Following $1B Medicaid shortfall, state poised to drop firm that produced forecast
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About a year and a half after state lawmakers learned about a nearly $1 billion Medicaid forecasting error, the state is positioning itself to drop the firm that produced the report.
Under its three-year, $13.6 million contract, Indianapolis-based Milliman Inc. produces an annual forecast, among several other actuary services, to predict Medicaid costs so lawmakers can adequately budget for the state’s second-largest line expense.
However, it was revealed in 2023 that the state had previously underestimated the cost of the growing program, resulting in a $985 million shortfall in the state’s Medicaid budget. From fiscal years 2023 to 2024, the state’s Medicaid burden grew by 53.7%, from $2.6 billion to $4.1 billion.
Milliman representatives maintain that the shortfall wasn’t the firm’s fault, pointing instead to the quality of data the projections were based on.
Milliman’s contract ends June 30, according to the state’s transparency portal. Instead of renewing, the state is negotiating with Deloitte Consulting LLP to take over the Indiana Family and Social Services Administration’s Medicaid services, according to a preliminary notice posted online Tuesday.
“While we are naturally disappointed with the recent decision in Indiana’s RFP for Medicaid actuarial services, we want to emphasize that this outcome was following a standard competitive procurement process,” Milliman said in a written statement sent to IBJ.
Since learning about the error, lawmakers have had to use the state’s reserves to pay for the under-budgeting. They’ve also cut costs, specifically by implementing assisted living waitlists and eliminating a pandemic-era practice that allowed parents to be paid as caregivers for their medically complex children.
In December 2024, Sen. Chris Garten, R-Charlestown, and Rep. Ed DeLaney, D-Indianapolis, grilled Jeremy Palmer, principal and consulting actuary with Milliman, over how the shortfall happened.
Palmer refused to call the shortfall a mistake, but rather a “forecast assumption.”
“Outside of government, if somebody made a billion-dollar mistake, you would have been fired,” Garten said at the time. “I’m looking for accountability, because this is Hoosier taxpayer money that’s squandered, as far as I’m concerned.”
In a Wednesday news release, DeLaney celebrated the decision to switch from Milliman.
“While I am still coming to terms with the fact that the public may never know what exactly happened to allow this egregious error, this is a good first step in correcting course,” Delaney said in the release. “Someone may be held accountable at last.”
The state has 45 days to finalize the deal with Deloitte.