The Indiana Statehouse is reflected in the ISTA building in downtown Indianapolis on Thursday, July 3. Photo by Leslie Bonilla Muñiz, Indiana Capital Chronicle.

By Whitney Downard
Indiana Capital Chronicle

INDIANAPOLIS — Indiana officials are assessing the financial impact on the state budget of the nearly 1,000-page priority megabill Pres. Donald Trump signed into law Friday, July 4.

Formerly known as the “big, beautiful bill,” it will reform the nation’s welfare programs, extend 2017 tax cuts and invest billions of dollars to ramp up deportation efforts for noncitizens.

Any impact to the federal budget largely depends on one’s political lens — with the nonpartisan Congressional Budget Office calculating a $3.25 trillion deficit while Republicans, using a so-called “budget trick,” say it will save $507 billion.

Impacts for the average Hoosier include a tax deduction for federal taxes on tips and overtime alongside phased out clean energy incentives, as detailed by the IndyStar. And according to U.S. Sen. Jim Banks, of Fort Wayne, the tax increase without the bill would have been $1,936 for the average Hoosier family.

But how the megabill will effect Indiana’s finances and the state budget is far less certain.

According to early estimates, Indiana could lose out on hundreds of millions in health care provider taxes and pay millions more to administer food programming. This comes on the heels of a $2 billion projected revenue shortfall that disrupted the 2025 legislative session and prompted cuts across the board for state agencies.

What About Medicaid?

The new law seeks to cut more than $1.1 trillion nationwide, with most of those dollars coming from Medicaid. Experts estimate that 11.8 million people could lose their insurance coverage — whether Medicaid or on the federal marketplace — by 2034.

Greater numbers of uninsured people could hit rural hospitals especially hard because they operate on thin profit margins and serve greater numbers of Medicaid enrollees.

Four congressional Democrats wrote that 338 hospitals would be impacted by Medicaid reductions, naming a dozen Indiana hospitals deemed to be at risk. To mitigate those concerns, the U.S. Senate created a $50 billion fund for rural hospitals — but it’s unclear how much of that could be dedicated to Indiana.

President Donald Trump holds up the “big, beautiful bill” that was signed into law as during a Fourth of July military family picnic on the South Lawn of the White House on Friday, July 4, in Washington, D.C. Photo by Alex Brandon, Pool, Getty Images.

A KFF analysis estimates the state will lose out on $23 billion over the next ten years for Medicaid, with the biggest portion of those losses attributed to work requirements for able-bodied adults. Hoosiers could fall off the rolls for several reasons: paperwork errors, not working or making too much money to meet eligibility levels.

The work requirements apply to those in the Healthy Indiana Plan, which covers low- to moderate-income adults. Last month, the Family and Social Services secretary, who oversees the state’s Medicaid program, warned that the megabill could fundamentally change HIP because of a proposed cap on provider taxes.

“That’s how we pay for the Healthy Indiana Plan,” Secretary Mitch Roob told lawmakers. “If (the proposal is) signed into law, this would require the state of Indiana to significantly roll back eligibility … because we have no match.”

Indiana currently taxes Medicaid providers at the maximum rate of 6%, netting $1.6 billion from hospitals in the 2024 fiscal year which, in turn, was used to leverage $5.5 billion in reimbursements from the federal government.

That $1.6 billion, along with revenue from the state’s cigarette tax, paid for Indiana’s 10% stake in HIP, while the federal government picked up 90% of the tab.

Congress set a new limit of 3.5% for provider taxes in the megabill, slashing the amount Indiana can collect. FSSA didn’t have an estimate for how much it would collect under the 3.5% threshold, noting that it currently has a waiver under consideration to restructure the provider tax. That pending application would also impose a provider tax on Managed Care Entities for the first time following legislation from earlier this year.

And What About SNAP?

Congress also approved work requirements for food benefits, or the Supplemental Nutrition Assistance Program, for those up to the age of 64. The federal government funds all of the costs associated with SNAP and states pick up part of the tab for administrative costs. Now, more costs will be the responsibility of states.

Indiana has 588,184 SNAP beneficiaries across 281,112 households, as of April 2025. The average household gets $409.37 per month to assist with food purchasing.

FSSA’s Marcus Barlow, the deputy chief of staff and communications director, said the state currently has a $97 million obligation for SNAP’s administrative costs. That number is expected to go up by $49 million to $146 million.

The state will bear an additional cost of $147 million due to its 9.52% error rate for 2024. States with error rates below 6% saw far smaller increases. Together, the state is expected to spend $196 million more on SNAP once these cuts take effect.

The Hill reported that states will be required to partially fund SNAP beginning in 2028 — two years after the midterms.

As noted by the Food Research & Action Center, error rates aren’t the same as fraud, which is rare. Standard error reporting was paused during the COVID-19 pandemic and contributed to a spike in error rates when reporting resumed.

The nonpartisan Congressional Budget Office estimates that 3.2 million people may lose access to SNAP under the megabill, which advocates say will increase food insecurity.