New Analysis: Indiana Medicaid Rates Lowest Among Surrounding States

​Dec. 5,  2023 (INDIANAPOLIS) — According to a new study that Health Management Associates (HMA) conducted on behalf of the Indiana Hospital Association (IHA), Indiana’s Medicaid base rates for hospital reimbursement are the lowest when compared with its neighboring states—Illinois, Kentucky, Michigan, and Ohio. This analysis aligns with findings in a Medicaid and CHIP Payment and Access Commission (MACPAC) report that ranked Indiana 8th lowest in hospital inpatient Medicaid payment among all 50 states and Washington, D.C.  As the report demonstrates​, a number of factors have contributed to Indiana’s low Medicaid base rates.

In addition, Indiana hospitals pay a $1.5 billion tax called the Hospital Assessment Fee (HAF) to the state to leverage federal funding to supplement the state’s low Medicaid base rates, which haven’t been raised in over 30 years. Even with these supplemental payments, Indiana Medicaid still covers only 57% of the net cost of treating patients. This is far less than Medicare payment, which is 87 cents per dollar of cost.

“We need to raise our reimbursement for hospitals now so that we don’t erode access to vital health care services or see our rural and urban safety hospitals close,” said Brian Tabor, president of IHA. “We must take into account that Indiana hospitals fund almost all of the Healthy Indiana Plan for hundreds of thousands of Hoosiers, and also that the state kept $300 million last year alone from the tax hospitals pay. We need to rebalance this equation.”

Policymakers in Kentucky and Illinois recently enacted policies to raise hospital reimbursement levels and Indiana lawmakers are expected to consider similar proposals.

“The Indiana General Assembly recognized the need to increase Medicaid rates for physicians and we are proud to have accomplished that this past session,” said Sen. Ed Charbonneau, Chairman of the Senate Health and Provider Services Committee. “We still have a lot of work ahead to ensure all of our health care providers are adequately reimbursed.”

Indiana employers also have voiced support for the measure to combat the cost shift of unpaid Medicaid costs onto Hoosier families and businesses.

“Medicaid reimbursement rates are too low in Indiana and that results in a shift to commercial insurance paid for by employers,” said Ashton Eller, Indiana Chamber vice president of health care policy and employment law. “We look forward to working with the state to raise Medicaid reimbursement rates to provide Hoosier businesses relief from this cost shift.”

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