March 20, 2026  – Indiana is making a significant shift in how it delivers Medicaid long-term care services, becoming one of the first states in recent years to step back from managed care for nursing home residents. A newly signed law will transition many long-term care patients out of managed care plans and back into a traditional fee-for-service system.

Governor Michael Braun signed the legislation, which requires Medicaid beneficiaries receiving long-term institutional care to move out of managed care coverage after 100 days. Beginning July 1, 2027, these individuals will instead receive coverage through the state’s fee-for-service model, which was previously used before the launch of Indiana’s PathWays for Aging program in 2024.

The PathWays program had placed responsibility for managing care and payments with private insurers, including Humana, Elevance Health, and UnitedHealthcare. Together, these plans oversaw Medicaid services for approximately 117,000 residents, including about 21,000 individuals living in nursing homes.

However, concerns about program performance emerged soon after implementation. Two of the participating insurers were placed on corrective action plans due to issues related to billing practices, claims processing delays, and contract compliance. According to industry reports, nursing homes were owed more than $100 million in late or improperly denied Medicaid payments last year.

State officials and provider organizations have raised questions about whether managed care is an effective model for long-term nursing home residents. Critics argue that individuals in institutional settings often have complex medical needs that require consistent care, leaving limited opportunity for managed care plans to improve outcomes or reduce costs.

“There is no care to manage for a long-stay resident,” said Paul Peaper, president of the Indiana Health Care Association, in remarks following the bill’s passage. “We had one of our members testify in front of the Senate Appropriations Committee. Her average long-stay resident has five to seven comorbidities. A managed care company is not going to do anything for that individual except extract their profit margin out of it.”

The original goal of Indiana’s managed care approach was to improve care coordination and reduce reliance on institutional settings by expanding access to home- and community-based services. While similar programs in other states have focused on these outcomes, Indiana providers say those goals were not fully realized.

Data from the program raised additional concerns. According to Peaper, the managed care organizations employed roughly 400 care coordinators for the entire covered population. A survey of assisted living residents found that more than half reported they had never been contacted by their insurer or did not know who their plan was.

Financial performance also played a role in the policy change. An independent analysis conducted by consulting firm CLA found that the state spent approximately $91 million more on nursing home care under the managed care model than it would have under the previous system. Overall program costs exceeded budget projections by more than $300 million.

The new law follows earlier legislative efforts to address these issues. In the prior year, lawmakers approved measures to impose additional penalties on insurers that failed to meet payment and billing standards.

Indiana’s decision comes as many states continue to rely on managed care to deliver long-term services and supports. As of the end of 2023, at least 24 states had adopted managed care models for long-term care. These programs are often designed to improve coordination and encourage care in home and community settings.