42 U.S.C. § 1396o–1 (THE PUBLIC HEALTH AND WELFARE)
§ 1396o–1. State option for alternative premiums and cost sharing
(a) State flexibility
(1) In general
Notwithstanding sections 1396o and 1396a(a)(10)(B) of this title, but subject to paragraph (2), a State, at its option and through a State plan amendment, may impose premiums and cost sharing for any group of individuals (as specified by the State) and for any type of services (other than drugs for which cost sharing may be imposed under subsection (c) and non-emergency services furnished in a hospital emergency department for which cost sharing may be imposed under subsection (e)), and may vary such premiums and cost sharing among such groups or types, consistent with the limitations established under this section. Nothing in this section shall be construed as superseding (or preventing the application of) subsection (g), (i), (j), or (k) of section 1396o of this title.
(2) Exemption for individuals with family income not exceeding 100 percent of the poverty line
(A) In general
Paragraph (1) and subsection (d) shall not apply, and sections 1396o and 1396a(a)(10)(B) of this title shall continue to apply, in the case of an individual whose family income does not exceed 100 percent of the poverty line applicable to a family of the size involved.
(B) Limit on aggregate cost sharing
To the extent cost sharing under subsections (c) and (e) or under section 1396o of this title is imposed against individuals described in subparagraph (A), the limitation under subsection (b)(1)(B)(ii) on the total aggregate amount of cost sharing shall apply to such cost sharing for all individuals in a family described in subparagraph (A) in the same manner as such limitations apply to cost sharing and families described in subsection (b)(1)(B)(ii).
(3) Definitions
In this section:
(A) Premium
The term “premium” includes any enrollment fee or similar charge.
(B) Cost sharing
The term “cost sharing” includes any deduction, copayment, or similar charge.
(b) Limitations on exercise of authority
(1) Individuals with family income between 100 and 150 percent of the poverty line
In the case of an individual whose family income exceeds 100 percent, but does not exceed 150 percent, of the poverty line applicable to a family of the size involved—
(A) no premium may be imposed under the plan; and
(B) with respect to cost sharing—
(i) the cost sharing imposed under subsection (a) with respect to any item or service may not exceed 10 percent of the cost of such item or service; and
(ii) the total aggregate amount of cost sharing imposed under this section (including any 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, as applied on a quarterly or monthly basis (as specified by the State).
(2) Individuals with family income above 150 percent of the poverty line
In the case of an individual whose family income exceeds 150 percent of the poverty line applicable to a family of the size involved—
(A) the total aggregate amount of premiums and cost sharing imposed under this section (including any 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, as applied on a quarterly or monthly basis (as specified by the State); and
(B) with respect to cost sharing, the cost sharing imposed with respect to any item or service under subsection (a) may not exceed 20 percent of the cost of such item or service.
(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 1396a(a)(10)(A)(i) of this title, and including individuals with respect to whom child welfare services are made available under part B of subchapter IV on the basis of being a child in foster care and individuals with respect to whom adoption or foster care assistance is made available under part E of such subchapter, without regard to age.
(ii) Pregnant women.
(iii) Any terminally ill individual who is receiving hospice care (as defined in section 1396d(o) of this title).
(iv) Any individual 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.
(v) Women who are receiving medical assistance by virtue of the application of sections 1396a(a)(10)(A)(ii)(XVIII) and 1396a(aa) of this title.
(vi) Disabled children who are receiving medical assistance by virtue of the application of sections 1396a(a)(10)(A)(ii)(XIX) and 1396a(cc) of this title.
(vii) An Indian who is furnished an item or service directly by the Indian Health Service, an Indian Tribe, Tribal Organization or Urban Indian Organization or through referral under contract health services.
(B) Cost sharing
Subject to the succeeding provisions of this section, no cost sharing shall be imposed under subsection (a) with respect to the following:
(i) Services furnished to individuals under 18 years of age that are required to be provided medical assistance under section 1396a(a)(10)(A)(i) of this title, and including services furnished to individuals with respect to whom child welfare services are made available under part B of subchapter IV on the basis of being a child in foster care or and 1 individuals with respect to whom adoption or foster care assistance is made available under part E of such subchapter, without regard to age.
(ii) Preventive services (such as well baby and well child care and immunizations) provided to children under 18 years of age regardless of family income.
