Real Estate Investment Trust Modernization Act of 1999

Summary: Amends title XIX (Medicaid) of the Social Security Act to prohibit the imposition of Medicaid home liens and Medicaid estate recovery for long-term care services in the case of an individual who has received benefits under a qualified long-term care insurance policy for at least three years during the five-year period ending on the date of provision of such services. 
Amends the Internal Revenue Code to: (1) repeal the inclusion in an employee's gross income of employer-provided coverage (through a flexible spending or similar arrangement (FSA)) of qualified long-term care services; (2) allow the carryover of amounts in excess of the maximum amount of reimbursement under an FSA; and (3) exclude from gross income the reimbursement of long-term care insurance premiums by FSAs (as well as the reimbursement of health insurance premiums during unemployment).

SECTION 1. RESTRICTING MEDICAID LIENS AND MEDICAID ESTATE RECOVERY FOR 
              LONG-TERM CARE SERVICES IN THE CASE OF CERTAIN 
              INDIVIDUALS WHO HAVE RECEIVED BENEFITS UNDER LONG-TERM 
              CARE INSURANCE POLICIES FOR AT LEAST 3 YEARS.

    (a) Limitation on Liens.--Subsection (a) of section 1917 of the 
Social Security Act (42 U.S.C. 1396p) is amended by adding at the end 
the following new paragraph:
    ``(4) No lien may be imposed under paragraph (1)(B) on an 
individual's home on account of medical assistance paid with respect to 
the provision of long-term care services (including nursing facility 
services and home health care services) if the individual (as of the 
date of provision of such services) had received benefits under a 
qualified long-term care insurance contract (as defined in section 
7702B(b)(1) of the Internal Revenue Code of 1986) for at least 3 years 
during the 5-year period ending on such date.''.
    (b) Limitation on Estate Recovery.--Subsection (b) of such section 
is amended--
            (1) in paragraph (1)(C)(i), by inserting ``and except as 
        provided in paragraph (5)'' after ``except as proivded in such 
        clause'', and
            (2) by adding at the end the following new paragraph:
    ``(5) A State shall not seek adjustment or recovery of any medical 
assistance correctly paid on behalf of an individual under the State 
plan under this subsection in the case of medical assistance for which 
a lien may not be imposed under subsection (a)(4).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to adjustments or recoveries initiated on or after the date of 
the enactment of this Act.

SEC. 2. TREATMENT OF CARRYOVERS AND LONG-TERM CARE INSURANCE UNDER 
              FLEXIBLE SPENDING ARRANGEMENTS.

    (a) Allowance of Carryovers, Permitted Reimbursement of Long-Term 
Care Insurance Premiums (and Health Insurance Premiums During 
Unemployment), and Repeal of Income Inclusion for Long-Term Care 
Insurance.--Subsection (c) of section 106 of the Internal Revenue Code 
of 1986 (relating to inclusion of long-term care benefits provided 
through flexible spending arrangements) is amended to read as follows:
    ``(c) Special Rules Relating to Flexible Spending Arrangements for 
Health.--
            ``(1) Carryover permitted.--
                    ``(A) In general.--For purposes of this title, a 
                flexible spending arrangement for health shall not 
                cease to be treated as such an arrangement, and no 
                amount shall be includible in the gross income of the 
                participant in such arrangement, solely because the 
                maximum amount of reimbursement otherwise available to 
                a participant under such arrangement for any year is 
                increased by the carryover amount.
                    ``(B) Carryover amount.--For purposes of this 
                paragraph, the term `carryover amount' means, for any 
                participant, for any year, and with respect to any 
                flexible spending arrangement, the excess (if any) of--
                            ``(i) the maximum amount of reimbursement 
                        available to such participant under such 
                        arrangement for the preceding year (determined 
                        after the application of this paragraph), over
                            ``(ii) the actual amount of reimbursement 
                        to which such participant is entitled under 
                        such arrangement for such preceding year by 
                        reason of covered claims incurred.
                In no event shall the carryover amount exceed the sum 
                of the premiums paid for coverage under such 
                arrangement with respect to such participant for such 
                year and such preceding year.
            ``(2) Reimbursement for long-term care insurance premiums 
        and (during unemployment) for health insurance premiums.--For 
        purposes of this title, a flexible spending arrangement for 
        health shall not cease to be treated as such an arrangement, 
        and no amount shall be includible in the gross income of the 
        participant in such arrangement, solely because such 
        arrangement--
                    ``(A) treats premium payments for any qualified 
                long-term care insurance contract (as defined in 
                section 7702B(b)) for the taxpayer and the taxpayer's 
                family members as reimbursable expenses, or
                    ``(B) treats premium payments for medical insurance 
                for the taxpayer and the taxpayer's family members as 
                reimbursable expenses if such payments are made--
                            ``(i) after separation of the taxpayer from 
                        employment, and
                            ``(ii) to obtain insurance for the period 
                        beginning on or after the date of such 
                        separation and ending on or before the earlier 
                        of--
                                    ``(I) the date which is 18 months 
                                after the date of such separation, or
                                    ``(II) the date on which the 
                                taxpayer becomes employed full-time.
            ``(3) Definitions and special rule regarding insurance 
        premiums.--For purposes of paragraph (2)--
                    ``(A) Family member.--The term `family member' 
                means, with respect to any taxpayer--
                            ``(i) the spouse of the taxpayer,
                            ``(ii) any child (within the meaning of 
                        section 151) of the taxpayer, if such child has 
                        not attained the age of 19 at the close of the 
                        calendar year in which the taxable year of the 
                        taxpayer begins, and
                            ``(iii) any parent or stepparent of the 
                        taxpayer or of the taxpayer's spouse.
                    ``(B) Medical insurance.--The term `medical 
                insurance' means insurance covering medical care 
                referred to in subparagraph (A) or (B) of section 
                213(d)(1).
                    ``(C) Limitation on long-term care insurance 
                premiums.--The rule of the last sentence of section 
                213(d)(1) and the rules of section 213(d)(10) (relating 
                to eligible long-term care premiums) shall apply.
            ``(4) Flexible spending arrangement.--For purposes of this 
        subsection, a flexible spending arrangement is a benefit 
        program which provides employees with coverage under which--
                    ``(A) specified incurred expenses may be reimbursed 
                (subject to reimbursement maximums and other reasonable 
                conditions), and
                    ``(B) the maximum amount of reimbursement which is 
                reasonably available to a participant for such coverage 
                is less than 500 percent of the value of such coverage.
        In the case of an insured plan, the maximum amount reasonably 
        available shall be determined on the basis of the underlying 
        coverage.
            ``(5) Coordination with cafeteria plan provisions.--Section 
        125(a) shall not fail to apply to a participant in a plan, and 
        a plan shall not fail to be treated as a cafeteria plan, solely 
        because a flexible spending arrangement available under the 
        plan--
                    ``(A) increases the maximum amount of reimbursement 
                otherwise available by the carryover amount, as 
                described in paragraph (1), or
                    ``(B) treats premium payments as reimbursable 
                expenses as described paragraph (2).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after the date of the enactment of this Act.