Guest Column: Why Indiana must rethink the Medicaid middle

Last month, the Indiana Family and Social Services Administration (FSSA) announced it is seeking to recoup nearly $200 million in alleged improper payments from five "high-risk" attendant care agencies. The audit results were not just disappointing; they were deeply concerning.

In a sample of claims, auditors found errors in nearly all claims reviewed, with some providers approaching a 100% error rate.

These findings raise a fundamental question: Is Indiana's current Medicaid structure delivering the accountability and value that taxpayers and vulnerable Hoosiers deserve?

Attendant care agencies play a central role in Indiana's home-based care system. They serve as the "employer of record" for thousands of caregivers, including family members, who assist with daily activities such as bathing, dressing and mobility. For this administrative role, the state pays a bundled rate of about $34.36 per hour.

Under current policy, at least 70% of that rate must go toward caregiver compensation and related expenses, leaving roughly 30% for administration, supervision and margins. In principle, those funds support oversight and quality. In practice, the recent audit raises concerns about whether those expectations are being met. Investigators reported missing care plans, incomplete background checks and improper billing.

Indiana may be adding complexity to an already strained structure.

With the rollout of PathWays for Aging — a Medicaid program that shifted long-term care into managed care plans — the state is increasingly relying on insurers such as Elevance, Humana, and UnitedHealthcare to coordinate care delivery. These entities can improve coordination, but they also introduce another administrative layer.

As a result, Indiana risks creating a system in which one set of intermediaries oversees another. Each layer adds complexity and profit expectations, making accountability harder to track. In that context, it becomes more difficult to answer a basic question: How much of each Medicaid dollar ultimately supports direct care?

Indiana's current structure directs a substantial share of each payment to administrative layers that are not consistently delivering value. Other states have taken a different approach — simplifying these layers and, in some cases, eliminating them entirely.

Connecticut, for example, took a direct approach. In 2012, the state eliminated managed care organizations from its Medicaid program and brought administration back under state control. Today, administrative costs run in the range of 3% to 4% of total spending — far below many managed care models. While not a perfect comparison, it shows that states can reduce costs and improve transparency by removing unnecessary intermediary layers.

A complementary reform can be seen in states like Oklahoma. For home-based programs, Medicaid beneficiaries can hire and supervise their own caregivers, while a state-contracted fiscal intermediary handles payroll, taxes and compliance.

The distinction is critical. In Indiana's current model, agencies both employ caregivers and bill the state, retaining a share of each payment. A fiscal intermediary separates those roles. The patient or family acts as the employer, directing care, while the intermediary performs a limited administrative function without controlling care delivery or retaining a large portion of the funds.

In practical terms, this shifts the role of the middleman from managing care to processing its transactions.

Taken together, these examples point in the same direction: States can reduce reliance on layered managed care while redesigning necessary administrative functions to be simpler, more transparent, and lower cost.

No model is without tradeoffs. Self-directed care places more responsibility on patients and families. But separating administrative functions from care delivery can improve accountability and make public spending easier to track.

It also allows problems to be identified earlier, rather than relying primarily on retrospective audits.

Indiana cannot dismantle its current system overnight. Agencies and managed care organizations provide infrastructure that many families rely on.

At the same time, the recent audit suggests the balance is not working as intended. The question is not whether administrative functions are necessary — it is whether Indiana should continue relying on an agency-based model that has shown clear weaknesses, or begin transitioning to a more transparent alternative.

A gradual shift toward self-directed care supported by fiscal intermediaries would preserve access while improving transparency and efficiency.

Such a transition will require effort: revising contracts, modernizing data systems and strengthening oversight within FSSA. But maintaining the current approach also carries costs, financial and operational, especially in the context of Medicaid budget pressures.

Indiana does not need to design a new model from scratch. Elements of a more streamlined, accountable approach already exist in other states.

Taxpayer dollars should reach the bedside as directly as possible. Every layer of the system should be able to demonstrate the value it adds to patients, caregivers and the public that funds it.