Indiana has enacted House Enrolled Act 1277 (“HEA 1277”), a Medicaid reform law that significantly changes the state’s PathWays for Aging program and other long-term services and supports. While many provisions of this law took effect July 1, 2026, the transition of certain long-stay nursing facility residents from managed care to fee-for-service Medicaid will begin July 1, 2027.
Long-Stay Nursing Facility Residents Will Transition to Fee-for-Service Medicaid
Beginning July 1, 2027, an individual who has received nursing facility services for 100 consecutive days will no longer be included in the population covered by Indiana’s risk-based managed care program. On the 100th day, the individual must transition to Medicaid fee-for-service. This change will apply to long-stay nursing facility residents, including residents of facilities licensed under Indiana’s comprehensive care facility rules, who are currently served through the PathWays for Aging program. Ind. Code § 12-15-13-1.8(e).
Indiana Must Seek Approval for a Standalone Assisted Living Waiver
HEA 1277 requires Indiana Family and Social Services Administration (“FSSA”) to apply to the U.S. Department of Health and Human Services for a Medicaid waiver dedicated to assisted living services (Indiana’s rules generally refer to these providers as residential care facilities). The waiver would serve individuals who are at least 60 years old and meet nursing facility level-of-care requirements. Ind. Code § 12-15-1.3-26.
If the federal government approves the waiver, FSSA must transfer waiver slots currently used by assisted living residents from existing Home and Community-Based Services (“HCBS”) waivers to the new assisted living waiver. FSSA must also establish a stakeholder work group to assist with the waiver’s development and implementation, and the Governor must include assisted living providers among the appointed members.
The law also extends several existing assisted living reimbursement and operational protections to the new waiver. These include reimbursement for assisted living services, integrated health care coordination and transportation when included in the individual’s service plan. It also preserves statutory restrictions on certain physical plant and operational requirements, including requirements concerning private rooms, kitchenettes, shared bathrooms and the separation of housing and service agreements. Ind. Code § 12-8-1.6-10.
An assisted living waiver participant whose service plan includes integrated health care coordination will be permitted to choose whether that coordination is provided by the assisted living provider or by FSSA. The law specifies that integrated health care coordination furnished by the assisted living provider is not duplicative of services provided by FSSA.
Cost Limit Required for Certain HCBS Waiver Participants
FSSA must also seek federal approval to amend the applicable HCBS waiver to establish an individual cost limit that does not exceed the institutional cost of nursing facility services. This limitation applies to individuals who:
- Are at least 60 years old;
- Meet nursing facility level-of-care requirements; and
- Are not transferring from another HCBS waiver.
FSSA was required to submit the waiver amendment by September 1, 2026. This statutory provision expires July 1, 2028. Ind. Code § 12-15-1.3-27.
New Documentation Requirements for HCBS Providers and Recipients
Effective July 1, 2026, FSSA must establish a procedure for documenting that HCBS services delivered to a Medicaid recipient align with the recipient’s individual service plan. The procedure must include a provider attestation regarding that alignment. Ind. Code § 12-8-1.6-4.
HCBS providers will also be required, upon request, to provide:
- The provider’s accounting records of service delivery to the recipient or the recipient’s legal guardian, no more than once per calendar quarter; and
- A plain-language, itemized statement of services billed for the recipient, no more than twice per calendar year.
Ind. Code § 12-15-11-11.
Recipients must review the requested records or statements and report errors or inconsistencies within 45 days after receipt. Upon request, the recipient’s case manager must assist with reviewing the documentation and reporting and resolving identified discrepancies. Ind. Code § 12-8-1.6-9.5.
Home Health Reimbursement Changes
HEA 1277 requires FSSA to collaborate with a home health services association and home health providers to develop a new Medicaid reimbursement methodology for home health services. FSSA must submit the methodology to the Legislative Council by November 30, 2026. Ind. Code § 12-15-34-14.6.
The existing statutory prohibition against reducing Medicaid reimbursement for home health services will expire June 30, 2027. The fiscal impact of any new reimbursement methodology is presently indeterminate. One change to home health reimbursement that will occur is the elimination of the overhead component of home health reimbursement. It is not clear what that will mean in the final rates, but the elimination of the overhead will be a significant change.
Separately, the law reduces the advance public-notice period required before FSSA implements a health facility reimbursement change that results in reduced reimbursement. The notice period changes from one year to six months. Ind. Code § 12-15-14-8.
Medicaid Estate Recovery Deadline Extended
HEA 1277 also changes Indiana’s Medicaid estate recovery process. The Medicaid Estate Recovery Unit previously had 120 days after a Medicaid recipient’s death to open an estate or file its claim in an existing estate. Effective July 1, 2026, the Medicaid Estate Recovery Unit will have nine months after the date of death. Ind. Code § 29-1-14-1(g).
The fiscal impact statement indicates that the longer filing period may allow the State to pursue claims that otherwise would have been barred under the 120-day deadline.
Key Takeaways
HEA 1277 represents a significant recalibration of Indiana’s Medicaid long-term care system. Nursing facilities, assisted living communities, HCBS providers and home health agencies should:
- Identify the statutory provisions applicable to their services;
- Monitor forthcoming waiver applications, federal approvals and FSSA implementation guidance;
- Begin planning for the July 1, 2027, transition of long-stay nursing facility residents to fee-for-service Medicaid;
- Review billing systems and managed care agreements for potential transition issues; and
- Consider participating in the assisted living waiver and home health reimbursement stakeholder processes.
Hall Render will continue to monitor implementation of HEA 1277 and related guidance from FSSA. If you have questions about how these changes may affect your organization, please contact:
- Brian Jent at (317) 977-1402 or bjent@hallrender.com;
- Ellie Tucker at (314) 228-7508 or etucker@hallrender.com;
- Sean Fahey at (317) 977-1472 or sfahey@hallrender.com;
- Robert Markette at (317) 977-1454 or rmarkette@hallrender.com;
- Todd Selby at (317) 977-1440 or tselby@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
