260 
‘‘(3) TREATMENT
IN
RELATION
TO
SPOUSAL 
SHARE.—To the extent that an entrance fee is deter-
mined to be an available resource to an individual 
applying for medical assistance and the individual 
has a community spouse as defined in section 
1924(h), the entrance fee shall be considered in the 
computation of spousal share pursuant to section 
1924(c).’’. 
CHAPTER 3—FLEXIBILITY IN COST 
SHARING AND BENEFITS 
SEC. 3121. STATE OPTION FOR ALTERNATIVE MEDICAID 
PREMIUMS AND COST SHARING. 
(a) IN GENERAL.—Title XIX of the Social Security 
Act is amended by inserting after section 1916 the fol-
lowing new section: 
‘‘STATE OPTION FOR ALTERNATIVE PREMIUMS AND COST 
SHARING 
‘‘SEC. 1916A. (a) STATE FLEXIBILITY.— 
‘‘(1) IN
GENERAL.—Notwithstanding sections 
1916 and 1902(a)(10)(B), a State, at its option and 
through a State plan amendment, may impose pre-
miums and cost sharing for any group of individuals 
(as specified by the State) and for any type of serv-
ices (and may vary such premiums and cost sharing 
among such groups or types, including through the 
use of tiered cost sharing for prescription drugs)
261 
consistent with the limitations established under this 
section. Nothing in this section shall be construed as 
superseding (or preventing the application of) sec-
tion 1916(g). 
‘‘(2) DEFINITIONS.—In this section: 
‘‘(A) PREMIUM.—The term ‘premium’ in-
cludes any enrollment fee or similar charge. 
‘‘(B) COST
SHARING.—The term ‘cost 
sharing’ includes any deduction, deductible, co-
payment, or similar charge. 
‘‘(b) LIMITATIONS ON EXERCISE OF AUTHORITY.— 
‘‘(1) 
INDIVIDUALS
WITH
FAMILY
INCOME 
BELOW 100 PERCENT OF POVERTY LEVEL.—In the 
case of an individual whose family income does not 
exceed 100 percent of the Federal poverty level ap-
plicable to a family of the size involved, subject to 
subsections (c)(2) and (e)(2)(A), the limitations oth-
erwise provided under subsections (a) and (b) of sec-
tion 1916 shall continue to apply and no premium 
will be imposed under the plan, except that the total 
annual aggregate amount of cost sharing imposed 
(including any increased cost sharing imposed under 
subsection (c) or (e)) for all individuals in the family 
may not exceed 5 percent of the family income of 
the family involved for the year involved.
262 
‘‘(2) 
INDIVIDUALS
WITH
FAMILY
INCOME 
ABOVE 100 PERCENT OF POVERTY LEVEL.—In the 
case of an individual whose family income exceeds 
100 percent of the Federal poverty level applicable 
to a family of the size involved, the total annual ag-
gregate amount of premiums and cost sharing im-
posed (including any increase and cost sharing im-
posed under subsection (c) or (e)) for all individuals 
in the family may not exceed 5 percent of the family 
income of the family involved for the year involved. 
‘‘(3) ADDITIONAL LIMITATIONS.— 
‘‘(A) PREMIUMS.—No premiums shall be 
imposed under this section with respect to the 
following: 
‘‘(i) Individuals under 18 years of age 
that are required to be provided medical 
assistance under section 1902(a)(10)(A)(i), 
and including individuals with respect to 
whom adoption or foster care assistance is 
made available under part E of title IV 
without regard to age. 
‘‘(ii) Pregnant women. 
‘‘(iii) Any terminally ill individual who 
is receiving hospice care (as defined in sec-
tion 1905(o)).
263 
‘‘(iv) Any individual who is an inpa-
tient in a hospital, nursing facility, inter-
mediate care facility for the mentally re-
tarded, or other medical institution, if such 
individual is required, as a condition of re-
ceiving services in such institution under 
the State plan, to spend for costs of med-
ical care all but a minimal amount of the 
individual’s income required for personal 
needs. 
