II 

109TH CONGRESS 

1ST SESSION S. 1602 

To amend title XIX of the Social Security Act to require States to disregard 

benefits paid under long-term care insurance for purposes of determining 

medicaid eligibility, to expand long-term care insurance partnerships between States and insurers, to amend the Internal Revenue Code of 

1986 to allow individuals a deduction for qualified long-term care insurance premiums, the use of such insurance under cafeteria plans and 

flexible spending arrangements, and a credit for individuals with longterm care needs, to establish home and community-based services as 

an optional medicaid benefit, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 29, 2005 

Mr. GRASSLEY (for himself, Mr. BAYH, and Mrs. CLINTON) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to require 

States to disregard benefits paid under long-term care 

insurance for purposes of determining medicaid eligibility, to expand long-term care insurance partnerships 

between States and insurers, to amend the Internal Revenue Code of 1986 to allow individuals a deduction for 

qualified long-term care insurance premiums, the use 

of such insurance under cafeteria plans and flexible 

spending arrangements, and a credit for individuals with 

long-term care needs, to establish home and community- 
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•S 1602 IS 

based services as an optional medicaid benefit, and for 

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Improving Long-Term Care Choices Act of 2005’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

TITLE I—LONG-TERM CARE INSURANCE 

Subtitle A—Consumer Protections 

Sec. 101. Disregard of benefits paid under long-term care insurance for purposes of determining medicaid eligibility. 

Sec. 102. Additional consumer protections for long-term care insurance. 

Sec. 103. Expansion of State long-term care partnerships. 

Sec. 104. National clearinghouse for long-term care information. 

Subtitle B—Amendments to the Internal Revenue Code of 1986

Sec. 121. Treatment of premiums on qualified long-term care insurance contracts. 

Sec. 122. Credit for taxpayers with long-term care needs. 

Sec. 123. Treatment of exchanges of long-term care insurance contracts. 

TITLE II—MEDICAID HOME AND COMMUNITY-BASED SERVICES 

OPTIONAL BENEFIT 

Sec. 201. Medicaid home and community-based services optional benefit. 

TITLE III—INTEGRATED ACUTE AND LONG-TERM CARE 

SERVICES FOR DUALLY ELIGIBLE INDIVIDUALS. 

Sec. 301. Removal of barriers to integrated acute and long-term care services 

for dually eligible individuals. 

TITLE IV—EFFECTIVE DATE 

Sec. 401. Effective date.

8 SEC. 2. FINDINGS. 

9 Congress finds that—
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1 (1) The Medicaid program is designed to assist 

2 low-income individuals with few resources obtain 

3 health care, including long-term care. 

4 (2) The average daily cost of a private room in 

5 a nursing home in the United States is more than 

6 $70,000 per year, with an average length of stay of 

7 2.4 years. 

8 (3) Many individuals deplete their savings and 

9 resources paying for long-term care or qualifying for 

10 Medicaid in order to receive that care. 

11 (4) Encouraging individuals to purchase private 

12 long-term care insurance that meets minimum Fed13 eral standards would help ensure that Medicaid is 

14 able to continue to offer long-term care to low-in15 come individuals who cannot afford that insurance. 

16 (5) Requiring consumer protections and stand17 ards for long-term care insurance will help ensure 

18 that Federal, State, and individual resources are 

19 used to purchase high-quality long-term care cov20 erage that meets individual needs. 

21 (6) In 1999, the United States Supreme Court, 

22 in Olmstead v. L.C. (527 U.S. 581) held that the 

23 medically unnecessary institutionalization of individ24 uals with disabilities constitutes discrimination in 
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1 violation of the provisions of the Americans with 

2 Disabilities Act of 1990 (ADA). 

3 (7) The Olmstead decision has had the effect of 

4 broadening State efforts to revise their Medicaid 

5 plans to develop alternatives to institutional care, 

6 but certain limitations in Medicaid’s structure con7 strain these efforts, in particular, the lack of certain 

8 coverage and benefit options related to community 

9 care, which in turn force States to rely on a more 

10 cumbersome Federal waiver process. 

11 (8) Based on preliminary 2002 data, total Med12 icaid expenditures for that year for long-term care 

13 services were $92,800,000,000 ($66,100,000,000 for 

14 services in institutions and $26,700,000,000 for 

15 services provided in home and community-based set16 tings). 

17 (9) Nationally, only 33 percent of public long18 term care spending is spent for home and commu19 nity-based services and supports. Among the elderly, 

20 over 84 percent of long-term care funding is spent 

21 for nursing facility and other institutional care. 

22 (10) In order to live independently, individuals 

23 with disabilities need access to home and commu24 nity-based services and supports. 
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1 (11) Most Americans would prefer to receive 

2 long-term care services in their homes and commu3 nities. 

4 (12) States are currently operating a com5 plicated system of over 261 different home and com6 munity-based waivers. 

7 (13) There is a need to build upon the progress 

8 made by the New Freedom Initiative, which was an9 nounced in 2001, and is a continuing nationwide ef10 fort to remove barriers to community living for peo11 ple of all ages with disabilities and long-term ill12 nesses. 

13 TITLE I—LONG-TERM CARE 

14 INSURANCE 

15 Subtitle A—Consumer Protections 

16 SEC. 101. DISREGARD OF BENEFITS PAID UNDER LONG17 TERM CARE INSURANCE FOR PURPOSES OF 

18 DETERMINING MEDICAID ELIGIBILITY. 

19 (a) MEDICAID STATE PLAN REQUIREMENT.—Section 

20 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)) 

21 is amended—

22 (1) in paragraph (66), by striking ‘‘and’’ at the 

23 end; 

24 (2) in paragraph (67), by striking the period at 

25 the end and inserting ‘‘; and’’; and 
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1 (3) by inserting after paragraph (67), the fol2 lowing: 

3 ‘‘(68) provide that, with respect to benefits (in4 cluding assigned benefits) paid under any insurance 

5 contract for coverage of qualified long-term care 

6 services (as defined in in section 7702B(c) of the In7 ternal Revenue Code of 1986), the State does not 

8 treat such benefits as income for purposes of deter9 mining an individual’s eligibility for medical assist10 ance under the State plan.’’. 

