II 

109TH CONGRESS 

1ST SESSION S. 1833 

To amend title XIX of the Social Security Act to provide for health 

opportunity accounts under the Medicaid Program. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 6, 2005 

Mr. CRAPO introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to provide 

for health opportunity accounts under the Medicaid Program. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Medicaid Health Op5 portunity Account Act of 2005’’. 

6 SEC. 2. HEALTH OPPORTUNITY ACCOUNTS UNDER THE 

7 MEDICAID PROGRAM. 

8 Title XIX of the Social Security Act is amended— 

9 (1) by redesignating section 1936 as section 

10 1937; and 
2 

•S 1833 IS

1 (2) by inserting after section 1935 the following 

2 new section: 

3 ‘‘HEALTH OPPORTUNITY ACCOUNTS

4 ‘‘SEC. 1936. (a) AUTHORITY.— 

5 ‘‘(1) IN GENERAL.—Notwithstanding any other 

6 provision of this title, the Secretary shall establish a 

7 demonstration program under which States may pro8 vide under their State plans under this title (includ9 ing such a plan operating under a statewide waiver 

10 under section 1115) in accordance with this section 

11 for the provision of alternative benefits consistent 

12 with subsection (c) for eligible population groups in 

13 one or more geographic areas of the State specified 

14 by the State. An amendment under the previous sen15 tence is referred to in this section as a ‘State dem16 onstration program’. 

17 ‘‘(2) INITIAL DEMONSTRATION.—The dem18 onstration program under this section shall begin on 

19 January 1, 2006. During the first 5 years of such 

20 program, the Secretary shall not approve more than 

21 10 State demonstration programs, with each State 

22 demonstration program covering one or more geo23 graphic areas specified by the State. After such 5- 

24 year period— 

25 ‘‘(A) unless the Secretary finds, taking 

26 into account cost-effectiveness, quality of care, 
3 

•S 1833 IS

1 and other criteria that the Secretary specifies, 

2 that a State demonstration program previously 

3 implemented has been unsuccessful, such a 

4 demonstration program may be extended or 

5 made permanent in the State; and 

6 ‘‘(B) unless the Secretary finds, taking 

7 into account cost-effectiveness, quality of care, 

8 and other criteria that the Secretary specifies, 

9 that all State demonstration programs pre10 viously implemented were unsuccessful, other 

11 States may implement State demonstration pro12 grams. 

13 ‘‘(3) APPROVAL.—The Secretary shall not ap14 prove a State demonstration program under para15 graph (1) unless the program incorporates the fol16 lowing: 

17 ‘‘(A) Creating patient awareness of the 

18 high cost of medical care. 

19 ‘‘(B) Providing incentives to patients to 

20 seek preventive care services. 

21 ‘‘(C) Reducing inappropriate use of health 

22 care services. 

23 ‘‘(D) Enabling patients to take responsi24 bility for health outcomes. 
4 

•S 1833 IS

1 ‘‘(E) Providing enrollment counselors and 

2 ongoing education activities. 

3 ‘‘(F) Providing transactions involving 

4 health opportunity accounts to be conducted 

5 electronically and without cash. 

6 ‘‘(G) Providing access to negotiated pro7 vider payment rates consistent with this section. 

8 Nothing in this section shall be construed as pre9 venting a State demonstration program from pro10 viding incentives for patients obtaining appropriate 

11 preventive care (as defined for purposes of section 

12 223(c)(2)(C) of the Internal Revenue Code of 1986), 

13 such as additional account contributions for an indi14 vidual demonstrating healthy prevention practices. 

15 ‘‘(4) NO REQUIREMENT FOR

16 STATEWIDENESS.—Nothing in this section or any 

17 other provision of law shall be construed to require 

18 that a State must provide for the implemention of 

19 a State demonstration program on a Statewide 

20 basis. 

21 ‘‘(5) REPORTS.—The Secretary shall periodi22 cally submit to Congress reports regarding the suc23 cess of State demonstration programs. 

24 ‘‘(b) ELIGIBLE POPULATION GROUPS.— 
5 

•S 1833 IS

1 ‘‘(1) IN GENERAL.—A State demonstration pro2 gram under this section shall specify the eligible 

3 population groups consistent with paragraph (2). 

4 ‘‘(2) ELIGIBILITY LIMITATIONS DURING INITIAL

5 DEMONSTRATION PERIOD.—During the initial 5 

6 years of the demonstration program under this sec7 tion, a State demonstration project shall not apply 

8 to any of the following individuals: 

9 ‘‘(A) Individuals who are 65 years of age 

10 or older. 

