The budget proposals crafted by Republican Gov. Mike Braun and the Republican-controlled House fully fund the state's projected Medicaid expenses, including the Healthy Indiana Plan, over the next two years.
Senate Republicans, however, believe Indiana could better use that money elsewhere and approved legislation on a party-line vote Tuesday to strip health coverage from at least 200,000 of the 700,000 Hoosiers currently served by the Healthy Indiana Plan (HIP).
Senate Bill 2, which next goes to the House, caps HIP enrollment at 500,000 members — no matter how many Hoosiers qualify based on a monthly income of less than $1,732 ($20,784 annually) for a single person, or less than $3,588 ($43,056 annually) for a family of four.
It also would impose repeated burdensome paperwork requirements to join the program and remain enrolled, including a part-time employment mandate that was projected in 2017 to cost $90 per member per month to administer, or more than $1,000 a year.
"The goal is to right-size the program. You know, some people in the HIP program will be better served in other Medicaid programs. Some will qualify for the exchange in which the federal government will pay for their premiums," said state Sen. Ryan Mishler, R-Mishawaka, the sponsor of the proposal. "If we can right-size this program we may free up money for other programs."
The amount of potential cost savings is unknown due to a vague financial impact statement compiled by the nonpartisan Legislative Services Agency that only says capping HIP enrollment may "significantly reduce expenditures for the state Medicaid program," while also noting the state will incur "significantly increased costs to establish and review eligibility."
The uncertainty is due in part to a requirement that any HIP program changes be authorized by the federal government, which pays 90% of the health care costs of HIP members, compared to the 10% paid by Indiana, as part of the Medicaid eligibility expansion authorized by the Affordable Care Act, also known as Obamacare.
Mishler noted Medicaid as a whole is the fastest-growing component of Indiana's budget with some $5 billion in additional costs over the last four years.
However, data presented to the State Budget Committee in December showed that while HIP comprised 33% of Indiana's Medicaid population during the 2024 state budget year, it accounted for less than a third of the $20 billion in total Medicaid spending.
Fully 44% of Indiana's Medicaid costs went to the 6% of Medicaid members living in nursing homes or receiving similar at-home health care services, records show.
"Medicaid is a big issue. This is just a start. There's a lot more work to do," Mishler said. "If we do nothing, many of our other programs are going to suffer and the largest will be K-12 (education). And I just want to do something before that happens."
It's not clear whether the federal government will approve Indiana's proposed HIP changes. Reportedly, major Medicaid cuts are on the table as Republicans in the U.S. House and Senate look for ways to pay for an estimated $4 trillion in tax cuts sought by Republican President Donald Trump.
The issue also is complicated by a June 2024 federal court ruling striking down HIP's monthly premium payment requirements as incompatible with the state's obligation to furnish medical assistance to Hoosiers entitled to receive it.
An arbitrary HIP enrollment cap and employment mandate also are likely to run afoul of that decision — putting the continued existence of the entire HIP program at risk if the Trump administration authorizes the changes endorsed by Indiana Senate Republicans.
Other components of the legislation include a prohibition on any advertising that encourages eligible Hoosiers to enroll in HIP, mandatory data sharing among state agencies to verify HIP eligibility, and monthly checks to ensure any HIP member who wins a state lottery or casino prize exceeding $3,000 remains eligible for the program.
Senate Democrats acknowledged the state financial issues tied to Medicaid. But they emphasized that using red tape and bureaucratic paperwork to knock people out of HIP only is going to send them into emergency rooms for medical care, and those costs either will go unpaid, threatening the viability of Indiana hospitals, particularly in rural areas, or get passed on to other Hoosiers through increased health insurance premiums.
"This is a piece of legislation that fundamentally will threaten the health and economic stability of our state," said Senate Democratic Leader Shelli Yoder, D-Bloomington.
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