State budget hearing flags Medicaid and childcare funding risks as agency leaders warn of cliffs

INDIANAPOLIS — Leaders from the Family and Social Services Administration, the Department of Health and affiliated agencies warned the Senate State Budget Committee that two budget risks — possible federal changes to Medicaid funding and the way child-care expansion was paid for earlier this administration — could leave the state facing sizable shortfalls.

“What I want to do is make Medicaid boring again,” Mitch Roob, secretary of the Indiana Family and Social Services Administration, told the committee, arguing for clearer, longer-term budgeting and tighter fiscal controls. Roob and other agency leaders said the governor’s proposed budget would fully fund Medicaid to the December forecast but that uncertainty in Washington, D.C., and prior one-time state funding for childcare mean the next two years could produce abrupt gaps.

Why it matters: Indiana spends roughly $24.1 billion in the governor’s biennial request for programs managed through FSSA. Large unexpected changes to federal sharing formulas for Medicaid or to the financing of childcare initiatives could force rapid program changes or require substantial one-time or ongoing state funding to cover services and provider payments.

What agency leaders told lawmakers - Medicaid forecast: Roob said the governor’s budget fully funds the Medicaid forecast, calling for $680 million in additional state/general-fund-equivalent support in fiscal 2026 and about $1.0 billion in fiscal 2027 to match projected caseloads and costs. Those numbers are included in the administration’s request to the committee. - Federal uncertainty: Roob and staff briefed senators about the legal and practical uncertainty that followed litigation over Medicaid expansion—the “Rose/Becerra” litigation and other federal court decisions—and about efforts in Congress to change the Social Security Act and allow states more flexibility (including optional work requirements). Roob said the state is pursuing federal legislative and waiver pathways but that timing could be slow. - Child-care funding: Gloria Sachdev, secretary of the new Health and Family Services vertical, said Governor Braun’s proposed budget includes roughly $360 million over the biennium to continue expanded child-care services. Sachdev and Roob said earlier administrations used one-time federal and TANF dollars to expand childcare access; that approach leaves the state with a funding ramp to cover those slots unless the General Assembly acts. The administration’s proposal would provide a local childcare assistance match program and preserve slots, though the House finance proposal reduces that funding from the governor’s request.

What lawmakers pressed the agencies on - Reducing risk and program design: Several senators asked whether the administration has contingency plans if federal matching rates or legal authority change. Roob said the administration is exploring state plan amendments, 1115 waivers and other options; he said some statutory “triggers” exist but that legal challenges may affect how easily eligibility can be reduced. - Communications and appeals: Senators asked how the state would communicate eligibility changes and manage redeterminations and appeals if a policy change forced a caseload contraction. Roob said specifics depend on the approach the legislature adopts and on federal approvals, but he promised clear processes and that existing Medicaid appeal rights would remain in place.

Discussion, next steps and guardrails - The administration told the committee it has started monthly financial reviews within FSSA to track spending and trends more quickly. Roob said those internal reviews will be reported quarterly to the legislature to increase transparency. - The administration asked lawmakers to consider statutory language enabling flexibility in implementation as federal policy and legal decisions evolve; senators signaled interest in guardrails and public notice.

What’s unresolved - Federal change timeline: Administration officials said they are optimistic about working with the state’s federal delegation but warned that federal statutory changes could be slow and that the state must plan for multiple contingencies. - Childcare financing: House and Senate budget plans differ. The administration favors the governor’s larger continuing funding; lawmakers could adopt a smaller continuation or a different, phased approach.

Look ahead: Committee members said they will weigh options during budget markup and study committee work over the spring and summer. Administration leaders asked the panel to preserve flexibility and to support the governor’s approach to preserve child-care capacity while the state secures longer‑term federal clarity.

— Reporting by the State Budget Committee hearing staff; key quotes and figures were drawn from testimony by Mitch Roob (Family and Social Services Administration), Gloria Sachdev (Secretary, Health and Family Services vertical) and Lindsay Weaver (State Health Commissioner).