11 ‘‘(B) Individuals who are disabled, regard12 less of whether or not their eligibility for med13 ical assistance under this title is based on such 

14 disability. 

15 ‘‘(C) Individuals who are eligible for med16 ical assistance under this title only because they 

17 are (or were within the previous 60 days) preg18 nant. 

19 ‘‘(D) Individuals who have been eligible for 

20 medical assistance for a continuous period of 

21 less than 3 months. 

22 ‘‘(3) LIMITATIONS.— 

23 ‘‘(A) STATE OPTION.—This subsection 

24 shall not be construed as preventing a State 

25 from further limiting eligibility to individuals 
6 

•S 1833 IS

1 who are likely to be eligible for medical assist2 ance for a period of one year or longer. 

3 ‘‘(B) ON ENROLLEES IN MEDICAID MAN4 AGED CARE ORGANIZATIONS.—Insofar as the 

5 State provides for eligibility of individuals who 

6 are enrolled in medicaid managed care organi7 zations, such individuals may participate in the 

8 State demonstration project only if the State 

9 provides assurances satisfactory to the Sec10 retary that the following conditions are met 

11 with respect to any such organization: 

12 ‘‘(i) In no case may the number of 

13 such individuals enrolled in the organiza14 tion who participate in the project exceed 

15 5 percent of the total number of individ16 uals enrolled in such organization. 

17 ‘‘(ii) The proportion of enrollees in 

18 the organization who so participate is not 

19 significantly disproportionate to the pro20 portion of such enrollees in other such or21 ganizations who participate. 

22 ‘‘(iii) The State has provided for an 

23 appropriate adjustment in the per capita 

24 payments to the organization to account 

25 for such participation, taking into account 
7 

•S 1833 IS

1 differences in the likely use of health serv2 ices between enrollees who so participate 

3 and enrollees who do not so participate. 

4 ‘‘(4) VOLUNTARY PARTICIPATION.—An eligible 

5 individual shall be enrolled in a State demonstration 

6 project only if the individual voluntarily enrolls. 

7 Such an enrollment shall be effective for a period of 

8 12 months, but may be extended for additional peri9 ods of 12 months each with the consent of the indi10 vidual. 

11 ‘‘(c) ALTERNATIVE BENEFITS.— 

12 ‘‘(1) IN GENERAL.—The alternative benefits 

13 provided under this section shall consist, consistent 

14 with this subsection, of at least— 

15 ‘‘(A) coverage for medical expenses in a 

16 year for items and services for which benefits 

17 are otherwise provided under this title after an 

18 annual deductible described in paragraph (2) 

19 has been met; and 

20 ‘‘(B) contribution into a health opportunity 

21 account. 

22 Nothing in subparagraph (A) shall be construed as 

23 preventing a State from providing for coverage of 

24 preventive care (referred to in subsection (a)(3)) 
8 

•S 1833 IS

1 within the alternative benefits without regard to the 

2 annual deductible. 

3 ‘‘(2) ANNUAL DEDUCTIBLE.—The amount of 

4 the annual deductible described in paragraph (1)(A) 

5 shall be at least 100 percent, but no more than 110 

6 percent, of the annualized amount of contributions 

7 to the health opportunity account under subsection 

8 (d)(2)(A)(i), determined without regard to any limi9 tation described in subsection (d)(2)(C)(ii). 

10 ‘‘(3) ACCESS TO NEGOTIATED PROVIDER PAY11 MENT RATES.— 

12 ‘‘(A) FEE-FOR-SERVICE ENROLLEES.—In 

13 the case of an individual who is participating in 

14 a State demonstration project and who is not 

15 enrolled with a medicaid managed care organi16 zation, the State shall provide that the indi17 vidual may obtain demonstration project med18 icaid services from— 

19 ‘‘(i) any participating provider under 

20 this title at the same payment rates that 

21 would be applicable to such services if the 

22 deductible described in paragraph (1)(A) 

23 was not applicable; or 

24 ‘‘(ii) any provider at payment rates 

25 that do not exceed 125 percent of the pay-
9 

•S 1833 IS

1 ment rate that would be applicable to such 

2 services furnished by a participating pro3 vider under this title if the deductible de4 scribed in paragraph (1)(A) was not appli5 cable. 

