LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 7191 NOTE PREPARED: Apr 15, 2021
BILL NUMBER: HB 1305 BILL AMENDED: Mar 25, 2021
SUBJECT: Medicaid Reimbursement for Children's Hospitals.
FIRST AUTHOR: Rep. Slager BILL STATUS: Enrolled
FIRST SPONSOR: Sen. Bohacek
FUNDS AFFECTED: X GENERAL IMPACT: State
X DEDICATED
X FEDERAL
Summary of Legislation: This bill specifies the reimbursement rate for inpatient and outpatient Medicaid
services that are provided by an out-of-state children's hospital located in a state bordering Indiana in state
fiscal years 2022 and 2023. The bill also requires Budget Committee review of the reimbursements provided
to those out-of-state children's hospitals. It requires the children's hospitals to provide information required
in the review to the Family and Social Services Administration not later than August 1.
Effective Date: July 1, 2021.
Explanation of State Expenditures: Summary - The bill provides that for inpatient and outpatient services
provided by children’s hospitals in states bordering Indiana and enrolled as Indiana Medicaid providers, the
Indiana Medicaid program and Children’s Health Insurance Program (CHIP) must issue reimbursement at
rates that are:
• comparable to the current federal Medicare reimbursement rate for the service provided by
the children’s hospital; or
• equal to 130% of the Medicaid reimbursement rate for a service that does not have a
Medicare reimbursement rate.
The bill specifies that these rate requirements will remain in effect during FY 2022 and FY 2023 only.
Rate Increases: The bill’s rate requirements will result in an indeterminable increase in reimbursement for
border state children’s hospitals. Total additional reimbursement will depend on the number of children’s
hospital services that have Medicare rates established and the difference between Medicare and Medicaid
rates for such services. Additionally, claims paid through managed care entities (MCEs) may be impacted
differently than claims paid directly by the Family and Social Services Administration (FSSA) on a fee-for-
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service basis. Additional capitation expenditures to MCEs will depend upon rates and contract specifics
negotiated between MCEs, hospitals, and the FSSA.
LSA received updated data from FSSA, reporting that in CY 2019 border state children’s hospitals received
a total of $27.1 M in reimbursement from Indiana Medicaid. Based on FSSA claims data available to LSA,
approximately 70% of these payments are expected to have been made through MCEs and the remaining 30%
paid directly by the FSSA on a fee-for-service basis. If all fee-for-service payments to border state children’s
hospitals for inpatient and outpatient care were paid at 130% of current rates, the state share of Medicaid fee-
for-service expenditures would be expected to increase by between $630,000 and $830,000. Additionally,
future capitation payments made by the FSSA to MCEs could increase by an unknown amount if MCEs are
required to increase reimbursement rates to border state children’s hospitals as a result of the bill. Total
reimbursement could increase further to the extent that children’s hospital care becomes more accessible to
Medicaid enrollees living in border communities as a result of the bill.
Transportation: The bill may also have an indeterminable impact on Medicaid reimbursement for non-
emergency medical transportation (NEMT). If border state children’s hospitals begin accepting more Indiana
Medicaid patients, there may be more NEMT trips made across borders and fewer long-distance trips made
within the state.
State Plan Amendment or Waiver: The bill also requires the FSSA to apply to the federal government for any
state plan amendment or waiver necessary to implement the revised rates. Applying for a state plan
amendment or waiver is within the FSSA’s routine administrative functions and should be able to be
implemented with no additional appropriations, assuming near customary agency staffing and resource levels.
If FSSA submits a state plan amendment or waiver to implement the enhanced rates, additional Medicaid
expenditures would not occur until after federal approval is received.
Budget Committee Review: The FSSA will experience a minor increase in workload to prepare applicable
claims and encounter data from border state children's hospitals for review by the Budget Committee before
November 1, 2022 and November 1, 2023. This function is expected to be completed within existing staffing
and resource levels. If the Budget Committee holds additional hearings to review the information required
by the bill, legislative committee members would be entitled to additional per diem compensation.
Legislators on the Budget Committee currently receive compensation set at 150% of the legislative business
per diem allowance.
Additional Information -
Out-of-State Provider Regulations: Indiana Administrative Code currently allows certain border state
hospitals to be reimbursed as if they were in-state, with the exception that out-of-state hospitals do not
receive additional payments from the hospital adjustment factor that in-state hospitals receive by paying the
Hospital Assessment Fee (HAF). The hospital adjustment factor is designed to ensure that Indiana hospitals
receive aggregate Medicaid reimbursements that approximate the federal Medicare upper payment limit.
Although out-of-state hospitals do not pay the HAF, certain border state children’s hospitals are eligible to
receive an enhanced base rate from Indiana Medicaid for inpatient care. The bill does not reference the HAF,
but it is assumed that the bill would require eligible services to be reimbursed as if the border state hospital
paid the HAF.
Medicaid Managed Care: The FSSA makes capitation (per member per month) payments to MCEs for health
care services delivered to MCE plan members, who represent about two-thirds of Medicaid enrollees.
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Capitation payments are based on estimated use of services among many other factors, including some
factors that may have downward pressure on the payment amounts. Future capitation payments will
incorporate the changes under the bill, but may not reflect a net change in the rate that is directly proportional
to the bill’s impact on fee-for-service payments.
Medicaid and CHIP State Share: Medicaid and CHIP are jointly funded between the state and federal
governments. The standard state share of costs for most Medicaid medical services for FFY 2021 is 34%.
The standard state share of CHIP costs is 24%. Under federal COVID-19 relief legislation, the state share
of costs is decreased to 28% for traditional Medicaid enrollees and 20% for CHIP enrollees for the duration
of the federally declared public health emergency.
Explanation of State Revenues: Summary - If children’s hospitals in border states begin accepting more
Indiana Medicaid patients, revenue from the Hospital Assessment Fee (HAF) could potentially decrease as
a result of those patients not being treated at in-state hospitals. The total reduction in HAF revenue is
indeterminable, but likely to be small.
Additional Information - Indiana hospitals are subject to the HAF, which is based on a percentage of total
inpatient and outpatient revenue generated by the hospital (up to a maximum of 6%). The HAF generated
$751.6 M in FY 2020. Of this revenue, 71.5% ($537.4 M in FY 2020) is used to increase hospital Medicaid
reimbursement up to specified limits. Any remainder of the 71.5% not used to increase hospital
reimbursement is distributed to the Hospital Medicaid Fee Fund. The remaining 28.5% ($202.4 M in FY
2020) of the HAF revenue is distributed to the General Fund to offset Medicaid costs incurred by the state.
Out-of-state hospitals are exempt from the HAF.
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: Family and Social Services Agency.
Local Agencies Affected:
Information Sources: 405 IAC 5-5; 405 IAC 1-8; 405 IAC 1-10.5; FSSA Claims and Encounter Database.
Fiscal Analyst: Adam White, 317-234-1360.
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