Indiana Medicaid Shake-Up Faces Resistance as State Disputes $100M Savings Claim

A proposal to overhaul Indiana’s managed long-term care system sparked tense exchanges this week, as lawmakers weighed projected savings against warnings from state officials that the move could destabilize Medicaid services.

House Bill 1277 would significantly alter the state’s Pathways for Aging program, which moved most long-term services for older adults and some disabled residents into managed care in 2024. Supporters say the measure could save more than $100 million annually. State leaders say those numbers don’t add up.

The bill would shift long-stay nursing home residents — those in facilities for at least 100 consecutive days — out of managed care and back into traditional fee-for-service Medicaid. That change would mean the state pays nursing homes directly instead of routing payments through managed care companies.

Industry representatives argue the switch would eliminate unnecessary administrative costs. Nick Goodwin of the Indiana Health Care Association said managed care organizations receive overhead payments for residents whose daily care is already handled by nursing home staff. He also pointed to billing issues, including overpayments followed by clawbacks, that he said have strained providers.

Supporters further argue the bill would help expand access to assisted living and home-based care. The state’s Medicaid waiver waitlist for home- and community-based services now exceeds 17,000 people.

But Family and Social Services Administration Secretary Mitch Roob pushed back forcefully. He said state actuaries have reviewed the proposal and do not see the promised savings.

“If I believed that this bill would result in savings, I would take them,” Roob told lawmakers. “Unfortunately, I do not.”

Roob also warned that pulling long-stay residents from managed care could simply shift administrative costs elsewhere. He urged lawmakers to give the newly launched integrated Medicare-Medicaid model more time to work, noting it has been in place for only weeks.

The Senate committee has not yet voted on the bill. Lawmakers must act before a Feb. 19 deadline.