11 (b) CONSUMER EDUCATION.—Not later than Janu12 ary 1, 2009, the Secretary of Health and Human Services 

13 shall establish a program for educating consumers regard14 ing—

15 (1) the advisability of obtaining a qualified 

16 long-term care insurance contract (as defined in sec17 tion 7702B(b) of the Internal Revenue Code of 

18 1986); and 

19 (2) the potential interaction between coverage 

20 under such an insurance contract and coverage of 

21 long-term care under Federal and State health in22 surance programs, (including under a long-term care 

23 partnership under section 1917(b)(1)(C)(ii) of the 

24 Social Security Act (42 U.S.C. 1396p(b)(1)(C)(ii)). 
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1 SEC. 102. ADDITIONAL CONSUMER PROTECTIONS FOR 

2 LONG-TERM CARE INSURANCE. 

3 (a) ADDITIONAL PROTECTIONS APPLICABLE TO

4 LONG-TERM CARE INSURANCE.—Subparagraphs (A) and 

5 (B) of section 7702B(g)(2) of the Internal Revenue Code 

6 of 1986 (relating to requirements of model regulation and 

7 Act) are amended to read as follows: 

8 ‘‘(A) IN GENERAL.—The requirements of 

9 this paragraph are met with respect to any con10 tract if such contract meets— 

11 ‘‘(i) MODEL REGULATION.—The fol12 lowing requirements of the model regula13 tion: 

14 ‘‘(I) Section 6A (relating to guar15 anteed renewal or noncancellability), 

16 other than paragraph (5) thereof, and 

17 the requirements of section 6B of the 

18 model Act relating to such section 6A. 

19 ‘‘(II) Section 6B (relating to pro20 hibitions on limitations and exclu21 sions) other than paragraph (7) there22 of. 

23 ‘‘(III) Section 6C (relating to ex24 tension of benefits). 
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1 ‘‘(IV) Section 6D (relating to 

2 continuation or conversion of cov3 erage). 

4 ‘‘(V) Section 6E (relating to dis5 continuance and replacement of poli6 cies). 

7 ‘‘(VI) Section 7 (relating to unin8 tentional lapse). 

9 ‘‘(VII) Section 8 (relating to dis10 closure), other than sections 8F, 8G, 

11 8H, and 8I thereof. 

12 ‘‘(VIII) Section 11 (relating to 

13 prohibitions against post-claims un14 derwriting). 

15 ‘‘(IX) Section 12 (relating to 

16 minimum standards). 

17 ‘‘(X) Section 13 (relating to re18 quirement to offer inflation protec19 tion). 

20 ‘‘(XI) Section 25 (relating to pro21 hibition against preexisting conditions 

22 and probationary periods in replace23 ment policies or certificates). 

24 ‘‘(XII) The provisions of section 

25 26 relating to contingent nonforfeiture 
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1 benefits, if the policyholder declines 

2 the offer of a nonforfeiture provision 

3 described in paragraph (4). 

4 ‘‘(ii) MODEL ACT.—The following re5 quirements of the model Act: 

6 ‘‘(I) Section 6C (relating to pre7 existing conditions). 

8 ‘‘(II) Section 6D (relating to 

9 prior hospitalization). 

10 ‘‘(III) The provisions of section 8 

11 relating to contingent nonforfeiture 

12 benefits, if the policyholder declines 

13 the offer of a nonforfeiture provision 

14 described in paragraph (4). 

15 ‘‘(B) DEFINITIONS.—For purposes of this 

16 paragraph— 

17 ‘‘(i) MODEL PROVISIONS.—The terms 

18 ‘model regulation’ and ‘model Act’ mean 

19 the long-term care insurance model regula20 tion, and the long-term care insurance 

21 model Act, respectively, promulgated by 

22 the National Association of Insurance 

23 Commissioners (as adopted as of October 

24 2000). 
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1 ‘‘(ii) COORDINATION.—Any provision 

2 of the model regulation or model Act listed 

3 under clause (i) or (ii) of subparagraph 

4 (A) shall be treated as including any other 

5 provision of such regulation or Act nec6 essary to implement the provision. 

7 ‘‘(iii) DETERMINATION.—For pur8 poses of this section and section 4980C, 

9 the determination of whether any require10 ment of a model regulation or the model 

11 Act has been met shall be made by the 

12 Secretary.’’. 

13 (b) EXCISE TAX.—Paragraph (1) of section 

14 4980C(c) of the Internal Revenue Code of 1986 (relating 

15 to requirements of model provisions) is amended to read 

16 as follows: 

17 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.— 

18 ‘‘(A) MODEL REGULATION.—The following 

19 requirements of the model regulation must be 

20 met: 

21 ‘‘(i) Section 9 (relating to required 

22 disclosure of rating practices to consumer). 

23 ‘‘(ii) Section 14 (relating to applica24 tion forms and replacement coverage). 
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1 ‘‘(iii) Section 15 (relating to reporting 

2 requirements). 

3 ‘‘(iv) Section 22 (relating to filing re4 quirements for marketing). 

5 ‘‘(v) Section 23 (relating to standards 

6 for marketing), including inaccurate com7 pletion of medical histories, other than 

8 paragraphs (1), (6), and (9) of section 

9 23C. 

10 ‘‘(vi) Section 24 (relating to suit11 ability). 

12 ‘‘(vii) Section 29 (relating to standard 

13 format outline of coverage). 

14 ‘‘(viii) Section 30 (relating to require15 ment to deliver shopper’s guide). 

16 The requirements referred to in clause (vi) shall 

17 not include those portions of the personal work18 sheet described in Appendix B relating to con19 sumer protection requirements not imposed by 

20 section 4980C or 7702B. 

21 ‘‘(B) MODEL ACT.—The following require22 ments of the model Act must be met: 

23 ‘‘(i) Section 6F (relating to right to 

24 return). 
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1 ‘‘(ii) Section 6G (relating to outline of 

2 coverage). 

3 ‘‘(iii) Section 6H (relating to require4 ments for certificates under group plans). 

5 ‘‘(iv) Section 6J (relating to policy 

6 summary). 

7 ‘‘(v) Section 6K (relating to monthly 

8 reports on accelerated death benefits). 

9 ‘‘(vi) Section 7 (relating to incontest10 ability period). 

11 ‘‘(C) DEFINITIONS.—For purposes of this 

12 paragraph, the terms ‘model regulation’ and 

13 ‘model Act’ have the meanings given such terms 

14 by section 7702B(g)(2)(B).’’. 