‘‘(B) COST SHARING.—Subject to the suc-
ceeding provisions of this section, no cost shar-
ing shall be imposed under this section with re-
spect to the following: 
‘‘(i) Services furnished to individuals 
under 18 years of age that are required to 
be provided medical assistance under sec-
tion 1902(a)(10)(A)(i), and including serv-
ices furnished to individuals with respect 
to whom adoption or foster care assistance 
is made available under part E of title IV 
without regard to age. 
‘‘(ii) Preventive services (such as well 
baby and well child care and immuniza-
264 
tions) provided to children under 18 years 
of age regardless of family income. 
‘‘(iii) Services furnished to pregnant 
women, if such services relate to the preg-
nancy or to any other medical condition 
which may complicate the pregnancy. 
‘‘(iv) Services furnished to a termi-
nally ill individual who is receiving hospice 
care (as defined in section 1905(o)). 
‘‘(v) Services furnished to any indi-
vidual who is an inpatient in a hospital, 
nursing facility, intermediate care facility 
for the mentally retarded, or other medical 
institution, if such individual is required, 
as a condition of receiving services in such 
institution under the State plan, to spend 
for costs of medical care all but a minimal 
amount of the individual’s income required 
for personal needs. 
‘‘(vi) Emergency services (as defined 
by the Secretary for purposes of section 
1916(a)(2)(D)). 
‘‘(vii) Family planning services and 
supplies 
described 
in 
section 
1905(a)(4)(C).
265 
‘‘(C) CONSTRUCTION.—Nothing in this 
paragraph shall be construed as preventing a 
State from exempting additional classes of indi-
viduals from premiums under this section or 
from exempting additional individuals or serv-
ices from cost sharing under this section. 
‘‘(4) INDEXING NOMINAL AMOUNTS.—In apply-
ing section 1916 under paragraph (1) with respect 
to cost sharing that is ‘nominal’ in amount— 
‘‘(A) the Secretary shall phase-in an in-
crease in such amount over a 3 year period (be-
ginning January 1, 2006) so that— 
‘‘(i) a $3 nominal amount in 2005 
would be increased to be a $5 nominal 
amount in 2008; and 
‘‘(ii) other nominal amounts would be 
increased by a proportional amount (with 
appropriate rounding) during such period; 
and 
‘‘(B) the Secretary shall increase such 
‘nominal’ amounts for each subsequent year 
(beginning with 2009) by the annual percentage 
increase in the medical care component of the 
consumer price index for all urban consumers
266 
(U.S. city average) as rounded up in an appro-
priate manner. 
‘‘(5) DETERMINATIONS OF FAMILY INCOME.— 
In applying this subsection, family income shall be 
determined in a manner specified by the State for 
purposes of this subsection, including the use of 
such disregards as the State may provide. Family in-
come shall be determined for such period and at 
such periodicity as the State may provide under this 
title. 
‘‘(6) POVERTY LINE DEFINED.—For purposes 
of this section, the term ‘poverty line’ has the mean-
ing given such term in section 673(2) of the Com-
munity Services Block Grant Act (42 U.S.C. 
9902(2)), including any revision required by such 
section. 
‘‘(7) CONSTRUCTION.—Nothing in this section 
shall be construed— 
‘‘(A) as preventing a State from further 
limiting the premiums and cost sharing imposed 
under this section beyond the limitations pro-
vided under this subsection; 
‘‘(B) as affecting the authority of the Sec-
retary through waiver to modify limitations on
267 
premiums and cost sharing under this sub-
section; or 
‘‘(C) as affecting any such waiver of re-
quirements in effect under this title before the 
date of the enactment of this section with re-
gard to the imposition of premiums and cost 
sharing. 
