The Policy Change
Indiana is experiencing a substantial improvement in its financial outlook, with new projections indicating the state’s budget surplus could swell to nearly $5 billion by the middle of 2027. This updated forecast, presented to the State Budget Committee, anticipates tax collections growing by 4.2% this fiscal year and an additional 2.7% in the subsequent year. These figures represent a significant increase of approximately $2.4 billion more than initial expectations when the current state budget was finalized in April, which had projected minimal growth of 0.8% and 0.1% respectively.
This robust revenue growth is expected to boost Indiana’s cash reserves from an anticipated $2.7 billion to $5 billion by mid-2027, representing about 22% of annual state spending. This level far surpasses the state’s typical target range of 10-15% for reserves. Despite this positive financial news, Republican fiscal leaders have indicated no immediate plans to increase spending, citing ongoing uncertainties early in the biennial budget cycle.
Concurrently, new projections also reveal a slower-than-expected growth in Indiana’s Medicaid program costs. The previous forecast in April predicted Medicaid costs would jump by 9.5% in the current fiscal year and 7.7% in the next, totaling a $1.2 billion increase over two years. However, the revised forecast now projects growth rates of 3.2% and 6.4% for the respective fiscal years, resulting in approximately $465 million less in state spending over the two-year period. This slowdown is partly attributed to a significant drop in Medicaid enrollment, which has decreased by about 15%—from 2 million people at the beginning of the year to 1.7 million in November—since the current administration began implementing quarterly income verification letters.
Despite the overall positive budget and slowing Medicaid cost growth, state Medicaid officials have announced plans to reduce the payment rate for Applied Behavior Analysis (ABA) therapy. This intervention, widely used to enhance communication and learning skills for children and young adults with autism spectrum disorder, has seen its expenses grow rapidly. The proposed cut will decrease the state’s current ABA therapy payment rate from approximately $68 an hour to around $61 an hour, aligning with what officials state is the national average. This 10% reduction is slated to take effect in April.
Impact on ABA
The planned 10% reduction in Medicaid reimbursement rates for ABA therapy will directly affect the more than 8,000 Hoosiers who rely on Medicaid to fund these critical services, with the majority being between three and eight years of age. For ABA providers, this rate cut could lead to significant financial pressures, potentially impacting their ability to maintain current staffing levels, invest in training, or expand services to meet growing demand. The state’s rationale for the cut stems from concerns over the program’s fast-growing expenses, with expenditures peaking at $611 million in 2023, though they had already dropped to $445 million in 2024 after former Governor Eric Holcomb’s administration previously set lower reimbursement rates.
Family and Social Services Administration Secretary Mitch Roob articulated the state’s position, stating that Governor Mike Braun directed him to bring ABA therapy costs to a
Source: indianapublicradio.org