15 (C) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to policies issued more than 1 year 

17 after the date of enactment of this Act. 

18 SEC. 103. EXPANSION OF STATE LONG-TERM CARE PART19 NERSHIPS. 

20 (a) IN GENERAL.—Section 1917(b)(1)(C)(ii) of the 

21 Social Security Act (42 U.S.C. 1396p(b)(1)(C)(ii)) is 

22 amended to read as follows: 

23 ‘‘(ii) Clause (i) shall not apply in the case of an 

24 individual who received medical assistance under—
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1 ‘‘(I) a Qualified State Long-Term Care In2 surance Partnership (as defined in paragraph 

3 (6)); or 

4 ‘‘(II) under a State plan of a State 

5 which—

6 ‘‘(aa) had a State plan amendment 

7 approved as of May 14, 1993, which pro8 vided for the disregard of any assets or re9 sources to the extent that payments are 

10 made under a long-term care insurance 

11 policy or because an individual has received 

12 (or is entitled to receive) benefits under a 

13 long-term care insurance policy; and 

14 ‘‘(bb) has a State plan amendment 

15 which satisfies the requirements of sub16 paragraphs (B) through (F) of paragraph 

17 (6).’’. 

18 (b) SATISFACTION OF MINIMUM FEDERAL STAND19 ARDS, TAX-QUALIFICATIONS, INFLATION PROTECTION, 

20 AND OTHER REQUIREMENTS FOR LONG-TERM CARE IN21 SURANCE PARTNERSHIPS.—Section 1917(e) of the Social 

22 Security Act (42 U.S.C. 1396p(e)) is amended by insert23 ing at the end the following: 

24 ‘‘(6) The term ‘Qualified State Long-Term 

25 Care Insurance Partnership’ means a State with an 
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1 approved State plan amendment that provides for 

2 the following: 

3 ‘‘(A) The disregard of any assets or re4 sources in an amount equal to the amount of 

5 payments made to, or on behalf of, an indi6 vidual who is a beneficiary under any long-term 

7 care insurance policy (including a certificate 

8 issued under a group insurance contract) sold 

9 under such plan amendment. 

10 ‘‘(B) A requirement that the State will 

11 treat benefits paid under any long-term care in12 surance policy (including a certificate issued 

13 under a group insurance contract) sold under a 

14 plan amendment of a State that maintains a 

15 Qualified Long-Term Care Insurance Partner16 ship or is described in subsection 

17 (b)(1)(C)(ii)(II) the same as the State treats 

18 benefits paid under such a policy sold under the 

19 State’s plan amendment. 

20 ‘‘(C) A requirement that any long-term 

21 care insurance policy (including a certificate 

22 issued under a group insurance contract) sold 

23 under such plan amendment be a qualified long24 term care insurance contract within the mean-
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1 ing of section 7702B(b) of the Internal Revenue 

2 Code of 1986. 

3 ‘‘(D) A requirement that any such policy 

4 sold under the State plan amendment shall pro5 vide for compound annual inflation protection. 

6 ‘‘(E) A requirement that any individual 

7 who sells such a policy receive training, and 

8 demonstrate evidence of an understanding of, 

9 the policy and how the policy relates to other 

10 public and private coverage of long-term care. 

11 ‘‘(F) A requirement that the issuer of any 

12 such policy report—

13 ‘‘(i) to the Secretary, such informa14 tion or data as the Secretary may require; 

15 and 

16 ‘‘(ii) to the State, the information or 

17 data reported to the Secretary (if any), the 

18 information or data required under the 

19 minimum reporting requirements developed 

20 under section 103(c)(1)(B) of the Improv21 ing Long-Term Care Choices Act of 2005, 

22 and such additional information or data as 

23 the State may require. 

24 For purposes of applying this paragraph, if a long25 term care insurance policy is exchanged for another 
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1 such policy, the date coverage became effective 

2 under the first policy shall determine when coverage 

3 first becomes effective.’’. 

4 (c) DEVELOPMENT OF RECIPROCITY AND UNIFORM

5 DATA STANDARDS.—

6 (1) IN GENERAL.—Not later than 1 year after 

7 the date of enactment of this Act, the Secretary of 

8 Health and Human Services, in consultation with 

9 the National Association of Insurance Commis10 sioners, issuers of long-term care insurance policies, 

11 States with experience with long-term care insurance 

12 partnership plans, and other States shall develop the 

13 following standards: 

14 (A) RECIPROCITY.—Standards for ensur15 ing that long-term care insurance policies 

16 issued under a State long-term care insurance 

17 partnership under section 1917(b)(1)(C)(ii) of 

18 the Social Security Act (42 U.S.C. 

19 1396p(b)(1)(C)(ii)) (as amended by subsection 

20 (a)) are portable to other States with such a 

21 partnership. 

22 (B) MINIMUM REPORTING REQUIRE23 MENTS.—Standards for minimum reporting re24 quirements for issuers of long-term care insur25 ance policies under such State long-term care 
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1 insurance partnerships that shall specify the 

2 data and information that each such issuer 

3 shall report to the State with which it has such 

4 a partnership. The requirements developed in 

5 accordance with this subparagraph shall specify 

6 the type and format of the data and informa7 tion to be reported and the frequency with 

8 which such reports are to be made. 

9 (2) STATE REPORTING REQUIREMENTS.—Noth10 ing in paragraph (1)(B) shall be construed as pro11 hibiting a State from requiring an issuer of a long12 term care insurance policy sold in the State (regard13 less of whether the policy is issued under a State 

14 long-term care insurance partnership under section 

15 1917(b)(1)(C)(ii) of the Social Security Act) to re16 quire the issuer to report information or data to the 

17 State that is in addition to the information or data 

18 required under the minimum reporting requirements 

19 developed under that paragraph. 

20 (d) ANNUAL REPORTS TO CONGRESS.—The Sec21 retary of Health and Human Services shall annually re22 port to Congress on the long-term care insurance partner23 ships established in accordance with section 

24 1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 

25 1396p(b)(1)(C)(ii))). Such reports shall include analyses 
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1 of the extent to which such partnerships expand or limit 

2 access of individuals to long-term care and the impact of 

3 such partnerships on Federal and State expenditures 

4 under the medicare and medicaid programs. 

