Indiana Medicaid program is $1 billion more expensive after forecasting error

Indiana’s Medicaid program will cost about $1 billion more in the current state budget than previously expected.

The state revealed an error Tuesday in the estimates lawmakers used to write the budget earlier this year.

The underestimate is centered largely on home- and community-based long-term care services. Access to those services were made easier during the COVID-19 pandemic. Once pandemic-era policies ended, demand stayed high, which wasn’t reflected in the funding estimate legislators received in April.

State Medicaid leaders said the flow of up-to-date information wasn’t good enough when they gave lawmakers the funding estimate. Those leaders pledged to make changes to their process.

Sen. Ryan Mishler (R-Mishawaka) said an error like this can’t happen again.

“We probably need to take more of an internal role with them, along with Medicaid Oversight, and work together to make sure it doesn’t happen again,” Mishler said.

The state will dip into its budget reserves to make up the funding shortfall in the current budget. Rep. Ed DeLaney (D-Indianapolis) said he found it "very disturbing" that the reserves had to be used to cover what he called "an accounting error."

"And we have to make sure that our agencies are operating in a way that that cannot happen again," DeLaney said.

State Medicaid leaders said they’ll look to reduce the shortfall, if possible — seeming to focus on more scrutiny of Medicaid claims.

READ MORE: Medicaid Oversight Committee approves final report with no recommendations
 

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But Office of Management and Budget Director Cris Johnston said there are long-term conversations needed about the growth of the Medicaid program.

“This amount of growth cannot continue, so there’s going to be some tough decisions ahead,” Johnston said.

Mishler has been sounding that alarm for months. And he helped put Medicaid policies under the microscope already this year, in a Medicaid Oversight Committee created by the legislature.

An updated state tax revenue forecast unveiled Tuesday also delivered bad news to lawmakers, though not with as hefty a price tag. Indiana is now projected to collect $473 million less in the current, two-year budget cycle than the forecast in April projected.

Still, lawmakers didn’t spend everything they were projected to have in the current budget, and the updated revenue forecast still shows the state on track to collect nearly $200 million more than needed for the budget’s spending.

Brandon is our Statehouse bureau chief. Contact him at bsmith@ipbs.org or follow him on Twitter at @brandonjsmith5.