6 ‘‘(B) TREATMENT UNDER MEDICAID MAN7 AGED CARE PLANS.—In the case of an indi8 vidual who is participating in a State dem9 onstration project and is enrolled with a med10 icaid managed care organization, the State shall 

11 enter into an arrangement with the organiza12 tion under which the individual may obtain 

13 demonstration project medicaid services from 

14 any provider under such organization at pay15 ment rates that do not exceed the payment rate 

16 that would be applicable to such services if the 

17 deductible described in paragraph (1)(A) was 

18 not applicable. 

19 ‘‘(C) COMPUTATION.—The payment rates 

20 described in subparagraphs (A) and (B) shall 

21 be computed without regard to any cost-sharing 

22 that would be otherwise applicable under sec23 tion 1916. 

24 ‘‘(D) DEFINITIONS.—For purposes of this 

25 paragraph: 
10 

•S 1833 IS

1 ‘‘(i) The term ‘demonstration project 

2 medicaid services’ means, with respect to 

3 an individual participating in a State dem4 onstration project, services for which the 

5 individual would be provided medical as6 sistance under this title but for the appli7 cation of the deductible described in para8 graph (1)(A). 

9 ‘‘(ii) The term ‘participating provider’ 

10 means— 

11 ‘‘(I) with respect to an individual 

12 described in subparagraph (A), a 

13 health care provider that has entered 

14 into a participation agreement with 

15 the State for the provision of services 

16 to individuals entitled to benefits 

17 under the State plan; or 

18 ‘‘(II) with respect to an indi19 vidual described in subparagraph (B) 

20 who is enrolled in a medicaid man21 aged care organization, a health care 

22 provider that has entered into an ar23 rangement for the provision of serv24 ices to enrollees of the organization 

25 under this title. 
11 

•S 1833 IS

1 ‘‘(4) NO EFFECT ON SUBSEQUENT BENEFITS.— 

2 Except as provided under paragraphs (1) and (2), 

3 alternative benefits for an eligible individual shall 

4 consist of the benefits otherwise provided to the indi5 vidual, including cost-sharing relating to such bene6 fits. 

7 ‘‘(5) OVERRIDING COST-SHARING AND COM8 PARABILITY REQUIREMENTS FOR ALTERNATIVE

9 BENEFITS.—The provisions of this title relating to 

10 cost-sharing for benefits (including section 1916) 

11 shall not apply with respect to benefits to which the 

12 annual deductible under paragraph (1)(A) applies. 

13 The provisions of section 1902(a)(10)(B) (relating 

14 to comparability) shall not apply with respect to the 

15 provision of alternative benefits (as described in this 

16 subsection). 

17 ‘‘(6) TREATMENT AS MEDICAL ASSISTANCE.— 

18 Subject to subparagraphs (D) and (E) of subsection 

19 (d)(2), payments for alternative benefits under this 

20 section (including contributions into a health oppor21 tunity account) shall be treated as medical assist22 ance for purposes of section 1903(a). 

23 ‘‘(7) USE OF TIERED DEDUCTIBLE AND COST24 SHARING.— 

25 ‘‘(A) IN GENERAL.—A State— 
12 

•S 1833 IS

1 ‘‘(i) may vary the amount of the an2 nual deductible applied under paragraph 

3 (1)(A) based on the income of the family 

4 involved so long as it does not favor fami5 lies with higher income over those with 

6 lower income; and 

7 ‘‘(ii) may vary the amount of the max8 imum out-of-pocket cost-sharing (as de9 fined in subparagraph (B)) based on the 

10 income of the family involved so long as it 

11 does not favor families with higher income 

12 over those with lower income. 

13 ‘‘(B) MAXIMUM OUT-OF-POCKET COST14 SHARING.—For purposes of subparagraph 

15 (A)(ii), the term ‘maximum out-of-pocket cost16 sharing’ means, for an individual or family, the 

17 amount by which the annual deductible level ap18 plied under paragraph (1)(A) to the individual 

19 or family exceeds the balance in the health op20 portunity account for the individual or family. 

21 ‘‘(8) CONTRIBUTIONS BY EMPLOYERS.—Noth22 ing in this section shall be construed as preventing 

23 an employer from providing health benefits coverage 

24 consisting of the coverage described in paragraph 
13 

•S 1833 IS

1 (1)(A) to individuals who are provided alternative 

2 benefits under this section. 