5 SEC. 104. NATIONAL CLEARINGHOUSE FOR LONG-TERM 

6 CARE INFORMATION. 

7 (a) ESTABLISHMENT.—The Secretary of Health and 

8 Human Services shall establish, by grant, contract, or 

9 interagency agreement, a National Clearinghouse for 

10 Long-Term Care Information. 

11 (b) DUTIES.—The National Clearinghouse for Long12 Term Care Information shall—

13 (1) educate consumers regarding the extent to 

14 which Federal and State health insurance programs 

15 provide coverage for long-term care and options for 

16 financing long-term care; 

17 (2) establish mechanisms for assisting con18 sumers with the decisionmaking process for deter19 mining whether to purchase a long-term care insur20 ance policy or pursue other options for financing 

21 long-term care; and 

22 (3) establish an Internet website that allows 

23 consumers to compare qualified long-term care in24 surance contracts (as defined in section 7702B(b) of 

25 the Internal Revenue Code of 1986) with respect to 
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1 price, benefits provided, historical data on premium 

2 increases, and other information that would help a 

3 consumer determine whether such a policy would 

4 meet their needs. 

5 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

6 are authorized to be appropriated for purposes of carrying 

7 out this section, such sums as may be necessary for fiscal 

8 year 2006 and each fiscal year thereafter. 

9 Subtitle B—Amendments to the 

10 Internal Revenue Code of 1986 

11 SEC. 121. TREATMENT OF PREMIUMS ON QUALIFIED LONG12 TERM CARE INSURANCE CONTRACTS. 

13 (a) IN GENERAL.—Part VII of subchapter B of chap14 ter 1 of the Internal Revenue Code of 1986 (relating to 

15 additional itemized deductions) is amended by redesig16 nating section 224 as section 225 and by inserting after 

17 section 223 the following new section: 

18 ‘‘SEC. 224. PREMIUMS ON QUALIFIED LONG-TERM CARE IN19 SURANCE CONTRACTS. 

20 ‘‘(a) IN GENERAL.—In the case of an individual, 

21 there shall be allowed as a deduction an amount equal to 

22 the applicable percentage of the amount of eligible long23 term care premiums (as defined in section 213(d)(10)) 

24 paid during the taxable year for coverage for the taxpayer 

25 and the taxpayer’s spouse and dependents under a quali-
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1 fied long-term care insurance contract (as defined in sec2 tion 7702B(b)). 

3 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

4 subsection (a), the applicable percentage shall be deter5 mined in accordance with the following table:

‘‘For taxable years beginning in calendar year—

The applicable 

percentage is—

2005, 2006, or 2007 ....................................................................... 25

2008 ................................................................................................ 35

2009 ................................................................................................ 65

2010 or thereafter .......................................................................... 100. 

6 ‘‘(c) COORDINATION WITH OTHER DEDUCTIONS.—

7 Any amount paid by a taxpayer for any qualified long8 term care insurance contract to which subsection (a) ap9 plies shall not be taken into account in computing the 

10 amount allowable to the taxpayer as a deduction under 

11 section 162(l) or 213(a).’’. 

12 (b) LONG-TERM CARE INSURANCE PERMITTED TO

13 BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE

14 SPENDING ARRANGEMENTS.— 

15 (1) CAFETERIA PLANS.—The last sentence of 

16 section 125(f) of such Code (defining qualified bene17 fits) is amended by inserting before the period at the 

18 end ‘‘; except that such term shall include the pay19 ment of premiums for any qualified long-term care 

20 insurance contract (as defined in section 7702B) to 

21 the extent the amount of such payment does not ex-
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1 ceed the eligible long-term care premiums (as de2 fined in section 213(d)(10)) for such contract’’. 

3 (2) FLEXIBLE SPENDING ARRANGEMENTS.—

4 Section 106 of such Code (relating to contributions 

5 by an employer to accident and health plans) is 

6 amended by striking subsection (c) and redesig7 nating subsection (d) as subsection (c). 

8 (c) CONFORMING AMENDMENTS.— 

9 (1) Section 62(a) of such Code is amended by 

10 inserting before the last sentence at the end the fol11 lowing new paragraph: 

12 ‘‘(21) PREMIUMS ON QUALIFIED LONG-TERM

13 CARE INSURANCE CONTRACTS.—The deduction al14 lowed by section 224.’’. 

15 (2) Sections 223(b)(4)(B), 223(d)(4)(C), 

16 223(f)(3)(B), 3231(e)(11), 3306(b)(18), 

17 3401(a)(22), 4973(g)(1), and 4973(g)(2)(B)(i) of 

18 such Code are each amended by striking ‘‘section 

19 106(d)’’ and inserting ‘‘section 106(c)’’. 

20 (3) Section 6041 of such Code is amended— 

21 (A) in subsection (f)(1) by striking ‘‘(as 

22 defined in section 106(c)(2))’’, and 

23 (B) by adding at the end the following new 

24 subsection: 
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1 ‘‘(h) FLEXIBLE SPENDING ARRANGEMENT DE2 FINED.—For purposes of this section, a flexible spending 

3 arrangement is a benefit program which provides employ4 ees with coverage under which— 

5 ‘‘(1) specified incurred expenses may be reim6 bursed (subject to reimbursement maximums and 

7 other reasonable conditions), and 

8 ‘‘(2) the maximum amount of reimbursement 

9 which is reasonably available to a participant for 

10 such coverage is less than 500 percent of the value 

11 of such coverage. 

12 In the case of an insured plan, the maximum amount rea13 sonably available shall be determined on the basis of the 

14 underlying coverage.’’. 

15 (4) The table of sections for part VII of sub16 chapter B of chapter 1 of such Code is amended by 

17 striking the last item and inserting the following 

18 new items:

‘‘Sec. 224. Premiums on qualified long-term care insurance contracts. 

‘‘Sec. 225. Cross reference.’’.

19 (d) EFFECTIVE DATES.— 

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the amendments made by this section 

22 shall apply to taxable years beginning after Decem23 ber 31, 2005. 
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1 (2) CAFETERIA PLANS AND FLEXIBLE SPEND2 ING ARRANGEMENTS.—The amendments made by 

3 subsection (b) shall apply to taxable years beginning 

4 after December 31, 2007. 