‘‘(d) ENFORCEABILITY OF PREMIUMS AND OTHER 
COST SHARING.— 
‘‘(1) 
PREMIUMS.—Notwithstanding 
section 
1916(c)(3) and section 1902(a)(10)(B), a State 
may, at its option, condition the provision of medical 
assistance for an individual upon prepayment of a 
premium authorized to be imposed under this sec-
tion, or may terminate eligibility for such medical 
assistance on the basis of failure to pay such a pre-
mium but shall not terminate eligibility of an indi-
vidual for medical assistance under this title on the 
basis of failure to pay any such premium until such 
failure continues for a period of not less than 60 
days. A State may apply the previous sentence for 
some or all groups of beneficiaries as specified by 
the State and may waive payment of any such pre-
mium in any case where the State determines that
268 
requiring such payment would create an undue hard-
ship. 
‘‘(2) COST SHARING.—Notwithstanding section 
1916(e) or any other provision of law, a State may 
permit a provider participating under the State plan 
to require, as a condition for the provision of care, 
items, or services to an individual entitled to medical 
assistance under this title for such care, items, or 
services, the payment of any cost sharing authorized 
to be imposed under this section with respect to 
such care, items, or services. Nothing in this para-
graph shall be construed as preventing a provider 
from reducing or waiving the application of such 
cost sharing.’’. 
(b) CONFORMING AMENDMENT.—Section 1916(f) of 
such Act (42 U.S.C. 1396o(f)) is amended by inserting 
‘‘and section 1916A’’ after ‘‘(b)(3)’’. 
(c) GAO STUDY OF IMPACT OF PREMIUMS AND COST 
SHARING.—The Comptroller General of the United States 
shall conduct a study on the impact of premiums and cost 
sharing under the medicaid program on access to, and uti-
lization of, services. Not later than January 1, 2008, the 
Comptroller General shall submit to Congress a report on 
such study.
269 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to cost sharing imposed for items 
and services furnished on or after January 1, 2006. 
SEC. 3122. SPECIAL RULES FOR COST SHARING FOR PRE-
SCRIPTION DRUGS. 
(a) IN GENERAL.—Section 1916A of the Social Secu-
rity Act, as inserted by section 3121, is amended by insert-
ing after subsection (b) the following new subsection: 
‘‘(c) SPECIAL RULES FOR COST SHARING FOR PRE-
SCRIPTION DRUGS.— 
‘‘(1) IN
GENERAL.—In order to encourage 
beneficiaries to use drugs (in this subsection referred 
to as ‘preferred drugs’) identified by the State as the 
least (or less) costly effective prescription drugs 
within a class of drugs (as defined by the State), 
with respect to one or more groups of beneficiaries 
specified by the State, subject to paragraphs (2) and 
(5), the State may— 
‘‘(A) provide an increase in cost sharing 
(above the nominal level otherwise permitted 
under section 1916 or subsection (b), but sub-
ject to paragraphs (2) and (3)) with respect to 
drugs that are not preferred drugs within a 
class; and
270 
‘‘(B) waive or reduce the cost sharing oth-
erwise applicable for preferred drugs within 
such class and shall not apply any such cost 
sharing for such preferred drugs for individuals 
for whom cost sharing may not otherwise be im-
posed under subsection (b)(3)(B). 
‘‘(2) LIMITATIONS.— 
‘‘(A) BY INCOME GROUP AS A MULTIPLE 
OF NOMINAL AMOUNTS.—In no case may the 
increase in cost sharing under paragraph (1)(A) 
with respect to a non-preferred drug exceed, in 
the case of an individual whose family income 
is— 
‘‘(i) below 100 percent of the poverty 
line applicable to a family of the size in-
volved, the amount of nominal cost sharing 
(as otherwise determined under subsection 
(b)); 
‘‘(ii) at least 100 percent, but below 
150 percent, of the poverty line applicable 
to a family of the size involved, two times 
the amount of nominal cost sharing (as 
otherwise determined under subsection 
(b)); or
271 
‘‘(iii) at least 150 percent of the pov-
erty line applicable to a family of the size 
involved, three times the amount of nomi-
nal cost sharing (as otherwise determined 
under subsection (b)). 
‘‘(B) LIMITATION
TO
NOMINAL
FOR
EX-
EMPT POPULATIONS.—In the case of an indi-
vidual who is otherwise not subject to cost shar-
ing due to the application of subsection (b)(3), 
any increase in cost sharing under paragraph 
(1)(A) with respect to a non-preferred drug 
may not exceed a nominal amount (as otherwise 
determined under subsection (b)). 
