Indianapolis, Indiana — Indiana is the first state in the country to pull the plug on a managed Medicaid program for long-stay nursing home residents, and the price tag is part of the reason why.
Governor Mike Braun signed House Enrolled Act 1277 into law Monday, ending the state’s PathWays for Health experiment for long-stay nursing home residents and shifting them back to traditional fee-for-service Medicaid by July 1, 2027. Industry groups had been pushing for the change almost from the day the program launched.
“When the industry that the bill is about likes it, that’s not always the case,” Braun said. “And when you can say it’s going to improve quality and do it at better value, those are three things that don’t necessarily happen on a bill. In this case, we got it.”
A $91 Million-a-Year Problem
A recent analysis by Clifton Larson Allen found Indiana was spending $91 million more per year on nursing home residents under PathWays than it would have under fee-for-service. The state’s long-term care association says the total damage was bigger — the sector absorbed roughly $300 million in extra costs during PathWays’ first year, with no measurable improvement in care.
“Our providers weren’t being paid more. We weren’t servicing more people, and so that $300 million more was just due to the existence of the managed care entities,” said Paul Peaper, president of the Indiana Health Care Association and Indiana Center for Assisted Living.
PathWays went live in July 2024 and moved about 117,000 long-term care beneficiaries onto private plans run by Humana, Elevance Health and UnitedHealthcare. Providers reported billing failures, claims denials and cash flow problems that hit smaller skilled nursing facilities the hardest. State regulators eventually placed all three insurers on corrective action plans, and the companies were collectively on the hook for more than $100 million in delayed or improper payments — money that mirrors the broader financial pressures facing operators across the state.
What Changes Now
The new law takes long-stay nursing home residents out of PathWays and puts them back under direct state administration starting July 1, 2027. It also caps individual costs for home and community-based waiver participants and steers projected savings toward shrinking a waitlist of nearly 12,000 Hoosiers waiting for other long-term care services.
Indiana will also ask federal regulators to approve a standalone assisted living waiver to expand access while keeping costs predictable.
Why Other States Are Watching
Roughly two dozen states have folded nursing home benefits into managed Medicaid arrangements over the past decade, and Indiana’s reversal is the highest-profile pushback against that trend so far. The state didn’t just complain about red tape — it produced an audit pointing to a specific, recurring price tag.
That’s evidence providers in other states have struggled to assemble. Industry sources say the Indiana law will surface in policy debates for years.
For operators, the takeaway is straightforward. The largest experiment in handing nursing home Medicaid to commercial insurers just got partially unwound by the state that ran it.