5 SEC. 122. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE 

6 NEEDS. 

7 (a) IN GENERAL.—Subpart A of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 (relating to nonrefundable personal credits), as 

10 amended by the Energy Tax Incentives Act of 2005, is 

11 amended by inserting after section 25D the following new 

12 section: 

13 ‘‘SEC. 25E. CREDIT FOR TAXPAYERS WITH LONG-TERM 

14 CARE NEEDS. 

15 ‘‘(a) ALLOWANCE OF CREDIT.— 

16 ‘‘(1) IN GENERAL.—There shall be allowed as a 

17 credit against the tax imposed by this chapter for 

18 the taxable year an amount equal to the applicable 

19 credit amount multiplied by the number of applica20 ble individuals with respect to whom the taxpayer is 

21 an eligible caregiver for the taxable year. 

22 ‘‘(2) APPLICABLE CREDIT AMOUNT.—For pur23 poses of paragraph (1), the applicable credit amount 

24 shall be determined in accordance with the following 

25 table:
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‘‘For taxable years beginning in calendar 

year—

The applicable 

credit 

amount 

is—

2005 ....................................................................................... $1,000

2006 ....................................................................................... 1,500

2007 ....................................................................................... 2,000

2008 ....................................................................................... 2,500

2009 or thereafter ................................................................. 3,000. 

1 ‘‘(b) LIMITATION BASED ON ADJUSTED GROSS IN2 COME.— 

3 ‘‘(1) IN GENERAL.—The amount of the credit 

4 allowable under subsection (a) shall be reduced (but 

5 not below zero) by $100 for each $1,000 (or fraction 

6 thereof) by which the taxpayer’s modified adjusted 

7 gross income exceeds the threshold amount. For 

8 purposes of the preceding sentence, the term ‘modi9 fied adjusted gross income’ means adjusted gross in10 come increased by any amount excluded from gross 

11 income under section 911, 931, or 933. 

12 ‘‘(2) THRESHOLD AMOUNT.—For purposes of 

13 paragraph (1), the term ‘threshold amount’ means— 

14 ‘‘(A) $150,000 in the case of a joint re15 turn, and 

16 ‘‘(B) $75,000 in any other case. 

17 ‘‘(3) INDEXING.—In the case of any taxable 

18 year beginning in a calendar year after 2005, each 

19 dollar amount contained in paragraph (2) shall be 

20 increased by an amount equal to the product of— 

21 ‘‘(A) such dollar amount, and 
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1 ‘‘(B) the medical care cost adjustment de2 termined under section 213(d)(10)(B)(ii) for 

3 the calendar year in which the taxable year be4 gins, determined by substituting ‘August 2004’ 

5 for ‘August 1996’ in subclause (II) thereof. 

6 If any increase determined under the preceding sen7 tence is not a multiple of $50, such increase shall 

8 be rounded to the next lowest multiple of $50. 

9 ‘‘(c) DEFINITIONS.—For purposes of this section— 

10 ‘‘(1) APPLICABLE INDIVIDUAL.— 

11 ‘‘(A) IN GENERAL.—The term ‘applicable 

12 individual’ means, with respect to any taxable 

13 year, any individual who has been certified, be14 fore the due date for filing the return of tax for 

15 the taxable year (without extensions), by a phy16 sician (as defined in section 1861(r)(1) of the 

17 Social Security Act) as being an individual with 

18 long-term care needs described in subparagraph 

19 (B) for a period— 

20 ‘‘(i) which is at least 180 consecutive 

21 days, and 

22 ‘‘(ii) a portion of which occurs within 

23 the taxable year. 

24 Notwithstanding the preceding sentence, a cer25 tification shall not be treated as valid unless it 
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is made within the 391 1 ⁄2 month period ending 

2 on such due date (or such other period as the 

3 Secretary prescribes). 

4 ‘‘(B) INDIVIDUALS WITH LONG-TERM CARE

5 NEEDS.—An individual is described in this sub6 paragraph if the individual meets any of the fol7 lowing requirements: 

8 ‘‘(i) The individual is at least 6 years 

9 of age and— 

10 ‘‘(I) is unable to perform (with11 out substantial assistance from an12 other individual) at least 3 activities 

13 of daily living (as defined in section 

14 7702B(c)(2)(B)) due to a loss of 

15 functional capacity, or 

16 ‘‘(II) requires substantial super17 vision to protect such individual from 

18 threats to health and safety due to se19 vere cognitive impairment and is un20 able to perform, without reminding or 

21 cuing assistance, at least 1 activity of 

22 daily living (as so defined) or to the 

23 extent provided in regulations pre24 scribed by the Secretary (in consulta25 tion with the Secretary of Health and 
27

•S 1602 IS 

1 Human Services), is unable to engage 

2 in age appropriate activities. 

3 ‘‘(ii) The individual is at least 2 but 

4 not 6 years of age and is unable due to a 

5 loss of functional capacity to perform 

6 (without substantial assistance from an7 other individual) at least 2 of the following 

8 activities: eating, transferring, or mobility. 

9 ‘‘(iii) The individual is under 2 years 

10 of age and requires specific durable med11 ical equipment by reason of a severe health 

12 condition or requires a skilled practitioner 

13 trained to address the individual’s condi14 tion to be available if the individual’s par15 ents or guardians are absent. 

16 ‘‘(2) ELIGIBLE CAREGIVER.— 

17 ‘‘(A) IN GENERAL.—A taxpayer shall be 

18 treated as an eligible caregiver for any taxable 

19 year with respect to the following individuals: 

20 ‘‘(i) The taxpayer. 

21 ‘‘(ii) The taxpayer’s spouse. 

22 ‘‘(iii) An individual with respect to 

23 whom the taxpayer is allowed a deduction 

24 under section 151(c) for the taxable year. 
28

•S 1602 IS 

1 ‘‘(iv) An individual who would be de2 scribed in clause (iii) for the taxable year 

3 if section 151(c) were applied by sub4 stituting for the exemption amount an 

5 amount equal to the sum of the exemption 

6 amount, the standard deduction under sec7 tion 63(c)(2)(C), and any additional stand8 ard deduction under section 63(c)(3) which 

9 would be applicable to the individual if 

10 clause (iii) applied. 

11 ‘‘(v) An individual who would be de12 scribed in clause (iii) for the taxable year 

13 if— 

14 ‘‘(I) the requirements of clause 

15 (iv) are met with respect to the indi16 vidual, and 

17 ‘‘(II) the requirements of sub18 paragraph (B) are met with respect to 

19 the individual in lieu of the support 

20 test under subsection (c)(1)(D) or 

21 (d)(1)(C) of section 152. 

