid and for whom consistent care financing is a direct quality-of-care issue. Facilities that house these residents have been among the hardest hit by PathWays’ payment failures.
Indiana isn’t the only state wrestling with the financial strain that comes when Medicaid payment flows are disrupted — it’s become one of the defining pressures on nursing home operators across the country this year. Indiana’s move to reverse course on managed care for its most vulnerable residents may give other states a model to consider.
