Notwithstanding any other provision of this subchapter, the Secretary shall establish a demonstration program under which States may provide under their State plans under this subchapter (including such a plan operating under a statewide waiver under section
1315 of this title) in accordance with this section for the provision of alternative benefits consistent with subsection (c) for eligible population groups in one or more geographic areas of the State specified by the State. An amendment under the previous sentence is referred to in this section as a “State demonstration program”.
(2) Initial demonstration
(A) In general
The demonstration program under this section shall begin on January 1, 2007. During the first 5 years of such program, the Secretary shall not approve more than 10 States to conduct demonstration programs under this section, with each State demonstration program covering 1 or more geographic areas specified by the State. After such 5-year period—
(i)unless the Secretary finds, taking into account cost-effectiveness, quality of care, and other criteria that the Secretary specifies, that a State demonstration program previously implemented has been unsuccessful, such a demonstration program may be extended or made permanent in the State; and
(ii)unless the Secretary finds, taking into account cost-effectiveness, quality of care, and other criteria that the Secretary specifies, that all State demonstration programs previously implemented were unsuccessful, other States may implement State demonstration programs.
(B) GAO report
Not later than 3 months after the end of the 5-year period described in subparagraph (A), the Comptroller General of the United States shall submit a report to Congress evaluating the demonstration programs conducted under this section during such period.
Out of any funds in the Treasury not otherwise appropriated, there is appropriated to the Comptroller General of the United States, $550,000 for the period of fiscal years 2007 through 2010 to carry out clause (i).
The Secretary shall not approve a State demonstration program under paragraph (1) unless the program includes the following:
(A)Creating patient awareness of the high cost of medical care.
(B)Providing incentives to patients to seek preventive care services.
(C)Reducing inappropriate use of health care services.
(D)Enabling patients to take responsibility for health outcomes.
(E)Providing enrollment counselors and ongoing education activities.
(F)Providing transactions involving health opportunity accounts to be conducted electronically and without cash.
(G)Providing access to negotiated provider payment rates consistent with this section.
Nothing in this section shall be construed as preventing a State demonstration program from providing incentives for patients obtaining appropriate preventive care (as defined for purposes of section 223(c)(2)(C) of the Internal Revenue Code of 1986), such as additional account contributions for an individual demonstrating healthy prevention practices.
(4) No requirement for statewideness
Nothing in this section or any other provision of law shall be construed to require that a State must provide for the implementation of a State demonstration program on a Statewide  basis.
(b) Eligible population groups
(1) In general
A State demonstration program under this section shall specify the eligible population groups consistent with paragraphs (2) and (3).
(2) Eligibility limitations during initial demonstration period
During the initial 5 years of the demonstration program under this section, a State demonstration program shall not apply to any of the following individuals:
(A)Individuals who are 65 years of age or older.
(B)Individuals who are disabled, regardless of whether or not their eligibility for medical assistance under this subchapter is based on such disability.
(C)Individuals who are eligible for medical assistance under this subchapter only because they are (or were within the previous 60 days) pregnant.
(D)Individuals who have been eligible for medical assistance for a continuous period of less than 3 months.
(3) Additional limitations
A State demonstration program shall not apply to any individual within a category of individuals described in section
1396u–7(a)(2)(B) of this title.
(A) State option
This subsection shall not be construed as preventing a State from further limiting eligibility.
(B) On enrollees in Medicaid managed care organizations
Insofar as the State provides for eligibility of individuals who are enrolled in Medicaid managed care organizations, such individuals may participate in the State demonstration program only if the State provides assurances satisfactory to the Secretary that the following conditions are met with respect to any such organization:
(i)In no case may the number of such individuals enrolled in the organization who participate in the program exceed 5 percent of the total number of individuals enrolled in such organization.
(ii)The proportion of enrollees in the organization who so participate is not significantly disproportionate to the proportion of such enrollees in other such organizations who participate.
(iii)The State has provided for an appropriate adjustment in the per capita payments to the organization to account for such participation, taking into account differences in the likely use of health services between enrollees who so participate and enrollees who do not so participate.
(5) Voluntary participation
An eligible individual shall be enrolled in a State demonstration program only if the individual voluntarily enrolls. Except in such hardship cases as the Secretary shall specify, such an enrollment shall be effective for a period of 12 months, but may be extended for additional periods of 12 months each with the consent of the individual.
(6) 1-year moratorium for reenrollment
An eligible individual who, for any reason, is disenrolled from a State demonstration program conducted under this section shall not be permitted to reenroll in such program before the end of the 1-year period that begins on the effective date of such disenrollment.
(c) Alternative benefits
(1) In general
The alternative benefits provided under this section shall consist, consistent with this subsection, of at least—
(A)coverage for medical expenses in a year for items and services for which benefits are otherwise provided under this subchapter after an annual deductible described in paragraph (2) has been met; and
(B)contribution into a health opportunity account.
Nothing in subparagraph (A) shall be construed as preventing a State from providing for coverage of preventive care (referred to in subsection (a)(3)) within the alternative benefits without regard to the annual deductible.
