STATEHOUSE: 'We don't see the savings': Indiana Medicaid restructuring bill draws pushback

For The Republic

A bill pitched as a fix for Indiana's troubled Pathways Medicaid program drew emotional testimony — and triggered pointed exchanges — as discussions around long-term care continued Thursday in the Senate Appropriations Committee.

Although supporters of the effort promised more than $100 million in annual savings, opponents — including Indiana's top Medicaid official — warned the proposal could undermine care coordination efforts just weeks after other key reforms launched.

House Bill 1277, authored by Rep. Brad Barrett, R-Richmond, would make significant changes to the state's Pathways for Aging program, Indiana's managed care model for long-term services and supports.

But a tense Thursday hearing indicated a continued divide between long-term care providers who say managed care is driving up costs and creating billing issues, and state officials who argue the system needs more time to take effect, rather than a restructure.

The committee did not take action on the bill, however. Chairman Sen. Ryan Mishler, R-Mishawaka, said amendments and a vote to advance the legislation to the chamber floor will likely come next week.

The bill must pass the full Senate before the Feb. 19 committee deadline. Lawmakers are scheduled to conclude the short session by the end of February.

What the bill would do

Pathways for Aging began enrolling members in 2024, moving most long-term services and supports for older Hoosiers and certain disabled adults into managed care.

Under the existing model, the state pays private managed care entities a set rate to coordinate medical care and long-term services, including nursing facility stays and in-home and community supports designed to help people remain outside institutional settings.

The shift was intended to better coordinate care and control Medicaid spending, but providers have raised concerns about payment delays, administrative complexities and the growing waitlist for home-based services.

The Medicaid waiver waitlist — for services that allow seniors to remain in their homes or assisted living and avoid entering costly nursing facilities — now exceeds 17,000 people, according to state data.

Nursing home and assisted living operators said changes proposed in House Bill 1277 are needed to stabilize the program, reduce overhead and bureaucratic costs and expand access to lower-cost care settings.

Barrett said legislation has been in the works for two years and "tries to find some middle ground" between providers who argue managed care is adding unnecessary costs and state officials who say the new model needs time to work.

"We're trying to find ways to save money and function more efficiently," he said.

The bill previously earned unanimous approval from Public Health and Ways and Means committees in the House, as well as a 93-0 from the House chamber.

The measure would move long-stay nursing home residents — those in facilities for 100 consecutive days — from managed care back to traditional fee-for-service Medicaid.

In practice, that means the state would pay nursing facilities directly for residents who remain long-term, instead of paying managed care companies a per-member rate to oversee and coordinate their care.

Supporters argue that, once a resident becomes long-stay, their care needs are stable and primarily handled within the facility.

The bill imposes individual cost limits on certain home- and community-based services and creates a separate assisted living waiver. Assisted living residents would additionally be allowed to choose whether care coordination is provided by their facility or a managed care entity.

Creating a stand-alone assisted living waiver, they argue, would better reflect the lower cost structure of assisted living compared to nursing homes and allow more seniors to be served in community settings.

Industry representatives and long-term care providers maintained the measure would reduce administrative costs paid to managed care companies and better align services with patient needs, contending that managed care entities receive overhead payments for members whose day-to-day care is already coordinated within nursing facilities.

Millions in possible savings

Nick Goodwin, director of government affairs for the Indiana Health Care Association, said the bill would save more than $100 million in Medicaid funding per year.

"Everyone understands … our population is aging," Goodwin said. "Our ability to financially right size this program and ensure it's on stable footing is very important."

He argued that transferring long-stay nursing home residents back to fee-for-service Medicaid would eliminate overhead payments to managed care entities — generating savings. He also described ongoing billing issues under Pathways, including large overpayments followed by clawbacks.

"We're seeing, actually, an uptick in overpayments," Goodwin said. "They will just process them in a hurried manner … and then often they don't recoup just the overpayment, they recoup the entire claim. So it creates an accounting nightmare."

Without naming a specific facility, Mishler cited one example "where they said it was a $3,900 bill, and they received a payment of over $100,000."

Nursing home representatives further emphasized that managed care coordinators add little value in nursing homes.

Under the managed care model, care coordinators employed by insurance companies are assigned to members to help manage services, authorize care and coordinate across providers.

Yvonne Tanner, a registered nurse with Brickyard Healthcare, argued that for long-stay residents, those responsibilities are already handled by in-house clinical staff.

"You have never met … a care coordinator for an insurance company," Tanner told the committee. "They are not there. They are not providing day to day care or coordination of the care for those residents."

Julie Simpkins, co-CEO of Gardant Management Solutions, an assisted living company operating 15 Indiana communities, said assisted living serves Medicaid-eligible seniors "at 40% of the cost" of nursing homes.

"By prioritizing assisted living services, the state would be able to serve more seniors at a lower per person cost," she said.

Other testimony focused on Indiana's Medicaid waiver waitlist.

Sherri Berghoff, owner of One Purpose Senior Living, which owns and operates assisted living communities in the Michiana region, shared in emotional testimony how her father died in May 2024 while still on the waitlist.

She said her family repeatedly checked on his status but were unable to secure services before his condition worsened.

"House Bill 1277, it's not abstract, it's not theoretical," Berghoff said. "It's about real people, about real families, about real Hoosiers."

'We don't see the savings'

But Family and Social Services Administration Secretary Mitch Roob pushed back. He disputed the projected savings and warned that unraveling key components of the Pathways model could destabilize the state's broader managed care structure and shift costs — not reduce them.

"If I believe those savings that were quoted today, I would happily take them," Roob told lawmakers. "If I believed that this bill would result in savings, I would take them. If I believed that this bill would result in higher quality of care, I would do that. Unfortunately, I do not."

Roob said shifting long-stay residents out of managed care would not reduce overall spending.

"The notion that we're saving money on the 100-day limit, I think, is an illusion," he said. "If you pull that member from them, that overhead will simply shift someplace else."

He also defended the state's fully integrated dual-eligible special needs plan, which launched in January.

The model integrates Medicare and Medicaid benefits for individuals eligible for both programs to streamline coverage and improve coordination for medically complex seniors.

"We're all of six weeks into that idea," Roob said. "Let's not kill it today … killing it today seems premature."

When pressed by Sen. Fady Qaddoura, D-Indianapolis, about conflicting savings estimates, Roob pointed to differences between industry projections and the state's actuarial analysis.

"Nick presented a back of the envelope guess. We don't guess. We use actuaries to give you numbers that you can rely on," he said. "Our actuaries have looked at it, and we don't see the savings."

Roob agreed that the state's growing waiver waitlist remains a concern and said his agency is continuously working to balance fiscal constraints with expanding access to services.

The secretary noted, though, that only about 40% of individuals who are "invited" off the waiver waitlist ultimately qualify for services after undergoing financial and clinical eligibility reviews, which he said complicates assumptions about how quickly the list can be reduced.

"There are unpleasant choices that need to be made to rein in a budget that has grown over the decades at 9.5% and try to get it to 2%," he said. "(Handling the waitlist) is a decision for the budget session — to decide how you want to deal with that… That's a real thing."

— The Indiana Capital Chronicle covers state government and the state legislature. For more, visit indianacapitalchronicle.com.

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