‘‘(C) CONTINUED APPLICATION OF AGGRE-
GATE CAP.—In addition to the limitations im-
posed under subparagraphs (A) and (B), any 
increase in cost sharing under paragraph (1)(A) 
continues to be subject to the aggregate cap on 
cost sharing applied under paragraph (1) or (2) 
of subsection (b), as the case may be. 
‘‘(D) TRICARE PHARMACY BENEFIT PRO-
GRAM LIMITATIONS.—In no case may a State— 
‘‘(i) treat as a non-preferred drug 
under this subsection a drug that is treat-
ed 
as 
a 
preferred 
drug 
under 
the
272 
TRICARE pharmacy benefit program es-
tablished under section 1074g of title 10, 
United States Code, as such program is in 
effect on the date of the enactment of this 
section; or 
‘‘(ii) impose cost sharing under this 
subsection that exceeds the cost sharing 
imposed under the standards under such 
pharmacy benefit program, as such pro-
gram is in effect as of the date of the en-
actment of this section. 
‘‘(3) WAIVER.—In carrying out paragraph (1), 
a State shall provide for the application of cost shar-
ing levels applicable to a preferred drug in the case 
of a drug that is not a preferred drug if the pre-
scribing physician determines that the preferred 
drug for treatment of the same condition either 
would not be as effective for the individual or would 
have adverse effects for the individual or both. 
‘‘(4) EXCLUSION AUTHORITY.—Nothing in this 
subsection shall be construed as preventing a State 
from excluding from paragraph (1) specified drugs 
or classes of drugs. 
‘‘(5) PRIOR
AUTHORIZATION
AND
APPEALS 
PROCESS.—A State may not provide for increased
273 
cost sharing under this subsection unless the State 
has implemented for outpatient prescription drugs a 
system for prior authorization and an appeals proc-
ess for determinations relating to prior authoriza-
tion.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to cost sharing imposed for 
items and services furnished on or after October 1, 2006. 
SEC. 3123. EMERGENCY ROOM COPAYMENTS FOR NON- 
EMERGENCY CARE. 
(a) IN GENERAL.—Section 1916A of the Social Secu-
rity Act, as inserted by section 3121 and as amended by 
section 3122, is further amended by adding at the end 
the following new subsection: 
‘‘(e) STATE OPTION FOR IMPOSING COST SHARING 
FOR NON-EMERGENCY CARE FURNISHED IN AN HOS-
PITAL EMERGENCY ROOM.— 
‘‘(1) IN
GENERAL.—Notwithstanding section 
1916 or the previous provisions of this section, but 
subject to the limitations of paragraph (2), a State 
may, by amendment to its State plan under this 
title, impose cost sharing for non-emergency services 
furnished to an individual (within one or more 
groups of individuals specified by the State) in a
274 
hospital emergency department under this subsection 
if the following conditions are met: 
‘‘(A) ACCESS TO NON-EMERGENCY ROOM 
PROVIDER.—The individual has actually avail-
able and accessible (as such terms are applied 
by the Secretary under section 1916(b)(3)) an 
alternate non-emergency services provider with 
respect to such services. 
‘‘(B) NOTICE.—The physician or hospital 
must inform the beneficiary after the appro-
priate screening assessment, but before pro-
viding the non-emergency services, of the fol-
lowing: 
‘‘(i) The hospital may require the pay-
ment of the State specified cost sharing 
before the service can be provided. 
‘‘(ii) The name and location of an al-
ternate non-emergency services provider 
(described in subparagraph (A)) that is ac-
tually available and accessible (as described 
in such subparagraph). 
‘‘(iii) The fact that such alternate 
provider can provide the services without 
the imposition of the increase in cost shar-
ing described in clause (i).
275 
‘‘(iv) The hospital provides a referral 
to coordinate scheduling of this treatment. 
Nothing in this subsection shall be construed as 
preventing a State from applying (or waiving) 
cost sharing otherwise permissible under this 
section to services described in clause (iii). 
