Health Opportunity Accounts

The Deficit Reduction Act allows 10 state Medicaid programs to set up five-year demonstration projects to provide Medicaid recipients with Health Opportunity Accounts (HOAs), similar to Health Savings Accounts (HSAs) used in the private sector.168 Proponents hope these accounts will create an awareness of health care costs and inject an element of consumerism into the purchase of medical services. The states that choose to participate will receive federal matching funds to contribute up to $1,000 per child and $2,500 per adult into the HOAs. HOAs can be used to purchase a variety of medical goods and services, and unused funds will be available for future use by participants. Moreover, if patients become ineligible for Medicaid, they have up to three years to use up to 75 percent of their HOA balances to purchase private health insurance.169 South Carolina, which had already applied for a HIFA waiver to restructure its Medicaid program, has applied to become one of the 10 states.