22 ‘‘(B) RESIDENCY TEST.—The require23 ments of this subparagraph are met if an indi24 vidual has as his principal place of abode the 

25 home of the taxpayer and— 
29

•S 1602 IS 

1 ‘‘(i) in the case of an individual who 

2 is an ancestor or descendant of the tax3 payer or the taxpayer’s spouse, is a mem4 ber of the taxpayer’s household for over 

5 half the taxable year, or 

6 ‘‘(ii) in the case of any other indi7 vidual, is a member of the taxpayer’s 

8 household for the entire taxable year. 

9 ‘‘(C) SPECIAL RULES WHERE MORE THAN

10 1 ELIGIBLE CAREGIVER.— 

11 ‘‘(i) IN GENERAL.—If more than 1 in12 dividual is an eligible caregiver with re13 spect to the same applicable individual for 

14 taxable years ending with or within the 

15 same calendar year, a taxpayer shall be 

16 treated as the eligible caregiver if each 

17 such individual (other than the taxpayer) 

18 files a written declaration (in such form 

19 and manner as the Secretary may pre20 scribe) that such individual will not claim 

21 such applicable individual for the credit 

22 under this section. 

23 ‘‘(ii) NO AGREEMENT.—If each indi24 vidual required under clause (i) to file a 

25 written declaration under clause (i) does 
30

•S 1602 IS 

1 not do so, the individual with the highest 

2 adjusted gross income shall be treated as 

3 the eligible caregiver. 

4 ‘‘(iii) MARRIED INDIVIDUALS FILING

5 SEPARATELY.—In the case of married indi6 viduals filing separately, the determination 

7 under this subparagraph as to whether the 

8 husband or wife is the eligible caregiver 

9 shall be made under the rules of clause (ii) 

10 (whether or not one of them has filed a 

11 written declaration under clause (i)). 

12 ‘‘(d) IDENTIFICATION REQUIREMENT.—No credit 

13 shall be allowed under this section to a taxpayer with re14 spect to any applicable individual unless the taxpayer in15 cludes the name and taxpayer identification number of 

16 such individual, and the identification number of the phy17 sician certifying such individual, on the return of tax for 

18 the taxable year. 

19 ‘‘(e) TAXABLE YEAR MUST BE FULL TAXABLE

20 YEAR.—Except in the case of a taxable year closed by rea21 son of the death of the taxpayer, no credit shall be allow22 able under this section in the case of a taxable year cov23 ering a period of less than 12 months.’’. 

24 (b) CONFORMING AMENDMENTS.— 
31

•S 1602 IS 

1 (1) Section 6213(g)(2) of such Code is amend2 ed by striking ‘‘and’’ at the end of subparagraph 

3 (L), by striking the period at the end of subpara4 graph (M) and inserting ‘‘, and’’, and by inserting 

5 after subparagraph (M) the following new subpara6 graph: 

7 ‘‘(N) an omission of a correct TIN or phy8 sician identification required under section 

9 25E(d) (relating to credit for taxpayers with 

10 long-term care needs) to be included on a re11 turn.’’. 

12 (2) The table of sections for subpart A of part 

13 IV of subchapter A of chapter 1 of such Code is 

14 amended by inserting after the item relating to sec15 tion 25D the following new item:

‘‘Sec. 25E. Credit for taxpayers with long-term care needs.’’.

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2005. 

19 SEC. 123. TREATMENT OF EXCHANGES OF LONG-TERM 

20 CARE INSURANCE CONTRACTS. 

21 (a) IN GENERAL.—Subsection (a) of section 1035 of 

22 the Internal Revenue Code of 1986 (relating to exchanges 

23 of insurance policies) is amended by striking the period 

24 at the end of paragraph (3) and inserting ‘‘; or’’ and by 

25 adding at the end the following new paragraph: 
32

•S 1602 IS 

1 ‘‘(4) a qualified long-term care insurance con2 tract for another qualified long-term care insurance 

3 contract.’’. 

4 (b) QUALIFIED LONG-TERM CARE INSURANCE CON5 TRACT.—Subsection (b) of section 1035 of such Code (re6 lating to definitions) is amended by adding at the end the 

7 following new paragraph: 

8 ‘‘(4) QUALIFIED LONG-TERM CARE INSURANCE

9 CONTRACT.—The term ‘qualified long-term care in10 surance contract’ means— 

11 ‘‘(A) any qualified long-term care insur12 ance contract (as defined in section 7702B), 

13 and 

14 ‘‘(B) any contract which is treated as such 

15 by section 321(f)(2) of the Health Insurance 

16 Portability and Accountability Act of 1996.’’. 

17 (c) EFFECTIVE DATE.— 

18 (1) IN GENERAL.—The amendments made by 

19 this section shall apply to exchanges after December 

20 31, 1997. 

21 (2) WAIVER OF LIMITATIONS.—If the credit or 

22 refund of any overpayment of tax with respect to a 

23 taxable year ending before the date of the enactment 

24 of this Act resulting from the application of section 

25 1035(a)(4) of the Internal Revenue Code of 1986, as 
33

•S 1602 IS 

1 added by this section, is prevented at any time by 

2 the operation of any law or rule of law (including res 

3 judicata), such credit or refund may nevertheless be 

4 allowed or made if the claim therefor is filed before 

5 the close of the 1-year period beginning on the date 

6 of the enactment of this Act. 

