An 11th-hour action during the 2023 Indiana General Assembly averted a reimbursement cut for physicians providing services under the Healthy Indiana Plan (HIP 2.0) and secured a reimbursement increase for physicians providing services to members of other Medicaid programs.

The final version of Indiana’s new two-year budget, signed by Gov. Eric Holcomb on May 4, sets reimbursement rates for all Medicaid services equal to the Medicare rate, regardless of the Medicaid program. HIP 2.0 services are already reimbursed at the Medicare rate, but other Medicaid services receive 75% of Medicare.

“The ISMA worked hard from the first day of the session to the last to ensure Hoosier physicians are appropriately compensated for their work with Indiana’s most vulnerable citizens,” said ISMA President Pardeep Kumar, MD, MBA. “The reimbursement increase confronts a barrier to physician participation in Medicaid, and hopefully will encourage more physicians to provide care to Hoosiers in need.”

Legislators were required to readjust Medicaid reimbursements this session under a directive from the federal Centers for Medicare and Medicaid Services (CMS). In 2020, CMS directed all states to set uniform rates for all Medicaid services and ordered Indiana to claw back $500 million previously paid to physicians under HIP. After Indiana appealed, CMS dropped the clawback demand but ordered Indiana to implement a new rate by 2024, eliminating the gap between HIP and non-HIP reimbursements.

The Holcomb administration initially proposed a uniform reimbursement rate of 83%, representing a modest increase for non-HIP services but a 17% cut for services through HIP. House and Senate fiscal leaders increased that proposal to 90% in their preliminary versions of the budget, but the release of a revised economic forecast on April 19 projected an additional $1.5 billion in state revenue over the next two years, which set the stage for legislators to drop the threatened reimbursement cut for HIP and fully fund reimbursements across all Medicaid programs.

“We are pleased that the legislature has fully funded HIP 2.0 at full Medicare rates, helping physicians further enhance the program for all Hoosiers,” said ISMA Vice President of Government Affairs John Ruckelshaus.

The state’s economic analysts calculated that the 90% rate would produce a net increase of $200.7 million in reimbursements to all Medicaid providers, including physicians, in fiscal 2025. With HIP reimbursements remaining at current levels and a 33% increase for traditional Medicaid, Hoosier Healthwise, and Hoosier Care Connect, the actual increase will be larger than that; the Family and Social Services Administration (FSSA) does not yet have an exact estimate.

The new reimbursement rates must be implemented by Jan. 1, but FSSA has advised ISMA that it hopes to have the revised rates in place when the state fiscal year begins on July 1 of this year.

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