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As the burden of Medicaid grows heavier, top legislative leaders said Wednesday they are focused this session on maintaining a balanced state budget and curbing growing costs for the health care program.
The Indiana General Assembly will enter its next session on Jan. 8, tasked in part with writing the 2026-2027 biennial budget. Growing costs, especially for Medicaid, could make it more difficult for Republican leadership to achieve a key goal: spending less than the state takes in.
“Look, we don’t get a handle on Medicaid,” House Speaker Todd Huston, R-Fishers, said. “The rest of this conversation? That’s moot.”
After Tuesday’s financial forecasts, lawmakers gained some clarity on how much money they have to work with heading into a budget session. Republicans, who hold majorities in both houses, have eyed some potentially expensive legislative goals, such as property tax reform, universal school vouchers and economic development funding.
The Dentons Legislative Conference on Wednesday was the first opportunity for many in Statehouse leadership on both sides of the aisle to air their thoughts on the fiscal predictions.
After a $985 million shortfall in the state’s Medicaid budget revealed last December, the state’s Medicaid bill is estimated to grow 9.4% in fiscal year 2026 to $4.8 billion, according to the forecast. The year after is projected to hit $5.2 billion, a 6.9% increase.
State revenue—including income tax, sales tax, gaming taxes and corporate income taxes—for the next two years is projected to hang around $23.2 billion per year.
Altogether, the state is projected to have an additional $803 million in revenue to work with. Over two years, Medicaid, which is the second-largest item in the budget behind K-12 education, is estimated to grow in cost by $753 million without additional cost-saving measures.
Lawmakers on panels throughout the day said they expected worse out of the fiscal forecasts. Sen. Travis Holdman, R-Markle, said he expected revenue to flatline at best but hard decisions are still ahead.
“There are cuts that are going to have to be made,” Holdman said. “We’re going to have to tighten the belt quite a bit.”
“I was led to believe it was going to be quite a bit worse. However, I still think it’s bad,” Rep. Craig Snow, R-Warsaw, said. “We’re going to really have to make some big adult decisions here for the sake of our state.”
Huston said his chamber will attempt to understand the root causes of why Medicaid is growing so fast. He said they will look into why there is a disconnect between the state doing well economically and why so many people still qualify for Medicaid.
“The path that we’re on right now is completely unsustainable,” Huston said.
Another key challenge is addressing the projection that revenue will essentially be flat in the second year of the budget. (The first year of the budget is expected to see a 3% increase in revenue.)
Huston said the upcoming forecast in April will be crucial in understanding if the prediction of just 0.3% growth in the second year will hold.
Rep. Greg Porter, D-Indianapolis, is urging leadership to move the next forecast to March, so lawmakers have more time to adjust if predictions shift, especially with a new presidential administration coming into office.
With a new gubernatorial administration and several lawmakers planning to tackle weighty state issues, a tight budget could complicate new legislation, especially if it requires new or more funding.
Senate President Pro Tempore Rodric Bray of Martinsville said it’s important to consider that all line items will be more expensive, due to overall rising costs. Some difficult decisions are expected, he said.
“I think [Medicaid] limits us,” Bray said. “When that begins to take over the budget and grow as a much larger percentage of the budget, what’s it going to take?”
Huston said lawmakers plan to continue investing in K-12 education, infrastructure and higher education, despite budgetary challenges.
Among Democrat leaders, Senate Minority Leader Greg Taylor (Indianapolis) and House Minority Leader Phil GiaQuinta (Fort Wayne) emphasized more funding for K-12 education, lower health care costs and measures to lower overall costs for expenses like rent and utilities.
Taylor also pushed Republican leadership to consider legalizing marijuana for several reasons, including as a new revenue stream for the state.
(Editor’s note: The Indiana Senate Democratic Caucus announced later Wednesday that they had ousted Taylor as their leader, just a day after The Indianapolis Star published a new round of allegations from women who say he sexually harassed them.)
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It’s only complicated because Republicans refuse to even broach the subject of rolling back the tax cuts they have made. When you are suggesting cutting back spending on the autistic to make ends meet, it’s a sign you may have cut too far.
We aren’t that far from Medicaid being the top item on the spending budget. We really need to evaluate the list of recipients and pare it down. Covid grew it and it needs to shrink. Education should remain our top budget item and our leadership in the world is shrinking in that category.
Previous reporting has the largest line item under Medicaid as long term care for seniors. We already divert some of the federal funding intended for that to build new hospitals and pay salaries to executives at county owned hospitals. The only suggestion I’m seeing from state officials when it comes to modifying eligibility is that we should cut spending on autistic people.
We as a state have given up on education. Whatever increases we dedicate to education don’t even keep up with inflation. We’re more worried about making sure that legislators keep getting campaign contributions from school choice advocates than … actual better outcomes for kids.
It’s painfully obvious – state legislators don’t see a future worth investing in for the state of Indiana.
keep in mind…when you talk about “savings” in Medicaid, you’re talking about one of two things: reduction in benefits to the most needy members of our society, or forcing compensation cuts on providers.
The latter just spreads the cost back to those with jobs and health insurance. Or stops providers from taking on more Medicaid patients. It doesn’t provide a solution for the problem. It just shuffles the deck chairs.
the former? well, let’s ask our Christian LT. Gov what the Bible would have to say about abandoning those most in need…I’m pretty sure it’s not a Christian value, and I hope its not one of those Hoosier Values the Republicans keep talking about…
There, but for the grace of God, go I…