7 TITLE II—MEDICAID HOME AND 

8 COMMUNITY-BASED SERV9 ICES OPTIONAL BENEFIT 

10 SEC. 201. MEDICAID HOME AND COMMUNITY-BASED SERV11 ICES OPTIONAL BENEFIT. 

12 (a) HOME AND COMMUNITY-BASED SERVICES AS AN

13 OPTIONAL BENEFIT FOR INDIVIDUALS ELIGIBLE FOR

14 MEDICAL ASSISTANCE.—Title XIX of the Social Security 

15 Act (42 U.S.C. 1396 et seq.) is amended—

16 (1) in section 1905(a)—

17 (A) in paragraph (27), by striking ‘‘and’’ 

18 at the end; 

19 (B) by redesignating paragraph (28) as 

20 paragraph (29); and 

21 (C) by inserting after paragraph (27), the 

22 following: 

23 ‘‘(28) subject to section 1930A, such home and 

24 community-based services (as defined in subsections 

25 (c)(4)(B) and (d)(5)(C)(i) of section 1915 (not in-
34

•S 1602 IS 

1 cluding payment for room and board but including, 

2 in the case of services described in section 

3 1915(c)(4)(B), any other services requested by a 

4 State and approved by the Secretary under such sec5 tion)) as the State shall specify in a State plan 

6 amendment; and’’; and 

7 (2) by inserting after section 1930, the fol8 lowing: 

9 ‘‘HOME AND COMMUNITY-BASED SERVICES

10 ‘‘SEC. 1930A. (a) IN GENERAL.—A State may pro11 vide through a State plan amendment for the provision 

12 of such home and community-based services under section 

13 1905(a)(28) as the State shall specify for individuals eligi14 ble for medical assistance under the State plan (without 

15 determining that but for the provision of such services the 

16 individuals would require the level of care provided in a 

17 hospital or a nursing facility or intermediate care facility 

18 for the mentally retarded), but only if the State meets the 

19 following requirements: 

20 ‘‘(1) NEEDS-BASED CRITERIA FOR ELIGIBILITY

21 FOR, AND RECEIPT OF, HOME AND COMMUNITY22 BASED SERVICES.—The State establishes needs23 based criteria for determining an individual’s eligi24 bility under the State plan for medical assistance for 

25 such home and community-based services, and if the 

26 individual is eligible for such services, the specific 
35

•S 1602 IS 

1 home and community-based services that the indi2 vidual will receive. 

3 ‘‘(2) ESTABLISHMENT OF MORE STRINGENT

4 NEEDS-BASED ELIGIBILITY CRITERIA FOR INSTITU5 TIONALIZED CARE.—The State establishes needs6 based criteria for determining whether an individual 

7 requires the level of care provided in a hospital, a 

8 nursing facility, or an intermediate care facility for 

9 the mentally retarded under the State plan or under 

10 any waiver of such plan that are more stringent 

11 than the needs-based criteria established under para12 graph (1) for determining eligibility for home and 

13 community-based services. 

14 ‘‘(3) PROJECTION OF NUMBER OF INDIVIDUALS

15 TO BE PROVIDED HOME AND COMMUNITY-BASED

16 SERVICES.—The State submits to the Secretary, in 

17 such form and manner, and upon such frequency as 

18 the Secretary shall specify, the projected number of 

19 individuals to be provided home and community20 based services. 

21 ‘‘(4) CRITERIA BASED ON INDIVIDUAL ASSESS22 MENT.—

23 ‘‘(A) IN GENERAL.—The criteria estab24 lished by the State for purposes of paragraphs 

25 (1) and (2) requires an assessment of an indi-
36

•S 1602 IS 

1 vidual’s support needs and capabilities, and 

2 may take into account the inability of the indi3 vidual to perform 1 or more activities of daily 

4 living (as defined in section 7702B(c)(2)(B) of 

5 the Internal Revenue Code of 1986) or the need 

6 for significant assistance to perform such activi7 ties, and such other risk factors as the State 

8 determines to be appropriate. 

9 ‘‘(B) ADJUSTMENT AUTHORITY.—The 

10 State plan amendment provides for modification 

11 of the criteria established under paragraph (1) 

12 (without having to obtain prior approval from 

13 the Secretary) in the event that the enrollment 

14 of individuals eligible for home and community15 based services exceeds the projected enrollment 

16 submitted for purposes of paragraph (3), but 

17 only if—

18 ‘‘(i) the State provides at least 60 

19 days notice to the Secretary and the public 

20 of the proposed modification; 

21 ‘‘(ii) the State deems an individual re22 ceiving home and community-based serv23 ices on the basis of the most recent version 

24 of the criteria in effect prior to the effec25 tive date of the modification to continue to 
37

•S 1602 IS 

1 be eligible for such services after the effec2 tive date of the modification and until such 

3 time as the individual no longer meets the 

4 standard for receipt of such services under 

5 such pre-modified criteria; and 

6 ‘‘(iii) after the effective date of such 

7 modification, the State applies the criteria 

8 for determining whether an individual re9 quires the level of care provided in a hos10 pital, a nursing facility, or an intermediate 

11 care facility for the mentally retarded 

12 under the State plan or under any waiver 

13 of such plan which applied prior to the ap14 plication of the more stringent criteria de15 veloped under paragraph (2). 

16 ‘‘(5) INDEPENDENT EVALUATION AND ASSESS17 MENT.—

18 ‘‘(A) ELIGIBILITY DETERMINATION.—The 

19 State uses an independent evaluation for mak20 ing the determinations described in paragraphs 

21 (1) and (2). 

22 ‘‘(B) ASSESSMENT.—In the case of an in23 dividual who is determined to be eligible for 

24 home and community-based services, the State 
38

•S 1602 IS 

1 uses an independent assessment, based on the 

2 needs of the individual to—

3 ‘‘(i) determine a necessary level of 

4 services and supports to be provided, con5 sistent with an individual’s physical and 

6 mental capacity, 

7 ‘‘(ii) prevent the provision of unneces8 sary or inappropriate care; and 

9 ‘‘(iii) establish an individualized care 

10 plan for the individual in accordance with 

11 paragraph (7). 

12 ‘‘(6) ASSESSMENT.—The independent assess13 ment required under paragraph (5)(B) shall include 

14 the following: 

15 ‘‘(A) An objective evaluation of an individ16 ual’s inability of the individual to perform 1 or 

17 more activities of daily living (as defined in sec18 tion 7702B(c)(2)(B) of the Internal Revenue 

19 Code of 1986) or the need for significant assist20 ance to perform such activities, and of the indi21 vidual’s ability to engage in major life activities 

22 such as walking, seeing, hearing, breathing, 

23 speaking, working, performing manual tasks, 

24 learning, thinking, concentrating, interacting 
39

•S 1602 IS 

1 with others, sleeping, and any other appropriate 

2 activities. 

3 ‘‘(B) A face-to-face evaluation of the indi4 vidual by an individual trained in the assess5 ment and evaluation of individuals whose phys6 ical or mental conditions trigger a potential 

7 need for home and community-based services. 