(iii) Services furnished to pregnant women, if such services relate to the pregnancy or to any other medical condition which may complicate the pregnancy, and counseling and pharmacotherapy for cessation of tobacco use by pregnant women (as defined in section 1396d(bb) of this title).
(iv) Services furnished to a terminally ill individual who is receiving hospice care (as defined in section 1396d(o) of this title).
(v) Services furnished to any individual 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 1396o(a)(2)(D) of this title).
(vii) Family planning services and supplies described in section 1396d(a)(4)(C) of this title.
(viii) Services furnished to women who are receiving medical assistance by virtue of the application of sections 1396a(a)(10)(A)(ii)(XVIII) and 1396a(aa) of this title.
(ix) Services furnished to disabled children who are receiving medical assistance by virtue of the application of sections 1396a(a)(10)(A)(ii)(XIX) and 1396a(cc) of this title.
(x) Items and services furnished to an Indian directly by the Indian Health Service, an Indian Tribe, Tribal Organization or Urban Indian Organization or through referral under contract health services.
(xi) Any in vitro diagnostic product described in section 1396d(a)(3)(B) of this title that is administered during any portion of the emergency period described in such section beginning on or after March 18, 2020 (and the administration of such product), and any service described in section 1396o(a)(2)(G) of this title that is furnished during any such portion.
(xii) During the period beginning on March 11, 2021, and ending on the last day of the first calendar quarter that begins one year after the last day of the emergency period described in section 1320b–5(g)(1)(B) of this title, a COVID–19 vaccine and the administration of such vaccine (for any individual eligible for medical assistance for such vaccine (and administration)).
(xiii) During the period beginning on March 11, 2021, and ending on the last day of the first calendar quarter that begins one year after the last day of the emergency period described in section 1320b–5(g)(1)(B) of this title, testing and treatments for COVID–19, including specialized equipment and therapies (including preventive therapies), and, in the case of an individual who is diagnosed with or presumed to have COVID–19, during the period during which such individual has (or is presumed to have) COVID–19, the treatment of a condition that may seriously complicate the treatment of COVID–19, if otherwise covered under the State plan (or waiver of such plan).
(xiv) Vaccines described in section 1396d(a)(13)(B) of this title and the administration of such vaccines.
(C) Construction
Nothing in this paragraph shall be construed as preventing a State from exempting additional classes of individuals from premiums under this section or from exempting additional individuals or services from cost sharing under subsection (a).
(4) 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 income shall be determined for such period and at such periodicity as the State may provide under this subchapter.
(5) Poverty line defined
For purposes of this section, the term “poverty line” has the meaning given such term in section 9902(2) of this title, including any revision required by such section.
(6) 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 provided under this section;
(B) as affecting the authority of the Secretary through waiver to modify limitations on premiums and cost sharing under this section; or
(C) as affecting any such waiver of requirements in effect under this subchapter before February 8, 2006, with regard to the imposition of premiums and cost sharing.
(c) Special rules for cost sharing for prescription 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 most (or more) cost 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 paragraph (2), the State may—
(A) provide cost sharing (instead of the level of cost sharing otherwise permitted under section 1396o of this title, but subject to paragraphs (2) and (3)) with respect to drugs that are not preferred drugs within a class; and
(B) waive or reduce the cost sharing otherwise 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 be imposed under subsection (a) due to the application of subsection (b)(3)(B).
(2) Limitations
(A) By income group
In no case may the cost sharing under paragraph (1)(A) with respect to a non-preferred drug exceed—
(i) in the case of an individual whose family income does not exceed 150 percent of the poverty line applicable to a family of the size involved, the amount of nominal cost sharing (as otherwise determined under section 1396o of this title); or
(ii) in the case of an individual whose family income exceeds 150 percent of the poverty line applicable to a family of the size involved, 20 percent of the cost of the drug.
(B) Limitation to nominal for exempt populations
In the case of an individual who is not subject to cost sharing under subsection (a) due to the application of paragraph (1)(B), any cost sharing under paragraph (1)(A) with respect to a non-preferred drug may not exceed a nominal amount (as otherwise determined under section 1396o of this title).
(C) Continued application of aggregate cap
In addition to the limitations imposed under subparagraphs (A) and (B), any cost sharing under paragraph (1)(A) continues to be subject to the aggregate cap on cost sharing applied under subsection (a)(2)(B) or under paragraph (1) or (2) of subsection (b), as the case may be.
