Indiana secures federal approval for Medicaid hospital payment reforms

Submitted

Following the State of Indiana’s announcement last Friday, May 15 regarding federal approval for updates to the Hospital Assessment Fee program and the State Directed Payment initiative, the Indiana Hospital Association (IHA) President Scott B. Tittle released this statement on how Indiana hospitals have reduced prices over time.

Tittle

“Today’s announcement marks an important step forward for Hoosier patients. We thank the Braun administration and the Indiana General Assembly for the multiyear effort to begin to address the significant financial challenges facing Indiana hospitals, and for working to bring much-needed supplemental federal dollars back to Indiana. This action provides a critical lifeline, underscoring a simple reality: base Medicaid rates do not cover the cost of care. We also thank Rep. Carbaugh and Sen. Garten for carrying the legislation that made this possible.

“While Indiana’s specific approach is unique, the State is now joining more than 40 others that have taken this step to address chronic Medicaid underpayment by utilizing federal supplemental payments. This funding is certainly significant; however, it does not fully close the gap, and more work remains to ensure Medicaid reimbursement is sustainable long-term.

“Importantly, this approach relies on hospitals stepping up – paying enhanced fees to draw down additional federal matching funds – while continuing the progress Indiana hospitals have made to lower prices and improve affordability.

“As implementation begins, we look forward to working with the administration and lawmakers to ensure the policy works as intended for all hospitals, including independent and rural providers, and that it is built on accurate data that reflects operating realities across Indiana’s diverse health care landscape.”

Background

Indiana hospitals have made significant progress on health care affordability.

Report: Indiana’s hospital systems lowered prices in 2024.

• A new state‑commissioned analysis shows Indiana’s five largest nonprofit hospital systems reduced their commercial prices by nearly 7 percentage points on average in 2024 compared to the year before.
• This marks one of the most significant year‑over‑year improvements to-date in the effort to make healthcare more affordable for Hoosiers.
• Commercial prices for all five systems averaged 252 percent of Medicare in 2024, a full 33 percentage points below the state benchmark set by the Indiana General Assembly.

National rankings show Indiana hospitals are making care more affordable for Hoosiers.

• Indiana ranked eighth best in the nation for health care costs in 2025, up from 15^th in 2021, per WalletHub.
• A 2024 Forbes analysis ranked Indiana 24^th out of 50 states in health care costs, improving 13 spots from the prior year.
• Employer-based insurance premiums in Indiana have remained at or below the national average since 2020, according to KFF.
• RAND Corporation studies show a clear downward trend in Indiana hospital prices, moving from the most expensive state in RAND 2.0 (2019) to ninth in the RAND 5.1 report (2024). While IHA has raised concerns about RAND’s methodology, the RAND study has reflected Indiana’s consistent improvement across reports, pointing to meaningful progress.