Fridays from the Statehouse

House Bill 1461 was concurred on and vote out of the House this week with unanimous support. The bill now goes to the governor for his signature to become law.

The bill improves the licensure process and requirements for administrators of nursing homes and assisted living communities and creates new oversight of health care services temp agencies. The legislation also requires the state to improve the timeliness of Medicaid eligibility determinations, contract with a new entity to do eligibility determinations, and bring forth recommendations to increase rural access to home and community-based services. IHCA/INCAL is greatly appreciative of the support from bill author, State Representative Brad Barrett, and bill sponsor, State Senator Liz Brown, in getting the bill passed.

April Revenue Forecast
The State Budget Committee met this morning to hear the updated Revenue, Medicaid, and Economic Forecasts for April 2023. This data will play a key role in shaping the final version of the state budget, which legislators must complete by April 29th. The April revenue forecast shows an increase in total general fund tax collection of 1.9% or $386.4 million for the rest of FY23, 2.7% or $578.5 million in FY24 and 2.5% or $540.4 million in FY25 over the December revenue forecast, giving legislators about $1.5 billion over the biennium more than previously projected. With these increases, the total general fund collection is projected to be $21.8 billion for FY24 and $22.4 for FY25. Collections for sales tax, individual income tax, and corporate income tax all came in above the December 2022 revenue forecast target for the first three months of 2023. During the initial budget presentations from state agencies at the beginning of session, the total amount of new money requested was more than $700 million, and these additional projected funds give legislators the opportunity to fund these request or other legislative priorities.

Medicaid Forecast
For the first time in this forecast, we are seeing finality to the Public Health Emergency (PHE), which will be ending on May 11th, and the pandemic maintenance of effort requirements, which ended on March 31st. The department will be completing redeterminations throughout the next year, and this process is expected to reduce the number of covered lives by a little less than 400,000 from the peak of coverage. Additionally, the introduction of regular reviews of provider rate increases and the managed care program for long term services and supports will help to control overall Medicaid costs as the Hoosier population continues to age.

Overall Medicaid costs are expected to grow 6.3% in FY24 to $18.2 billion and an additional 2.6% in FY25 to $18.7 billion. The state’s share of this expense, starting from a baseline of $2.3 billion in FY23, is growing 45.1% in FY24 to $3.4 billion and an additional 9.9% in FY25 to $3.8 billion. This is a change of $90.5 million less than the December forecast for FY24 and $43.0 million more than the December forecast for FY25 for the state’s share.

The large increase in the state’s share of expenses is due to the phase out of the 6.2% enhanced federal match, which accounts for about $500 million of the increase, as well as decreased reimbursement from MCE’s once the redetermination period is complete. While many MCEs have been covering additional lives during the maintenance of effort, these lives were overall healthier than the average Medicaid user, leading to reimbursements to the state for unused care. As those lives start to leave Medicaid during the redetermination process, those reimbursements will shrink, creating the need for more state dollars.

This information does not include any current legislative proposals for HIP equalization or the rate matrix that is being developed by FSSA. However, projections for these items were provided to legislators in slides 10-12 of the presentation. More information on rate indexing can be found at https://www.in.gov/fssa/files/Rate-Review-Medicaid-Matrix.pdf.

Economic Forecast
The nation and state experienced stronger than expected economic performance at the end of 2022 into early 2023, meaning that the economic forecast has been revised upward for most major economic indicators. Because of this continued strength in the short-term, growth in GDP has been projected to slow down to modest, but still positive, growth for 2024 and 2025 of 1.4% and 1.9% respectively.

Inflation is coming down but still remains higher than desired, which has offset the gains that have been made in higher wages and revenues. Additionally, the collapse of Silicon Valley Bank (SVB) will likely lead to tighter lending standards from banks, which is predicted to offset the need for the Federal Reserve to raise interest rates as much as was previously projected.

Indiana experienced a 2.3% increase in payroll employment, led by the pandemic-affected sectors of leisure & hospitality, health & social services, and construction. In specific economic sectors, the outlook for manufacturing remains solid while the pace of homebuilding is expected to slow in 2023. Supply chain issues in most sectors continue to move towards resolution. Overall, Indiana remains on solid ground and the state’s risks mirror those at the national level, including the long-term issues of increasing the skills and number of workers in the labor pool.

The budget will be finalized next week, and the forecast was good news for legislators who are trying to fund more strategic initiatives, while maintaining an adequate reserve.

As always, please don’t hesitate to reach out to Nick Goodwin at ngoodwin@ihca.org if you have questions on bills moving through the legislative process or if you want to be more engaged on public policy matters.