(3) Waiver
In carrying out paragraph (1), a State shall provide for the application of cost sharing levels applicable to a preferred drug in the case of a drug that is not a preferred drug if the prescribing 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 specified drugs or classes of drugs from the application of paragraph (1).
(d) Enforceability of premiums and other cost sharing
(1) Premiums
Notwithstanding section 1396o(c)(3) of this title and section 1396a(a)(10)(B) of this title, 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 section, or may terminate eligibility for such medical assistance on the basis of failure to pay such a premium but shall not terminate eligibility of an individual for medical assistance under this subchapter 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 premium in any case where the State determines that requiring such payment would create an undue hardship.
(2) Cost sharing
Notwithstanding section 1396o(e) of this title 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 subchapter 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 paragraph shall be construed as preventing a provider from reducing or waiving the application of such cost sharing on a case-by-case basis.
(e) State option for permitting hospitals to impose cost sharing for non-emergency care furnished in an emergency department
(1) In general
Notwithstanding section 1396o of this title and section 1396a(a)(1) of this title 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 subchapter, permit a hospital to impose cost sharing for non-emergency services furnished to an individual (within one or more groups of individuals specified by the State) in the hospital emergency department under this subsection if the following conditions are met:
(A) Access to non-emergency room provider
The individual has actually available and accessible (as such terms are applied by the Secretary under section 1396o(b)(3) of this title) an alternate non-emergency services provider with respect to such services.
(B) Notice
The hospital must inform the beneficiary after receiving an appropriate medical screening examination under section 1395dd of this title and after a determination has been made that the individual does not have an emergency medical condition, but before providing the non-emergency services, of the following:
(i) The hospital may require the payment of the State specified cost sharing before the service can be provided.
(ii) The name and location of an alternate non-emergency services provider (described in subparagraph (A)) that is actually available and accessible (as described in such subparagraph).
(iii) The fact that such alternate provider can provide the services without the imposition of cost sharing described in clause (i).
(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) Individuals with family income between 100 and 150 percent of the poverty line
In the case of an individual described in subsection (b)(1) who is not described in subparagraph (B), the cost sharing imposed under this subsection may not exceed twice the amount determined to be nominal under section 1396o of this title, subject to the percent of income limitation otherwise applicable under subsection (b)(1)(B)(ii).
(B) Application to exempt populations
In the case of an individual described in subsection (a)(2)(A) or who is not subject to cost sharing under subsection (b)(3)(B) with respect to non-emergency services described in paragraph (1), 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 section 1396o of this title) so long as no cost sharing is imposed to receive such care through an outpatient department or other alternative health care provider in the geographic area of the hospital emergency department involved.
(C) Continued application of aggregate cap; relation to other cost sharing
In addition to the limitations imposed under subparagraphs (A) and (B), any cost sharing under paragraph (1) is subject to the aggregate cap on cost sharing applied under subsection (a)(2)(B) or under paragraph (1) or (2) of subsection (b), as the case may be. Cost sharing imposed for services under this subsection shall be instead of any cost sharing that may be imposed for such services under subsection (a) or section 1396o of this title.
(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 section 1395dd of this title; or
(B) to modify any obligations under either State or Federal standards relating to the application of a prudent-layperson standard with respect to payment or coverage of emergency services by any managed care organization.
(4) Definitions
For purposes of this subsection:
(A) Non-emergency services
The term “non-emergency services” means any care or services furnished in an emergency department of a hospital that do not constitute an appropriate medical screening examination or stabilizing examination and treatment required to be provided by the hospital under section 1395dd of this title.
(B) Alternate non-emergency services provider
The term “alternative non-emergency services provider” means, with respect to non-emergency services for the diagnosis 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 can provide clinically appropriate services for the diagnosis or treatment of a condition contemporaneously with the provision of the non-emergency services that would be provided in an emergency department of a hospital for the diagnosis or treatment of a condition, and that is participating in the program under this subchapter.