(2) Annual deductible
The amount of the annual deductible described in paragraph (1)(A) shall be at least 100 percent, but no more than 110 percent, of the annualized amount of contributions to the health opportunity account under subsection (d)(2)(A)(i), determined without regard to any limitation described in subsection (d)(2)(C)(i)(II).
(3) Access to negotiated provider payment rates
(A) Fee-for-service enrollees
In the case of an individual who is participating in a State demonstration program and who is not enrolled with a Medicaid managed care organization, the State shall provide that the individual may obtain demonstration program Medicaid services from—
(i)any participating provider under this subchapter at the same payment rates that would be applicable to such services if the deductible described in paragraph (1)(A) was not applicable; or
(ii)any other provider at payment rates that do not exceed 125 percent of the payment rate that would be applicable to such services furnished by a participating provider under this subchapter if the deductible described in paragraph (1)(A) was not applicable.
(B) Treatment under medicaid managed care plans
In the case of an individual who is participating in a State demonstration program and is enrolled with a Medicaid managed care organization, the State shall enter into an arrangement with the organization under which the individual may obtain demonstration program Medicaid services from any provider described in clause (ii) of subparagraph (A) at payment rates that do not exceed the payment rates that may be imposed under that clause.
The payment rates described in subparagraphs (A) and (B) shall be computed without regard to any cost sharing that would be otherwise applicable under sections
1396o–1 of this title.
For purposes of this paragraph:
(i)The term “demonstration program Medicaid services” means, with respect to an individual participating in a State demonstration program, services for which the individual would be provided medical assistance under this subchapter but for the application of the deductible described in paragraph (1)(A).
(ii)The term “participating provider” means—
(I)with respect to an individual described in subparagraph (A), a health care provider that has entered into a participation agreement with the State for the provision of services to individuals entitled to benefits under the State plan; or
(II)with respect to an individual described in subparagraph (B) who is enrolled in a Medicaid managed care organization, a health care provider that has entered into an arrangement for the provision of services to enrollees of the organization under this subchapter.
(4) No effect on subsequent benefits
Except as provided under paragraphs (1) and (2), alternative benefits for an eligible individual shall consist of the benefits otherwise provided to the individual, including cost sharing relating to such benefits.
(5) Overriding cost sharing and comparability requirements for alternative benefits
The provisions of this subchapter relating to cost sharing for benefits (including sections
1396o–1 of this title) shall not apply with respect to benefits to which the annual deductible under paragraph (1)(A) applies. The provisions of section
1396a(a)(10)(B) of this title (relating to comparability) shall not apply with respect to the provision of alternative benefits (as described in this subsection).
(6) Treatment as medical assistance
Subject to subparagraphs (D) and (E) of subsection (d)(2), payments for alternative benefits under this section (including contributions into a health opportunity account) shall be treated as medical assistance for purposes of section
1396b(a) of this title.
(7) Use of tiered deductible and cost sharing
(A) In general
(i)may vary the amount of the annual deductible applied under paragraph (1)(A) based on the income of the family involved so long as it does not favor families with higher income over those with lower income; and
(ii)may vary the amount of the maximum out-of-pocket cost sharing (as defined in subparagraph (B)) based on the income of the family involved so long as it does not favor families with higher income over those with lower income.
(B) Maximum out-of-pocket cost sharing
For purposes of subparagraph (A)(ii), the term “maximum out-of-pocket cost sharing” means, for an individual or family, the amount by which the annual deductible level applied under paragraph (1)(A) to the individual or family exceeds the balance in the health opportunity account for the individual or family.
(8) Contributions by employers
Nothing in this section shall be construed as preventing an employer from providing health benefits coverage consisting of the coverage described in paragraph (1)(A) to individuals who are provided alternative benefits under this section.
(d) Health opportunity account
(1) In general
For purposes of this section, the term “health opportunity account” means an account that meets the requirements of this subsection.
(A) In general
No contribution may be made into a health opportunity account except—
(i)contributions by the State under this subchapter; and
(ii)contributions by other persons and entities, such as charitable organizations, as permitted under section
1396b(w) of this title.
(B) State contribution
A State shall specify the contribution amount that shall be deposited under subparagraph (A)(i) into a health opportunity account.
(C) Limitation on annual State contribution provided and permitting imposition of maximum account balance
(I)may impose limitations on the maximum contributions that may be deposited under subparagraph (A)(i) into a health opportunity account in a year;
(II)may limit contributions into such an account once the balance in the account reaches a level specified by the State; and
(III)subject to clauses (ii) and (iii) and subparagraph (D)(i), may not provide contributions described in subparagraph (A)(i) to a health opportunity account on behalf of an individual or family to the extent the amount of such contributions (including both State and Federal shares) exceeds, on an annual basis, $2,500 for each individual (or family member) who is an adult and $1,000 for each individual (or family member) who is a child.
(ii)Indexing of dollar limitations
For each year after 2006, the dollar amounts specified in clause (i)(III) shall be annually increased by the Secretary by a percentage that reflects the annual percentage increase in the medical care component of the consumer price index for all urban consumers.