3 ‘‘(d) HEALTH OPPORTUNITY ACCOUNT.— 

4 ‘‘(1) IN GENERAL.—For purposes of this sec5 tion, the term ‘health opportunity account’ means an 

6 account that meets the requirements of this sub7 section. 

8 ‘‘(2) CONTRIBUTIONS.— 

9 ‘‘(A) IN GENERAL.—No contribution may 

10 be made into a health opportunity account ex11 cept— 

12 ‘‘(i) contributions by the State under 

13 this title; and 

14 ‘‘(ii) contributions by other persons 

15 and entities, such as charitable organiza16 tions. 

17 ‘‘(B) STATE CONTRIBUTION.—A State 

18 shall specify the contribution amount that shall 

19 be deposited under subparagraph (A)(i) into a 

20 health opportunity account. 

21 ‘‘(C) LIMITATION ON ANNUAL STATE CON22 TRIBUTION PROVIDED AND PERMITTING IMPO23 SITION OF MAXIMUM ACCOUNT BALANCE.— 

24 ‘‘(i) IN GENERAL.—A State— 
14 

•S 1833 IS

1 ‘‘(I) may impose limitations on 

2 the maximum contributions that may 

3 be deposited under subparagraph 

4 (A)(i) into a health opportunity ac5 count in a year; 

6 ‘‘(II) may limit contributions into 

7 such an account once the balance in 

8 the account reaches a level specified 

9 by the State; and 

10 ‘‘(III) subject to clauses (ii) and 

11 (iii) and subparagraph (D)(i), may 

12 not provide contributions described in 

13 subparagraph (A)(i) to a health op14 portunity account on behalf of an in15 dividual or family to the extent the 

16 amount of such contributions (includ17 ing both State and Federal shares) 

18 exceeds, on an annual basis, $2,500 

19 for each individual (or family mem20 ber) who is an adult and $1,000 for 

21 each individual (or family member) 

22 who is a child. 

23 ‘‘(ii) INDEXING OF DOLLAR LIMITA24 TIONS.—For each year after 2006, the dol25 lar amounts specified in clause (i)(III) 
15 

•S 1833 IS

1 shall be annually increased by the Sec2 retary by a percentage that reflects the an3 nual percentage increase in the medical 

4 care component of the consumer price 

5 index for all urban consumers. 

6 ‘‘(iii) BUDGET NEUTRAL ADJUST7 MENT.—A State may provide for dollar 

8 limitations in excess of those specified in 

9 clause (i)(III) (as increased under clause 

10 (ii)) for specified individuals if the State 

11 provides assurances satisfactory to the Sec12 retary that contributions otherwise made 

13 to other individuals will be reduced in a 

14 manner so as to provide for aggregate con15 tributions that do not exceed the aggregate 

16 contributions that would otherwise be per17 mitted under this subparagraph. 

18 ‘‘(D) LIMITATIONS ON FEDERAL MATCH19 ING.— 

20 ‘‘(i) STATE CONTRIBUTION.—A State 

21 may contribute under subparagraph (A)(i) 

22 amounts to a health opportunity account in 

23 excess of the limitations provided under 

24 subparagraph (C)(i)(III), but no Federal 

25 financial participation shall be provided 
16 

•S 1833 IS

1 under section 1903(a) with respect to con2 tributions in excess of such limitations. 

3 ‘‘(ii) NO FFP FOR PRIVATE CONTRIBU4 TIONS.—No Federal financial participation 

5 shall be provided under section 1903(a) 

6 with respect to any contributions described 

7 in subparagraph (A)(ii) to a health oppor8 tunity account. 

9 ‘‘(E) APPLICATION OF DIFFERENT MATCH10 ING RATES.—The Secretary shall provide a 

11 method under which, for expenditures made 

12 from a health opportunity account for medical 

13 care for which the Federal matching rate under 

14 section 1903(a) exceeds the Federal medical as15 sistance percentage, a State may obtain pay16 ment under such section at such higher match17 ing rate for such expenditures. 

