Indiana underestimated Medicaid cost by nearly $1 billion, new report says

Indiana’s initial estimate for Medicaid expenses is nearly $1 billion short of its now-predicted need, state lawmakers learned in a report that ignited concern over the state’s budget and access to the low-income healthcare program.

A December outlook found that Medicaid is predicted to need $984 million more than what was thought in April, when the state’s biennium budget was finalized.

State budget director Zachary Jackson said the forecast used to develop the budget allowed Indiana to move $525 million from Medicaid to the state’s general fund in July. The state has directed that $271 million of that money be moved back to Medicaid to address the shortfall of the last year, he said.

According to the predictions presented to lawmakers on Tuesday, the state will need to appropriate $255.2 million more for the program before July 2024 and $457.9 million more for the following year.

The flawed April forecast was based on data that did not reflect the latest needs of enrollees, state agencies said. Jackson said demand for certain categories, such as elderly care, outpaced what state official anticipated. According to the report, home and community based long-term services and support are anticipated to be in need of the most funding over the next two years.

Medicaid director Cora Steinmetz told lawmakers Tuesday that the agency is working on proposals for controlling costs, prompting concern over access to the the program.

“We’re exploring all aspects of the Medicaid program to look at where there might be an opportunity to generate potential savings on the appropriation,” Steinmetz said.

Indiana’s lawmakers finalize the state budget during odd-numbered years, leaving lawmakers and state agencies with a limited a path to enact legislative change in the upcoming 2024 session. Steinmetz said the agency will draft proposals for cost containment within the power of the agency and the budget committee.

States across the country are unwinding pandemic-era protections that kept millions of people covered by Medicaid. In Indiana, the number of people enrolled in Medicaid steadily grew every month from March 2020 until May of this year, when the federal budget law ended the protections.

Indiana’s total enrollment has fallen every month since then. Even so, the demand is still greater than before the pandemic.

According to the report, Indiana saw a net growth of over 370,000 Medicaid enrollees since January 2020.