(Aug. 14, 1935, ch. 531, title XIX, § 1916A, as added and amended Pub. L. 109–171, title VI, §§ 6041(a), 6042(a), 6043(a), Feb. 8, 2006, 120 Stat. 81, 85, 86; Pub. L. 109–432, div. B, title IV, § 405(a)(1)–(5), Dec. 20, 2006, 120 Stat. 2996–2998; Pub. L. 111–5, div. B, title V, § 5006(a)(2), Feb. 17, 2009, 123 Stat. 506; Pub. L. 111–148, title II, § 2102(b), title IV, § 4107(c)(2), Mar. 23, 2010, 124 Stat. 289, 561; Pub. L. 116–127, div. F, § 6004(a)(2)(B), Mar. 18, 2020, 134 Stat. 205; Pub. L. 117–2, title IX, § 9811(a)(3)(B), Mar. 11, 2021, 135 Stat. 210; Pub. L. 117–169, title I, § 11405(a)(2)(B), Aug. 16, 2022, 136 Stat. 1900; Pub. L. 119–21, title VII, § 71120(b)(2), July 4, 2025, 139 Stat. 317.)
heading: Editorial Notes
heading: Amendments
text: 2025—Subsec. (a)(1). Pub. L. 119–21 substituted “(j), or (k)” for “or (j)”.
2022—Subsec. (b)(3)(B)(xiv). Pub. L. 117–169 added cl. (xiv).
2021—Subsec. (b)(3)(B)(xi). Pub. L. 117–2, § 9811(a)(3)(B)(i), substituted “any service” for “any visit”.
Subsec. (b)(3)(B)(xii), (xiii). Pub. L. 117–2, § 9811(a)(3)(B)(ii), added cls. (xii) and (xiii).
2020—Subsec. (b)(3)(B)(xi). Pub. L. 116–127 added cl. (xi).
2010—Subsec. (a)(1). Pub. L. 111–148, § 2102(b), substituted “, (i), or (j)” for “or (i)”.
Subsec. (b)(3)(B)(iii). Pub. L. 111–148, § 4107(c)(2), inserted “, and counseling and pharmacotherapy for cessation of tobacco use by pregnant women (as defined in section 1396d(bb) of this title)” after “complicate the pregnancy”.
2009—Subsec. (b)(3)(A)(vii). Pub. L. 111–5, § 5006(a)(2)(A), added cl. (vii).
Subsec. (b)(3)(B)(x). Pub. L. 111–5, § 5006(a)(2)(B), added cl. (x).
2006—Subsec. (a)(1). Pub. L. 109–432, § 405(a)(3)(A), substituted “subsection (g) or (i) of section 1396o” for “section 1396o(g)” in second sentence.
Pub. L. 109–432, § 405(a)(1)(A), inserted “but subject to paragraph (2),” after “1396a(a)(10)(B) of this title,” and “and non-emergency services furnished in a hospital emergency department for which cost sharing may be imposed under subsection (e)” after “subsection (c)”.
Subsec. (a)(2), (3). Pub. L. 109–432, § 405(a)(1)(B), (C), added par. (2) and redesignated former par. (2) as (3).
Subsec. (b)(1), (2). Pub. L. 109–432, § 405(a)(2)(A), struck out “, subject to subsections (c)(2) and (e)(2)(A)” after “involved” in introductory provisions.
Subsec. (b)(3)(A)(i). Pub. L. 109–432, § 405(a)(4)(A), substituted “child welfare services are made available under part B of subchapter IV on the basis of being a child in foster care” for “aid or assistance is made available under part B of subchapter IV to children in foster care”.
Subsec. (b)(3)(A)(vi). Pub. L. 109–432, § 405(a)(3)(B)(i), added cl. (vi).
Subsec. (b)(3)(B)(i). Pub. L. 109–432, § 405(a)(4)(B), substituted “child welfare services are made available under part B of subchapter IV on the basis of being a child in foster care or” for “aid or assistance is made available under part B of subchapter IV to children in foster care”.
Subsec. (b)(3)(B)(ix). Pub. L. 109–432, § 405(a)(3)(B)(ii), added cl. (ix).
Subsec. (c). Pub. L. 109–171, § 6042(a), added subsec. (c).
Subsec. (c)(1). Pub. L. 109–432, § 405(a)(2)(B), substituted “most (or more) cost effective” for “least (or less) costly effective” in introductory provisions.
Subsec. (c)(1)(B). Pub. L. 109–432, § 405(a)(2)(C), substituted “be imposed under subsection (a) due to the application of” for “otherwise be imposed under”.
Subsec. (c)(2)(B). Pub. L. 109–432, § 405(a)(2)(D), substituted “not subject to cost sharing under subsection (a) due to the application of paragraph (1)(B)” for “otherwise not subject to cost sharing due to the application of subsection (b)(3)(B)”.
