State leaders downplay concerns of possible federal Medicaid cuts

Gov. Mike Braun and House Speaker Todd Huston speak to reporters March 3 after a private meeting between the pair. (IBJ Photo / Cate Charron)

As the federal government considers ways to reduce Medicaid spending to help finance the extension of tax cuts, Indiana government leaders are not yet sounding the alarm over the potential of losing billions of dollars for its ever-growing entitlement program.

The U.S. House of Representatives passed a budget resolution last week that would instruct the committee tasked with funding Medicaid to reduce spending by up to $880 billion through 2034. Health policy nonprofit KFF estimates Indiana could miss out on $12.7 billion to fund the state’s program if the federal government enacts a per-capita funding cap to reduce spending, which is one proposal being considered.

Medicaid, which pays for health care primarily for low-income people and those with disabilities, is largely funded by the federal government. It traditionally has paid about two-thirds of the cost of services, while states pay the remainder. States can reform or expand coverage beyond federal mandatory coverage requirements.

In Indiana, nearly 2 million Hoosiers have coverage through the program, according to enrollment reports.

Indiana Gov. Mike Braun, who has pushed for reduced health care costs and increased price transparency, said Monday that the onus will be on the health care industry to relax high prices.

“I put that burden not on levels of government—put that burden on the health care industry,” he said. “Large corporate hospitals and insurance companies are going to have to figure out how we do it for less.”

Braun also said the state is seeking to run the program more efficiently and reduce waste and fraud.

“We’ll have to react to whatever they do to make sure that we don’t backslide,” he said.

Indiana House Speaker Todd Huston, R-Fishers, said Monday that lawmakers’ past fiscal conservatism has prepared them for changes in federal funding if that occurs.

“We’ve kept the state on really good, solid footing,” he said, “because you never know what was going to turn the corner on you.”

President Donald Trump has said his administration won’t touch Medicaid and politicians on both sides of the aisle have warned against cuts to the popular program since it insures a sizable swath of the country. But experts say it will be difficult to find savings for tax cuts without making Medicaid spending cuts.

U.S. House Speaker Mike Johnson, R-Louisiana, has said his chamber will be focused on rooting out Medicaid “fraud, waste and abuse” to save money. Other proposed changes could include installing work requirements and curbing coverage, according to the Associated Press.

Indiana also has what’s known as a “trigger” law. If Congress decided to end funding to the Affordable Care Act’s Medicaid expansion, the state’s Healthy Indiana Plan would likely be significantly curtailed, causing hundreds of thousands of Hoosiers to lose coverage. Currently, federal reimbursement covers about 90% of HIP costs.

Current HIP enrollment in the HIP program, which serves Hoosiers with moderate-to-low incomes, is north of 700,000. About 76% of Hoosiers in the plan have coverage that hinges on the ACA Medicaid expansion, according to a state fiscal analysis.

Not including potential federal cuts, Indiana has had to pick up the tab for a multibillion-dollar spike in Medicaid costs largely attributed to a dramatic increase in enrollment during the pandemic that hasn’t dropped to prior levels. That surge resulted in a forecasting error, leading lawmakers to under-budget Medicaid costs by nearly $1 billion over the last two years.

The Legislature’s fiscal leaders are actively advancing legislation to reform HIP to cool spending. That includes priority bill Senate Bill 2, which would institute a 500,000 enrollment cap on the program and establish work requirements.

State lawmakers have also repeatedly said this year’s budget process is especially tight due to ballooning Medicaid costs, which is expected to cost $10 billion over the next two years.

The state’s budget proposal funds Medicaid with the assumption that the federal government would financially support the program as it has. It doesn’t account for the potential funding gap created if Congress approves major budget cuts.

If federal cuts warrant new state budgeting or legislation, the governor can call a special session at which lawmakers can amend the budget.

The Associated Press contributed to this story.