For Clark County’s Eva Bell, getting her family on Medicaid’s Healthy Indiana Plan (HIP) was both a relief and an additional stressor. So many of the state’s requirements and communications felt arbitrary and random to enrollees, she said.
Combined with the chance that the state could cancel coverage or enact another change, Bell said, “it was always a toss-up on whether — when we went to the doctor — whether we had Medicaid or not.”
“You’re so thankful to have this service but at the same time you’re so incredibly fearful that at any moment, you’re going to find out that for some reason it’s just disappeared. And you’re just living in that,” Bell added.
For Medicaid’s 1.98 million Hoosier enrollees, the pandemic was a reprieve from the seemingly haphazard rules imposed by the Family and Social Services Administration that could put someone’s insurance status at risk. But, with those rules either expired or expiring, the state will be revisiting the entitlement program repeatedly identified as the “fastest-growing part” of Indiana’s biennial budget.
The 150-member General Assembly will meet again in January to start drafting a new spending plan for the next two years, taking a close look at Medicaid after last year’s forecast missed the mark by nearly $1 billion. The 2025 session will be the first time lawmakers have monthly expense reports alongside enrollment numbers after FSSA implemented the move earlier this year following legislator concerns.
But while state-level politicians decry Medicaid’s growth, its underlying causes are less clear — though national experts say Medicaid is growing nationwide. Additionally, Medicaid’s costs can’t be divorced from local market rates — meaning that as long as Hoosiers pay above-average prices for health care, Medicaid will too.
“Medicaid is not its own health care system. Medicaid is buying services in the overall health care market from plans and providers just like private insurance, just like Medicare. So if overall health care costs are going up, Medicaid costs also might be going up,” said Robin Rudowitz, the vice president and director for KFF’s Program on Medicaid and the Uninsured.
KFF is a non-profit organization dedicated to health policy, including state decisions made concerning Medicaid.
Whatever the ultimate plan, Hoosier enrollees — all of whom are moderate- to low-income and often don’t have another option — will bear the brunt of the state’s decisions.
“Every time that you check the mail and you see a letter from FSSA, you’re just like, ‘Oh my God. They’re going to tell me that I lost my health care because I didn’t pay a POWER Account. But did I even get that letter this month? How was I supposed to know when to pay that? Or for some other technical reason or somehow they didn’t process it. There was always a reason for you to suddenly not have health care,” Bell said.
At one point, only one of her three children lost coverage — for a reason Bell still can’t determine. The state’s administration of HIP and “inconsistent communication” are additionally stressful for parents trying to navigate care for their children.
“When you’ve got to take your kids to the doctor, what do you do when they tell you that the Medicaid is no good?” Bell asked.
What we know about Medicaid’s growth
Short term, one reason why Medicaid is getting more expensive for states is that enhanced federal funding connected to the COVID-19 pandemic is expiring. During that time, Indiana couldn’t boot any Hoosiers off of the program and the federal government increased its share of program costs.
For Indiana, that meant that even as its Medicaid rolls swelled it saved money because the federal government paid for three-quarters of the costs, rather than the traditional two-thirds. Indiana has mostly concluded its review of beneficiaries, which is higher than pre-pandemic norms. In a nationwide survey, state Medicaid directors reportedly expected state costs to go up 17.2% in this fiscal year “primarily due to the phase out of enhanced federal Medicaid matching funds.”
“That is a one-time bump. It seems like a high rate but it’s really because it’s making up for the re-shift back to the regular match rate,” Rudowitz said. “… when you look at total Medicaid spending, total Medicaid spending (growth) was actually expected to be quite moderate because enrollment is coming down.”
Long-term growth is a different story that hinges on the country’s aging and unhealthy population.
The tab for the 2024-2025 fiscal year came out to $26 billion, including both federal and state dollars. For state spending alone, Medicaid cost $8.2 billion. The state spends a lower percentage of its total state expenditures on Medicaid when compared to other states, or 11% compared with a national average of 17%.
According to Centers for Medicare and Medicaid Services, total Medicaid spending swelled to $805.7 billion in 2022, or 18% of the national health expenditure, but trailed behind total spending for private health insurance and Medicare.
But Medicaid also grew the fastest that year, up 9.6% from the year before, while Medicare and private health insurance spending both grew by 5.9%.
On average, Indiana’s Medicaid expenditure growth per enrollee has lagged behind the national average, averaging 1.5% from 1991 to 2020 versus 2.8% nationally — even though Indiana’s rolls over that time grew faster than the national average, or 5.2% annually versus 3.8%.
Going forward, Medicare’s growth is expected to eclipse other insurers due to the oncoming “silver tsunami,” when the nation’s Baby Boomer generation will all be at retirement age and start utilizing the program at higher rates. But experts still predict that Medicaid expenditures will grow faster than those in the private sector.
One reason is because Medicaid is the primary payer for long-term services and supports, such as nursing homes, that Medicare doesn’t cover. Over half of the $438 billion spent nationally on long-term care in 2022 came from Medicaid, according to KFF.
“Long-term services and supports are extraordinarily expensive, whether you’re in an institution or in the community,” Rudowitz said. “… Basically, you’re either paying out of pocket for these costs if you have the resources. But many people do not have those resources and wind up relying on the Medicaid program.”
Elderly and disabled Medicaid beneficiaries make up roughly one-third of the overall population but account for 94% of expenditures — making their health care more expensive than the average user.
By 2030, an estimated 20% of Hoosiers will be retirement age. The growing number of older Hoosiers was one of the reasons why FSSA pivoted to managed care for long-term services this summer, a move that makes expenditures more stable and predictable for states but may deliver mixed results to enrollees.
What Indiana controls in terms of Medicaid
The state does have some flexibility when it comes to the Medicaid program. For example, eligibility for children is at least 133% of the federal poverty level ($25,820 for a family of three) but nearly every state has increased that minimum to include families earning slightly more, including Indiana.
“The federal government sets these broad rules for the program and then states have a lot of discretion in terms of flexibility in covering optional populations and optional services and how services are delivered,” Rudowitz said.
Some of the tailoring is done in the state plan amendment, such as Indiana’s decision to expand Medicaid to moderate-income families under HIP. Other changes need special approval from the federal government under a waiver, such as the state’s decision to charge monthly fees to enrollees known as POWER Accounts. Some states have opted to use a waiver to expand payments to parents under attendant care.
Indiana isn’t one of the handful of states that ease the transition process for the formerly incarcerated by enrolling them onto Medicaid 30 days before their release. Nor is it one of the dozen states that explicitly covers doulas — instead Indiana uses its Title V Maternal and Child Health Services Block Grant to cover services.
Other add-ons — such as work requirements — are often approved and rescinded by presidential administrations. Under the Trump administration, states were encouraged to implement work requirements but the Biden administration reversed those approvals upon taking office.
Recent legislation has sought to address two potential areas of savings: reducing the state’s overall high health care prices and improving the state’s dismal public health metrics.
Work on the former has been slow going as stakeholders disagree on the best approach to reduce costs. The state will revisit a 2023 program in the upcoming session that invested $225 million in local public health departments and funded initiatives focused on smoking cessation and infant health.
By Whitney Downard — Indiana Capital Chronicle is part of States Newsroom, a not-for-profit news network supported by grants and a coalition of donors as a 501c(3) public charity.