(iii)Budget neutral adjustment
A State may provide for dollar limitations in excess of those specified in clause (i)(III) (as increased under clause (ii)) for specified individuals if the State provides assurances satisfactory to the Secretary that contributions otherwise made to other individuals will be reduced in a manner so as to provide for aggregate contributions that do not exceed the aggregate contributions that would otherwise be permitted under this subparagraph.
(D) Limitations on Federal matching
A State may contribute under subparagraph (A)(i) amounts to a health opportunity account in excess of the limitations provided under subparagraph (C)(i)(III), but no Federal financial participation shall be provided under section
1396b(a) of this title with respect to contributions in excess of such limitations.
(ii)No FFP for private contributions
No Federal financial participation shall be provided under section
1396b(a) of this title with respect to any contributions described in subparagraph (A)(ii) to a health opportunity account.
(E) Application of different matching rates
The Secretary shall provide a method under which, for expenditures made from a health opportunity account for medical care for which the Federal matching rate under section
1396b(a) of this title exceeds the Federal medical assistance percentage, a State may obtain payment under such section at such higher matching rate for such expenditures.
(A) General uses
Subject to the succeeding provisions of this paragraph, amounts in a health opportunity account may be used for payment of such health care expenditures as the State specifies.
Subject to subparagraph (B)(ii), in no case shall such account be used for payment for health care expenditures that are not payment of medical care (as defined by section 213(d) of the Internal Revenue Code of 1986).
In applying clause (i), a State may restrict payment for—
(I)providers of items and services to providers that are licensed or otherwise authorized under State law to provide the item or service and may deny payment for such a provider on the basis that the provider has been found, whether with respect to this subchapter or any other health benefit program, to have failed to meet quality standards or to have committed 1 or more acts of fraud or abuse; and
(II)items and services insofar as the State finds they are not medically appropriate or necessary.
The State demonstration program shall provide for a method whereby withdrawals may be made from the account for such purposes using an electronic system and shall not permit withdrawals from the account in cash.
(B) Maintenance of health opportunity account after becoming ineligible for public benefit
Notwithstanding any other provision of law, if an account holder of a health opportunity account becomes ineligible for benefits under this subchapter because of an increase in income or assets—
(I)no additional contribution shall be made into the account under paragraph (2)(A)(i);
(II)subject to clause (iii), the balance in the account shall be reduced by 25 percent; and
(III)subject to the succeeding provisions of this subparagraph, the account shall remain available to the account holder for 3 years after the date on which the individual becomes ineligible for such benefits for withdrawals under the same terms and conditions as if the account holder remained eligible for such benefits, and such withdrawals shall be treated as medical assistance in accordance with subsection (c)(6).
Withdrawals under this subparagraph from an account—
(I)shall be available for the purchase of health insurance coverage; and
(II)may, subject to clause (iv), be made available (at the option of the State) for such additional expenditures (such as job training and tuition expenses) specified by the State (and approved by the Secretary) as the State may specify.
(iii)Exception from 25 percent savings to Government for private contributions
Clause (i)(II) shall not apply to the portion of the account that is attributable to contributions described in paragraph (2)(A)(ii). For purposes of accounting for such contributions, withdrawals from a health opportunity account shall first be attributed to contributions described in paragraph (2)(A)(i).
(iv)Condition for non-health withdrawals
No withdrawal may be made from an account under clause (ii)(II) unless the account holder has participated in the program under this section for at least 1 year.
(v)No requirement for continuation of coverage
An account holder of a health opportunity account, after becoming ineligible for medical assistance under this subchapter, is not required to purchase high-deductible or other insurance as a condition of maintaining or using the account.
A State may coordinate administration of health opportunity accounts through the use of a third party administrator and reasonable expenditures for the use of such administrator shall be reimbursable to the State in the same manner as other administrative expenditures under section
1396b(a)(7) of this title.
Amounts in, or contributed to, a health opportunity account shall not be counted as income or assets for purposes of determining eligibility for benefits under this subchapter.
(6) Unauthorized withdrawals
A State may establish procedures—
(A)to penalize or remove an individual from the health opportunity account based on nonqualified withdrawals by the individual from such an account; and
(B)to recoup costs that derive from such nonqualified withdrawals.
 So in original. Probably should not be capitalized.
The Internal Revenue Code of 1986, referred to in subsecs. (a)(3) and (d)(3)(A)(ii), is classified generally to Title 26, Internal Revenue Code.
A prior section 1938 of act Aug. 14, 1935, was renumbered section
1939 and is classified to section
1396v of this title.
Prohibiting Initiation of New Health Opportunity Account Demonstration Programs
Pub. L. 111–3, title VI, § 613,Feb. 4, 2009, 123 Stat. 101, provided that: “After the date of the enactment of this Act [Feb. 4, 2009], the Secretary of Health and Human Services may not approve any new demonstration programs under section 1938 of the Social Security Act (42 U.S.C. 1396u–8).”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
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Description of Change
Statutes at Large
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