Indiana’s Medicaid expansion ‘trigger’ law could affect coverage of 754K Hoosiers

The insurance coverage of hundreds of thousands of Hoosiers could be at risk should the federal government seek to reduce its share of Medicaid costs under the incoming Trump administration.

Indiana is one of nine states with a “trigger” provision that could revoke the state’s Healthy Indiana Plan—a Medicaid program covering more than 754,000 Hoosiers with moderate-to-low incomes—if Congress opted to reduce its financial obligation, according to an analysis from KFF and the Georgetown University Center for Children and Families.

Under the current program, the federal government pays for 90% of costs for so-called “expansion populations,” or those earning up to 138% of the federal poverty level—defined as an annual income of $43,056 for a family of four in 2024.

Tracey Hutchings-Goetz, the communications and policy director for Hoosier Action, said most people know someone on HIP—whether it’s their barber, hairdresser or the stay-at-home parent who doesn’t have other coverage options.

“It really provides that safety net so that folks know, if they have a medical emergency, they don’t need to hesitate to go to the emergency room,” Hutchings-Goetz said.

President-elect Donald Trump has vowed to cut costs upon assuming office, and national reporting points to Medicaid as a potential target, specifically its expansion under the Affordable Care Act. Trump came within one vote of overturning portions of the popular program during his first presidential term.

More than 1.9 million Hoosiers are covered by Medicaid, including nearly 40,000 children. Minors, senior citizens and Hoosiers with disabilities are typically covered by other programs and are not part of the expansion population.

Roughly two-thirds of Indiana’s total Medicaid budget is covered by the federal government. For the 2024 fiscal year, that amount came to nearly $13.5 billion, compared to the $3.7 billion from state coffers. That year included an enhanced federal match for some months to offset costs associated with COVID-19 insurance protections.

In that same year, HIP accounted for nearly 30% of Medicaid expenditures, or nearly $5.9 billion, according to reports from the Family and Social Services Administration that oversees Medicaid.

Where we are

The state’s “trigger” law that could curtail HIP dates back to a 2016 bill that sharply limits the powers of the FSSA secretary. The same law compelled the agency to impose a monthly contribution requirement that was struck down by a federal court earlier this year.

Senate Enrolled Act 165 dictates that FSSA “may not operate (HIP) in a manner that would obligate the state to financial participation beyond the level of state appropriations or funding otherwise authorized for the plan.”

More plainly, state code says that if federal assistance falls below 90%, “the office shall terminate the plan” and allows for FSSA to pivot to the original, slimmed-down version of HIP launched under former Gov. Mitch Daniels.

However, there is an avenue to raise funding by increasing the Hospital Assessment Fee, which currently provides much of the 10% in state funding for HIP. But hospitals, through their lobbying association, have been eager to reform the long-standing provider tax — though the health care providers have long been in support of HIP.

Generally speaking, hospitals in other states have pointed to the economic benefits to themselves and their greater communities when insurance coverage expands. A summary of analyses from KFF found that residents in expansion states reported greater access to health services and better health outcomes, including a lower reliance on emergency room utilization. Additionally, some studies found labor market growth and decreased overall mortality.

“HIP pays for our rural hospitals; it keeps those open, it keeps doctor’s practices open,” Hutchings-Goetz added. “It’s really important to understand that when you take away health care from Hoosiers … it’s also taking away health care jobs from nurses, doctors and people who work in administrative capacities.”

Medicaid in Indiana

Complicating Medicaid’s political future in Indiana: a $1 billion budget “variance” revealed in December 2023. Agency efforts and cash infusions from the state surplus have reduced that projected shortfall and an updated forecast this month will reveal how much progress has been made. As of August 2024, the latest monthly Medicaid financial report available, FSSA was still short a forecasted $458 million for the 2025 fiscal year.

With this in mind, key budget architects have warned that 2025 will be a year with tighter purse strings, signaling a desire to closer scrutinize Medicaid spending.

But not all Indiana leaders are convinced that Medicaid—and its expansion provision—is on the chopping block.

“You’ve got to rein it in. I’ve been the loudest Senate voice on fiscal insanity out there and finally—I guess right when I’m leaving—people are starting to pay attention,” Braun, one of Indiana’s two senators in Congress, told reporters last week. “… to really solve it, you will eventually have to find ways to save money within Social Security, Medicare and Medicaid.”

Such methods could include the following, according to Braun: raising taxing, lowering benefits, implementing a means test or raising the retirement age.

In Indiana, Braun said that savings could be achieved by tackling Medicaid fraud and administrative costs, maintaining that it would be “fairly easy to find 5% savings” in each agency. A whistleblower lawsuit earlier this year claimed hospitals and insurers defrauded Medicaid’s coffers to the tune of up to $700 million.

But he said he’d “rather not” cut Medicaid benefits to Hoosiers, even to those under HIP.

“I’m going to look first at the lower-hanging fruit,” Braun said.

Both Braun and Trump are expected to be sworn into their respective offices in January.