A proposal on a provider tax put hospitals and the Braun administration on opposing sides, though both acknowledge change was needed. (Getty Images)
A bill to reform a provider fee put newly minted administration officials on the opposite side of Indiana hospitals, as uncertainty at the federal level threatens to disrupt long-standing norms.
Mitch Roob, who leads the state’s Medicaid efforts, panned a proposal to change the Hospital Assessment Fee’s structure on Wednesday. HAF is levied against the providers to pay for the state’s portion of its Medicaid expansion population, otherwise known as the Healthy Indiana Plan (HIP).
“The hospital group has chosen to go down this path. It is a path which the (Gov. Mike) Braun administration will not go down with them,” Roob said, citing a handful of issues with the bill.
House Bill 1586 would also create a provider fee on Managed Care Entities. But the bill elevates the negotiating role of hospitals, Roob said, and would divert some funding from state coffers.
Tim Kennedy, the general counsel for the Indiana Hospital Association, said that the entity would continue working with the state to find a better place to land.
“To be very clear: we need FSSA’s help on this. We need their expertise,” Kennedy said. “… we look forward to working with them to make this operational.”
Hospitals paid an estimated $1.6 billion in HAF in the 2024 fiscal year, an amount used to leverage an estimated $5.5 billion from the federal government, according to a fiscal note.
Indiana keeps roughly $300 million, or 28.5%, of HAF funds for administrative fees. Through the complex federal reimbursement process for Medicaid, hospitals get back enough money to cover 57% of costs, according to the Indiana Hospital Association.
The proposal put forth by the hospital lobbyists would instead pay that $300 million administration cost through the tax on Managed Care Entities. Hospital officials say redirecting that $300 million would boost the federal reimbursement to hospitals and cover 80% of their service costs.
Currently, Managed Care Entities don’t have a provider tax in Indiana, unlike 20 other states.
Over three dozen states have a “state directed payment program” to increase federal reimbursements, according to IHA.
However, Roob said that the federal government would be phasing out state directed payments in 2027.
Author Rep. Brad Barrett, R-Richmond, asked the committee to advance the bill for more discussion to Ways and Means, which must approve any bills with a fiscal component. Lawmakers passed it unanimously.
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