Gov. Braun signs bipartisan Medicaid Reform bill into law

Gov. Michael Braun signed House Enrolled Act (HEA) 1277 into law March 12 to help reform the beleaguered PathWays for Aging Medicaid program for elderly and vulnerable Hoosiers in need of skilled nursing, assisted living or other home and community-based services.

Authored by State Rep. Brad Barrett (R-Richmond) and sponsored by State Sen. Mike Crider (R-Greenfield), the new law addresses many of the documented issues in the PathWays for Aging program while importantly saving millions in Medicaid funding and allowing the Indiana Family and Social Services Administration (FSSA) to expand access to care for elderly Hoosiers.

"With Governor Braun's signature on HEA 1277 we're making meaningful progress on the issues that have affected PathWays for Aging," Barrett said. "I'm proud of the collaborative work done on this bipartisan legislation and grateful for my colleagues in both chambers who helped shape these important reforms. These steps help ensure taxpayer resources go further and allow us to reach more elderly Hoosiers who need care in their homes or communities."

"I sponsored HEA 1277 because it was clear reform was needed to ensure Hoosiers get the care they need," Crider said. "It's our hope that this legislation will reduce some administrative burdens on providers while at the same time reform PathWays to provide more options for families as they choose the best level of care for their loved ones."

"Thanks to this new law, Indiana is taking important steps to return care to caregivers instead of Fortune 500 companies, expand access to care for our aging Hoosiers, while saving Indiana's taxpayers millions of dollars," said Paul Peaper, IHCA/INCAL president. "We greatly appreciate Rep. Barrett, Sen. Crider, Governor Braun, and all state policymakers for their engagement on these important issues, which will bring certainty and stability to Indiana's long-term care continuum."

The PathWays for Aging managed Medicaid program launched on July 1, 2024, which allowed Humana, Elevance Health and United Health Care to oversee the Medicaid coverage for approximately 117,000 Hoosiers. The program has been plagued with issues since day one.

Soon after its launch, Humana and Elevance were placed on corrective action plans with the state due to a multitude of billing, claims processing and contract violations. Last year alone, all three insurance companies owed more than $100 million in late and inappropriately denied Medicaid payments to just providers of skilled nursing care.

By July 1, 2025, one year into the insurance companies overseeing PathWays for Aging, the program was more than $300 million over budget. A recent report from international accounting firm Clifton Larson Allen (CLA) further evaluated public data from FSSA on the PathWays program and projections issued under the previous fee for service program for this population. CLA found that of the $300 million overage in program expenses from the managed care entities, Indiana was paying $91 million per year more for individuals in nursing homes then had the state maintained its control under a fee for service structure.

Due to the insurers' administrative and financial failures in overseeing the PathWays for Aging program, HEA 1277 attempts to address their shortcomings by moving long-stay nursing home residents out of the PathWays for Aging program and into a fee-for-service model that is not run by the insurance companies starting July 1, 2027. Nursing home residents who are 59 years old and younger today are currently under a fee for service program, so with this legislative change, long-stay residents would also be under fee for service. Similar to what the Clifton Larson Allen report identified for Indiana, New York instituted a similar transition for its long-stay nursing home population and saved $246 million per year as a result.

HEA 1277 also implements an individual cost limit for Medicaid beneficiaries on the PathWays waiver. The PathWays Medicaid waiver allows individuals who qualify for nursing home level of care and are 60 years old and older to be served in their home or community. As has been shared publicly by FSSA, thousands of individuals are costing the Medicaid program $150,000-$200,000 or more per year for care, while nursing home care is nearly half that and assisted living care is a fifth of that cost.

The new cap on costs could result in tens of millions of dollars in annual savings to the Medicaid program, allowing FSSA to reinvest those savings into expanding access to the nearly 12,000 individuals currently on the PathWays waitlist.

HEA 1277 goes on to require FSSA to file a waiver application with the Centers for Medicare and Medicaid Services by September 1 to establish a standalone waiver for assisted living services. Illinois, Ohio and other states have similar assisted living Medicaid waivers, which have served as important Medicaid cost savings programs given the clear affordability and high quality of assisted living services.

"The waitlist was in response to exploding Medicaid costs, and assisted living is being unfairly targeted," Peaper said. "A separate waiver creates a clear path to the most affordable HCBS service that generates the clearest savings to the state. A separate waiver also allows the state to specifically assess the population using those services and the resulting cost savings realized versus lumping assisted living in with more than a dozen other HCBS, as is currently the case for PathWays and the corresponding waitlist. These changes are a win-win for the state and the vulnerable, but there's still work to be done. As Hoosiers and their health-care providers continue to live under the problematic PathWays program, we will continue to advocate for common-sense, evidence-based solutions to help ease the pain it causes."

To learn more about HEA 1277, visit iga.in.gov/ legislative/2026/bills/house/1277/details.