Subsec. (c)(2)(C). Pub. L. 109–432, § 405(a)(1)(D), inserted “under subsection (a)(2)(B) or” after “cost sharing applied”.
Subsec. (e). Pub. L. 109–171, § 6043(a), added subsec. (e).
Subsec. (e)(2)(A). Pub. L. 109–432, § 405(a)(2)(E), substituted “Individuals with family income between 100 and 150 percent of the poverty line” for “For poorest beneficiaries” in heading and “under subsection (b)(1)(B)(ii)” for “under subsection (b)(1)” in text.
Pub. L. 109–432, § 405(a)(1)(E), inserted “who is not described in subparagraph (B)” after “in subsection (b)(1)”.
Subsec. (e)(2)(B). Pub. L. 109–432, § 405(a)(2)(F), substituted “described in subsection (a)(2)(A) or who is not subject to cost sharing under subsection (b)(3)(B) with respect to non-emergency services described in paragraph (1)” for “who is otherwise not subject to cost sharing under subsection (b)(3)”.
Subsec. (e)(2)(C). Pub. L. 109–432, § 405(a)(2)(G), inserted “or section 1396o of this title” after “subsection (a)”.
Pub. L. 109–432, § 405(a)(1)(D), inserted “under subsection (a)(2)(B) or” after “cost sharing applied”.
Subsec. (e)(4)(A). Pub. L. 109–432, § 405(a)(5), struck out “the physician determines” after “a hospital that”.
heading: Statutory Notes and Related Subsidiaries
heading: Effective Date of 2022 Amendment
text: Amendment by Pub. L. 117–169 effective on the 1st day of the 1st fiscal quarter that begins on or after the date that is 1 year after Aug. 16, 2022 and applicable to expenditures made under a State plan or waiver of such plan under title XIX of the Social Security Act or under a State child health plan or waiver of such plan under title XXI of such Act on or after such effective date, see section 11405(c) of Pub. L. 117–169, set out as a note under section 1396a of this title.
heading: Effective Date of 2010 Amendment
text: Pub. L. 111–148, title II, § 2102(b), Mar. 23, 2010, 124 Stat. 289, provided that the amendment made by section 2102(b) is effective as if included in the enactment of section 5006(a) of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5).
Amendment by section 4107(c)(2) of Pub. L. 111–148 effective Oct. 1, 2010, see section 4107(d) of Pub. L. 111–148, set out as a note under section 1396d of this title.
heading: Effective Date of 2009 Amendment
text: Amendment by Pub. L. 111–5 effective July 1, 2009, see section 5006(f) of Pub. L. 111–5, set out as a note under section 1396a of this title.
heading: Effective Date of 2006 Amendment
text: Pub. L. 109–432, div. B, title IV, § 405(a)(6), Dec. 20, 2006, 120 Stat. 2998, provided that: “The amendments made by this subsection [amending this section] shall take effect as if included in the amendments made by sections [sic] 6041(a) of the Deficit Reduction Act of 2005 [Pub. L. 109–171], except that insofar as such amendments are to, or relate to, subsection (c) or (e) of section 1916A of the Social Security Act [42 U.S.C. 1396o–1], such amendments shall take effect as if included in the amendments made by section 6042 or 6043, respectively, of the Deficit Reduction Act of 2005 [Pub. L. 109–171].”
Pub. L. 109–171, title VI, § 6042(b), Feb. 8, 2006, 120 Stat. 86, provided that: “The amendment made by subsection (a) [amending this section] shall apply to cost sharing imposed for items and services furnished on or after March 31, 2006.”
Amendment by section 6043(a) of Pub. L. 109–171 applicable to non-emergency services furnished on or after Jan. 1, 2007, see section 6043(c) of Pub. L. 109–171, set out as a note under section 1396b of this title.
heading: Effective Date
text: Section applicable to cost sharing imposed for items and services furnished on or after Mar. 31, 2006, see section 6041(c) of Pub. L. 109–171, set out as an Effective Date of 2006 Amendment note under section 1396o of this title.
heading: Applicability of 2020 Amendment to Territories
text: Amendment by Pub. L. 116–127 applicable with respect to a State plan of a territory in the same manner as a State plan of one of the 50 States, see section 6004(a)(2)(C) of Pub. L. 116–127, set out as a note under section 1396o of this title.