HEA 1277 Indiana Medicaid Reform: What Changes for Elder Care

Why HEA 1277 Was Necessary

When Indiana launched PathWays for Aging in July 2024 — replacing the traditional Aged and Disabled Waiver with a managed care model for residents 60 and older — the three selected Managed Care Entities (Anthem, Humana, and UnitedHealthcare) quickly ran into budget problems. Program costs exceeded projections by over $300 million in the first year. The waiting list for HCBS waiver slots grew past 11,000 people. Payment delays and coverage disputes between MCEs and nursing home providers created friction across the system.

Governor Mike Braun signed House Enrolled Act 1277 on March 12, 2026, to address these structural problems. The law doesn't eliminate managed care — it restructures how the state allocates its Medicaid long-term care spending, with direct consequences for families navigating dementia care.

The Four Major Changes

1. Nursing Home Residents Get Carved Out of Managed Care

Starting July 1, 2027, long-term care residents who remain in a skilled nursing facility for 100 consecutive days will be removed from managed care and transitioned back to traditional Fee-For-Service (FFS) Medicaid administered directly by the state.

What this means for families: if your parent enters a nursing home and stays past 100 days, their care coordination shifts from their MCE (Anthem, Humana, or UHC) to the state. This aims to resolve the payment disputes between MCEs and nursing homes that were delaying reimbursements and creating uncertainty for facilities.

2. Home-Based Waiver Services Get Cost Caps

HEA 1277 imposes an individual cost limit on PathWays Waiver services delivered at home. The total cost of in-home waiver services — attendant care, home health aide hours, home modifications, medical equipment — cannot exceed what it would cost to care for that same individual in a nursing facility.

This is the provision that most directly affects families trying to keep a parent with dementia at home. If a parent needs intensive 24/7 attendant care that costs more than a nursing home bed, the waiver won't cover it. The practical effect pushes the highest-acuity cases toward facility placement when the numbers don't work out.

3. A Standalone Assisted Living Waiver

FSSA must submit a formal application to the federal Centers for Medicare & Medicaid Services (CMS) by September 1 to create a new, independent waiver specifically for assisted living services — separating them from the general PathWays Waiver.

Currently, assisted living services are bundled into the same waiver as all other home and community-based care, which means they compete for the same pool of federally approved slots. A standalone waiver would create dedicated capacity for assisted living placements with its own cost controls, potentially reducing wait times for families whose parent needs residential care but not skilled nursing.

Separately, effective July 1, 2025, FSSA implemented the Assisted Living Reserve Capacity Procedure: if a parent has been living in a Medicaid-enrolled assisted living facility for at least 30 calendar days as a private-pay resident, and they exhaust their personal funds and become newly Medicaid-eligible, the facility, MCE, or AAA can submit an FSSA Referral Form with the tenant lease to [email protected] to activate priority waiver placement through reserved slots. This prevents the scenario where a parent has to leave an assisted living community simply because their private funds ran out while they were on the general waitlist.

4. Estate Recovery Claim Deadline Changes

Effective July 1, 2026, HEA 1277 changes the window for the Medicaid Estate Recovery Unit to assert claims against a deceased recipient's estate from 120 days to nine months after the date of death. The longer period increases the exposure of Transfer on Death (TOD) deeds, payable-on-death bank accounts, and other non-probate transfers to estate recovery.

The practical impact: Transfer on Death (TOD) deeds, payable-on-death bank accounts, and other non-probate transfers are more vulnerable if the estate recovery claim is filed within that nine-month window. Families need to understand that giving assets away or restructuring ownership late in the game doesn't necessarily protect those assets from recovery.

What Hasn't Changed

The core Medicaid eligibility rules remain the same: $2,982 monthly income cap (requiring a Miller Trust if exceeded), $2,000 asset limit for single applicants, Community Spouse Resource Allowance between $32,532 and $162,660, and the 60-month look-back period for asset transfers.

The PathWays Waiver waitlist remains chronological — your position is still based on your original level of care assessment date, and the three priority triggers (nursing facility discharge, CHOICE program transition, and hospital discharge) still bypass the standard queue.

What Families Should Do Now

If your parent is currently receiving in-home waiver services, check whether the total cost of those services approaches the nursing facility rate. If it does, the cost cap may affect service authorizations at the next care plan review.

If your parent is in assisted living and approaching private-fund exhaustion, the new Assisted Living Reserve Capacity procedure is directly relevant — talk to the facility's admissions coordinator about submitting the FSSA referral before funds run out entirely.

The Indiana Dementia & Memory Care Guide covers the full PathWays Waiver application workflow, including how to position your parent for the priority placement triggers and navigate the Medicaid financial eligibility process under the new HEA 1277 rules.

See more Indiana guides →