The Healthy Indiana Plan would be significantly cut down if Congress approved proposed spending plans. Federal reimbursement covers around 90% of HIP charges. Photo by Side Effects Public Media.

News Release

INDIANAPOLIS — As the federal government considers how to shrink Medicaid to balance more tax cuts, leaders in Indiana government are not voicing worry over billions possibly being lost in its growing entitlement program.

A budget resolution recently passed by the U.S. House of Representatives instructs the committee funding medicaid to reduce $880 billion of spending through 2034. Estimates by the nonprofit Kaiser Family Foundation say Indiana could lose $12.7 billion in state program funding if a proposed per-capita funding cap was enacted by the federal government.

The Medicaid program covers healthcare costs mainly for those with disabilities or low incomes and is funded by the federal government. Traditionally, two-thirds of costs are covered on the federal level, with the remainder paid by states. Coverage by states can be expanded beyond federal mandatory coverage requirements at the state’s discretion.

According to enrollment reports, nearly 2 million Indiana residents are covered by Medicaid.

On Monday, March 4, Indiana Governor Mike Braun said it would be the healthcare industry’s burden to lower high prices. He also said the state is investigating how to reduce fraud and waste within the program.

While President Donald Trump has said Medicaid won’t be affected by spending cuts, as politicians warn the program insures many in the U.S., experts say major cuts without Medicaid would be difficult.

If Congress ended funding for the Affordable Care Act’s Medicaid expansion, Indiana’s Healthy Indiana Plan — which is 90% covered by federal reimbursement — would be greatly reduced by a “trigger” law.

Currently the HIP program enrolls more than 700,000 moderate-to-low income Hoosiers. According to state fiscal analysis, of those enrolled, around 76% have coverage hinging on the ACA Medicaid expansion.

Without federal budget cuts, Indiana still has had to pay a multibillion-dollar increase in Medicaid costs. Due to a massive increase in Medicaid enrollment attributed to the pandemic, lawmakers underestimated Medicaid costs by almost $1 billion over the past two years as enrollment stayed at pandemic levels.

In an attempt to reduce spending, Indiana Legislature’s fiscal leaders are advancing legislation to reform the HIP program. One such piece of legislation is Senate Bill 2, which would limit enrollment to 500,000 and add work requirements to the program.

State lawmakers have also repeatedly said this year’s budget process is especially tight due to ballooning Medicaid costs, which is expected to cost $10 billion over the next two years.

Current state budget proposals assume federal funding for Medicaid would stay the same as before, not taking into account the large funding gap Congress’s budget cut proposals would create.

If cuts in federal funding mean a new state budget is needed, the governor can call a special session where lawmakers can amend the budget.