North Dakota on Tuesday became the first state to implement a federal program that allows low- to middle-income families with special needs children to receive Medicaid coverage.

Under a bill approved by the Legislature and signed by Gov. John Hoeven, the state will spend $2.7 million to allow families who normally wouldn't qualify for Medicaid to "buy into" the program for a small fee. Those families must be below 200 percent of the poverty line - about $41,000 a year for a family of four - and have a special needs child with medical bills.

Sen. Tim Mathern, D-Fargo, who sponsored the bill, said it's designed for families who make too much money to qualify for Medicaid, but too little to pay for either their child's medical bills or enough private insurance to cover those bills.

"Basically, there are these families we know who could lose their insurance, their home and their job because of the expense of caring for a family member," Mathern said. "This is a chance to stop that process before it starts."

To enroll in the program, eligible families pay 5 percent of their income for Medicaid coverage, which covers only the child and can be supplemented by private insurance. Medicaid, a 1960s era expansion of the Social Security Act, is designed to provide health care to poor citizens.

The new "buy-in" program comes from the Dylan Lee James Act of 2005, a federal law that makes it available to any state wishing to participate. It was inspired by its namesake, a Texas boy whose Down syndrome resulted in extraordinary medical bills and financial hardship for his family.

Under the act, the federal government will foot part of the bill for any state that adopts the program and pays in its share.

"We really take a lot of pride in the fact that we are the first state in the nation to pass this bill," said Donene Feist, state director for Family Voices of North Dakota.

Feist's group assists families in navigating the healthcare system and lobbies for expanded coverage, which she calls "a basic human right."

In a related bill signing on Tuesday, Hoeven approved a measure creating a Prescription Drug Repository. The repository will collect and distribute unused medication that otherwise would go to waste.

Most commonly, medication is discarded after a patient's death. The repository is viewed as a way to provide this medication free or at a reduced cost to those who would have had trouble affording it new.

"It's one of those win-win situations that we don't often get to do in legislation," said Rep. Robin Weisz, R-Hurdsfield.

The North Dakota State Board of Pharmacy will manage the program and set up a Web site to show which medications are available through the repository.

(Reach reporter Jonathan Rivoli at 223-8482 or jonathan.rivoli@;bismarcktribune.com.)