Bill to Provide Medicaid Relief for Hospitals Clears First Hurdle in Legislative Process
HB 1586 Passes House Public Health Committee 11-0
January 22, 2025 (INDIANAPOLIS) — Members of the Indiana House Public Health Committee voted unanimously 11-0 today in favor of House Bill (HB) 1586 to provide significant Medicaid relief for Indiana hospitals and improve access to care for Hoosiers if passed this session.
According to the Indiana Hospital Association, it’s been over 30 years since Indiana raised its Medicaid base rates paid to hospitals, which are reimbursed only 57 cents on the dollar on average for every Medicaid patient they serve. This results in $2.7 billion in unpaid statewide health care costs each year.
Authored by Chairman Rep. Brad Barrett (R-Richmond), HB 1586 would allow Indiana hospitals to be assessed up to the federally allowable maximum through the Hospital Assessment Fee (HAF) to leverage additional federal funding that would raise Medicaid reimbursement for hospitals at no cost to the state. The federal model, called a State Directed Payment Program, has been enacted in 38 other states or territories across the U.S., including in all of Indiana’s surrounding states.
“Thanks to Chairman Barrett and members of the House Public Health Committee, we have an opportunity to maintain and improve access across the state through this important legislation and decrease the reliance of hospitals on higher reimbursement from employer-sponsored health plans,” said Scott B. Tittle, president of the Indiana Hospital Association “The current shortfall in unpaid Medicaid costs not only hurts our state’s hospitals, but harms consumers, who must pay increasing premiums to cover this cost-shifting gap.”
According to Kaufman Hall, Indiana hospitals operated on less than a 1% operating margin cumulatively in 2023, lagging below the national average of 2.3%. Meanwhile, hospital operating expenses exceeded national growth, creating unsustainable financial conditions that make it difficult to maintain access to necessary services, IHA said.
Since 2019, 13 birthing units have closed in Indiana with nine of those having closed within the past two years.
“Without immediate assistance, ongoing Medicaid underpayments will only exacerbate the closure of health care services across the state,” said Tittle. “HB 1586 would allow Indiana to join our surrounding states and utilize a federal program that would boost these low rates and protect access to care in all communities.”
Hospital leaders from Schneck Medical Center, Methodist Hospitals, and Marion Health testified in support of the bill.
“Not only does this proposal direct more funding towards our small, rural hospitals, it provides enhanced reimbursement for rural birthing hospitals to improve access and health outcomes for Hoosier moms and babies,” said Dr. Eric Fish, president and CEO of Schneck Medical Center based in Seymour, Indiana. “Protecting our remaining birthing centers is something we must prioritize at the state level, and HB 1586 goes directly toward that effort.”
“As a safety net hospital that relies heavily on government funding to serve a disproportionate share of Medicare and Medicaid patients, I am here to tell you we cannot wait one more session,” said Matthew Doyle, president and CEO of Methodist Hospitals serving Northwest Indiana from Lake County. “This is the path for Methodist to remain viable in our community, protect access for the patients we serve, and help every hospital in the state do the same.”
“We take pride in our ability to serve the critical health care needs of our rural community as an independent hospital,” said Stephanie Hilton-Siebert, president and CEO of Marion Health in Grant County. “But it is increasingly challenging for hospitals like Marion Health to maintain independence without immediate changes to Indiana’s Medicaid program. For years to come, this legislation will be the difference between maintaining a positive operating margin or not—for our hospital and for all hospitals across Indiana.”
To learn more about HB 1586 visit IHAconnect.org.