‘‘(2) LIMITATIONS.— 
‘‘(A) FOR
POOREST
BENEFICIARIES.—In 
the case of an individual described in subsection 
(b)(1), the cost sharing imposed under this sub-
section may not exceed twice the amount deter-
mined to be nominal under this section, subject 
to the percent of income limitation otherwise 
applicable under subsection (b)(1). 
‘‘(B) APPLICATION
TO
EXEMPT
POPU-
LATIONS.—In the case of an individual who is 
otherwise not subject to cost sharing under sub-
section (b)(3), a State may impose cost sharing 
under paragraph (1) for care in an amount that 
does not exceed a nominal amount (as otherwise 
determined under subsection (b)) so long as no 
cost sharing is imposed to receive such care 
through an outpatient department or other al-
ternative health care provider in the geographic
276 
area of the hospital emergency department in-
volved. 
‘‘(C) CONTINUED APPLICATION OF AGGRE-
GATE CAP.—In addition to the limitations im-
posed under subparagraphs (A) and (B), any 
increase in cost sharing under paragraph (1) 
continues to be subject to the aggregate cap on 
cost sharing applied under paragraph (1) or (2) 
of subsection (b), as the case may be. 
‘‘(3) CONSTRUCTION.—Nothing in this section 
shall be construed— 
‘‘(A) to limit a hospital’s obligations with 
respect to screening and stabilizing treatment 
of an emergency medical condition under sec-
tion 1867; or 
‘‘(B) to modify any obligations under ei-
ther State or Federal standards relating to the 
application of a prudent-layperson standard 
with respect to payment or coverage of emer-
gency services by any managed care organiza-
tion. 
‘‘(4) DETERMINATION STANDARD.—No hospital 
or physician that makes a determination with re-
spect to the imposition of cost sharing under this 
subsection shall be liable in any civil action or pro-
277 
ceeding for such determination absent a finding by 
clear and convincing evidence of gross negligence by 
the hospital or physician. The previous sentence 
shall not affect any liability under section 1867 or 
otherwise applicable under State law based upon the 
provision (or failure to provide) care. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) NON-EMERGENCY
SERVICES.—The 
term ‘non-emergency services’ means any care 
or services furnished in a emergency depart-
ment of a hospital that the physician deter-
mines do not constitute an appropriate medical 
screening examination or stabilizing examina-
tion and treatment screening required to be 
provided by the hospital under section 1867. 
‘‘(B) ALTERNATE NON-EMERGENCY SERV-
ICES
PROVIDER.—The term ‘alternative non- 
emergency services provider’ means, with re-
spect to non-emergency services for the diag-
nosis or treatment of a condition, a health care 
provider, such as a physician’s office, health 
care clinic, community health center, hospital 
outpatient department, or similar health care 
provider, that provides clinically appropriate
278 
services for such diagnosis or treatment of the 
condition within a clinically appropriate time of 
the provision of such non-emergency services 
and that is participating in the program under 
this title.’’. 
(b) GRANT FUNDS FOR ESTABLISHMENT OF ALTER-
NATE NON-EMERGENCY SERVICES PROVIDERS.—Section 
1903 of the Social Security Act (42 U.S.C. 1396b) is 
amended by adding at the end the following new sub-
section: 
‘‘(x) PAYMENTS FOR ESTABLISHMENT OF ALTER-
NATE NON-EMERGENCY SERVICES PROVIDERS.— 
‘‘(1) PAYMENTS.—In addition to the payments 
otherwise provided under subsection (a), subject to 
paragraph (2), the Secretary shall provide for pay-
ments to States under such subsection for the estab-
lishment of alternate non-emergency service pro-
viders (as defined in section 1916A(f)(5)(B)), or 
networks of such providers. 
‘‘(2) LIMITATION.—The total amount of pay-
ments under this subsection shall be equal to, and 
shall not exceed, $100,000,000 during the four-year 
period beginning with 2006. This subsection con-
stitutes budget authority in advance of appropria-
tions Acts and represents the obligation of the Sec-