18 ‘‘(3) USE.— 

19 ‘‘(A) GENERAL USES.— 

20 ‘‘(i) IN GENERAL.—Subject to the 

21 succeeding provisions of this paragraph, 

22 amounts in a health opportunity account 

23 may be used for payment of such health 

24 care expenditures as the State specifies. 
17 

•S 1833 IS

1 ‘‘(ii) GENERAL LIMITATION.—In no 

2 case shall such account be used for pay3 ment for health care expenditures that are 

4 not payment of medical care (as defined by 

5 section 213(d) of the Internal Revenue 

6 Code of 1986). 

7 ‘‘(iii) STATE RESTRICTIONS.—In ap8 plying clause (i), a State may restrict pay9 ment for— 

10 ‘‘(I) providers of items and serv11 ices to providers that are licensed or 

12 otherwise authorized under State law 

13 to provide the item or service and may 

14 deny payment for such a provider on 

15 the basis that the provider has been 

16 found, whether with respect to this 

17 title or any other health benefit pro18 gram, to have failed to meet quality 

19 standards or to have committed one 

20 or more acts of fraud or abuse; and 

21 ‘‘(II) items and services insofar 

22 as the State finds they are not medi23 cally appropriate or necessary. 

24 ‘‘(iv) ELECTRONIC WITHDRAWALS.— 

25 The State demonstration program shall 
18 

•S 1833 IS

1 provide for a method whereby withdrawals 

2 may be made from the account for such 

3 purposes using an electronic system and 

4 shall not permit withdrawals from the ac5 count in cash. 

6 ‘‘(B) MAINTENANCE OF HEALTH OPPOR7 TUNITY ACCOUNT AFTER BECOMING INELI8 GIBLE FOR PUBLIC BENEFIT; 25 PERCENT SAV9 INGS TO GOVERNMENT.— 

10 ‘‘(i) IN GENERAL.—Notwithstanding 

11 any other provision of law, if an account 

12 holder of a health opportunity account be13 comes ineligible for benefits under this title 

14 because of an increase in income or as15 sets— 

16 ‘‘(I) no additional contribution 

17 shall be made into the account under 

18 paragraph (2)(A)(i); 

19 ‘‘(II) subject to clause (iii), the 

20 balance in the account shall be re21 duced by 25 percent; and 

22 ‘‘(III) subject to the succeeding 

23 provisions of this subparagraph, the 

24 account shall remain available to the 

25 account holder for withdrawals under 
19 

•S 1833 IS

1 the same terms and conditions as if 

2 the account holder remained eligible 

3 for such benefits. 

4 ‘‘(ii) SPECIAL RULES.—Withdrawals 

5 under this subparagraph from an ac6 count— 

7 ‘‘(I) shall be available for the 

8 purchase of health insurance coverage; 

9 and 

10 ‘‘(II) may, subject to clause (iv), 

11 be made available (at the option of 

12 the State) for such additional expendi13 tures (such as job training and tuition 

14 expenses) specified by the State (and 

15 approved by the Secretary) as the 

16 State may specify. 

17 ‘‘(iii) EXCEPTION FROM 25 PERCENT

18 SAVINGS TO GOVERNMENT FOR PRIVATE

19 CONTRIBUTIONS.—Clause (i)(II) shall not 

20 apply to the portion of the account that is 

21 attributable to contributions described in 

22 paragraph (2)(A)(ii). For purposes of ac23 counting for such contributions, with24 drawals from a health opportunity account 
20 

•S 1833 IS

1 shall first be attributed to contributions 

2 described in paragraph (2)(A)(i). 

3 ‘‘(iv) CONDITION FOR NON-HEALTH

4 WITHDRAWALS.—No withdrawal may be 

5 made from an account under clause (ii)(II) 

6 unless the accountholder has participated 

7 in the program under this section for at 

8 least 1 year. 

9 ‘‘(v) NO REQUIREMENT FOR CONTINU10 ATION OF COVERAGE.—An account holder 

11 of a health opportunity account, after be12 coming ineligible for medical assistance 

13 under this title, is not required to purchase 

14 high-deductible or other insurance as a 

15 condition of maintaining or using the ac16 count. 

17 ‘‘(4) ADMINISTRATION.—A State may coordi18 nate administration of health opportunity accounts 

19 through the use of a third party administrator. 

20 ‘‘(5) TREATMENT.—Amounts in, or contributed 

21 to, a health opportunity account shall not be counted 

22 as income or assets for purposes of determining eli23 gibility for benefits under this title. 

24 ‘‘(6) UNAUTHORIZED WITHDRAWALS.—A State 

25 may establish procedures— 
21 

•S 1833 IS

1 ‘‘(A) to penalize or remove an individual 

2 from the health opportunity account based on 

3 nonqualified withdrawals by the individual from 

4 such an account; and 

5 ‘‘(B) to recoup costs that derive from such 

6 nonqualified withdrawals.’’. 

Æ