8 ‘‘(C) Where appropriate, consultation with 

9 the individual’s family, spouse, guardian, or 

10 other responsible individual. 

11 ‘‘(D) Consultation with appropriate treat12 ing and consulting health and support profes13 sionals caring for the individual. 

14 ‘‘(E) An examination of the individual’s 

15 relevant history, medical records, and care and 

16 support needs, guided by best practices and re17 search on effective strategies that result in im18 proved health and quality of life outcomes. 

19 ‘‘(F) If the State offers individuals the op20 tion to self-direct the purchase of, or control the 

21 receipt of, home and community-based service, 

22 an evaluation of the ability of the individual or 

23 the individual’s representative to self-direct the 

24 purchase of, or control the receipt of, such serv25 ices if the individual so elects. 
40

•S 1602 IS 

1 ‘‘(7) INDIVIDUALIZED CARE PLAN.—

2 ‘‘(A) IN GENERAL.—In the case of an indi3 vidual who is determined to be eligible for home 

4 and community-based services, the State uses 

5 the independent assessment required under 

6 paragraph (5)(B) to establish a written individ7 ualized care plan for the individual. 

8 ‘‘(B) PLAN REQUIREMENTS.—The State 

9 ensures that the individualized care plan for an 

10 individual—

11 ‘‘(i) is developed—

12 ‘‘(I) in consultation with the indi13 vidual, the individual’s treating physi14 cian, health care or support profes15 sional, or other appropriate individ16 uals, as defined by the State, and, 

17 where appropriate the individual’s 

18 family, caregiver, or representative; 

19 and 

20 ‘‘(II) taking into account the ex21 tent of, and need for, any family or 

22 other supports for the individual; 

23 ‘‘(ii) identifies the necessary home and 

24 community-based services to be furnished 

25 to the individual (or, if the individual elects 
41

•S 1602 IS 

1 to self-direct the purchase of, or control 

2 the receipt of, such services, funded for the 

3 individual); and 

4 ‘‘(iii) is reviewed at least annually and 

5 as needed when there is a significant 

6 change in the individual’s circumstances. 

7 ‘‘(C) STATE OPTION TO OFFER ELECTION

8 FOR SELF-DIRECTED SERVICES.—

9 ‘‘(i) INDIVIDUAL CHOICE.—At the op10 tion of the State, the State may allow an 

11 individual or the individual’s representative 

12 to elect to receive self-directed home and 

13 community-based services in a manner 

14 which gives them the most control over 

15 such services consistent with the individ16 ual’s abilities and the requirements of 

17 clause (ii). 

18 ‘‘(ii) SELF-DIRECTED SERVICES.—The 

19 term ‘self-directed’ means, with respect to 

20 the home and community-based services of21 fered under the State plan amendment, 

22 such services for the individual which are 

23 planned and purchased under the direction 

24 and control of such individual or the indi25 vidual’s authorized representative, includ-
42

•S 1602 IS 

1 ing the amount, duration, scope, provider, 

2 and location of such services, under the 

3 State plan consistent with the following re4 quirements: 

5 ‘‘(I) ASSESSMENT.—There is an 

6 assessment of the needs, capabilities, 

7 and preferences of the individual with 

8 respect to such services. 

9 ‘‘(II) SERVICE PLAN.—Based on 

10 such assessment, there is developed 

11 jointly with such individual or the in12 dividual’s authorized representative a 

13 plan for such services for such indi14 vidual that is approved by the State 

15 and that—

16 ‘‘(aa) specifies those services 

17 which the individual or the indi18 vidual’s authorized representative 

19 would be responsible for direct20 ing; 

21 ‘‘(bb) identifies the methods 

22 by which the individual or the in23 dividual’s authorized representa24 tive will select, manage, and dis25 miss providers of such services; 
43

•S 1602 IS 

1 ‘‘(cc) specifies the role of 

2 family members and others whose 

3 participation is sought by the in4 dividual or the individual’s au5 thorized representative with re6 spect to such services; 

7 ‘‘(dd) is developed through a 

8 person-centered process that is 

9 directed by the individual or the 

10 individual’s authorized represent11 ative, builds upon the individual’s 

12 capacity to engage in activities 

13 that promote community life and 

14 that respects the individual’s 

15 preferences, choices, and abilities, 

16 and involves families, friends, 

17 and professionals as desired or 

18 required by the individual or the 

19 individual’s authorized represent20 ative; 

21 ‘‘(ee) includes appropriate 

22 risk management techniques that 

23 recognize the roles and sharing of 

24 responsibilities in obtaining serv25 ices in a self-directed manner and 
44 

•S 1602 IS 

1 assure the appropriateness of 

2 such plan based upon the re3 sources and capabilities of the in4 dividual or the individual’s au5 thorized representative; and 

6 ‘‘(ff) may include an individ7 ualized budget which identifies 

8 the dollar value of the services 

9 and supports under the control 

10 and direction of the individual or 

11 the individual’s authorized rep12 resentative. 

13 ‘‘(III) BUDGET PROCESS.—With 

14 respect to individualized budgets de15 scribed in subclause (II)(ff), the State 

16 plan amendment— 

17 ‘‘(aa) describes the method 

18 for calculating the dollar values 

19 in such budgets based on reliable 

20 costs and service utilization; 

21 ‘‘(bb) defines a process for 

22 making adjustments in such dol23 lar values to reflect changes in 

24 individual assessments and serv25 ice plans; and 
45

•S 1602 IS 

1 ‘‘(cc) provides a procedure 

2 to evaluate expenditures under 

3 such budgets. 

4 ‘‘(8) QUALITY ASSURANCE; CONFLICT OF IN5 TEREST STANDARDS.—

6 ‘‘(A) QUALITY ASSURANCE.—The State en7 sures that the provision of home and commu8 nity-based services meets Federal and State 

9 guidelines for quality assurance. 

10 ‘‘(B) CONFLICT OF INTEREST STAND11 ARDS.—The State establishes standards for the 

12 conduct of the independent evaluation and the 

13 independent assessment to safeguard against 

14 conflicts of interest. 

15 ‘‘(9) REDETERMINATIONS AND APPEALS.—The 

16 State allows for at least annual redeterminations of 

17 eligibility, and appeals in accordance with the fre18 quency of, and manner in which, redeterminations 

19 and appeals of eligibility are made under the State 

20 plan. 

21 ‘‘(10) PRESUMPTIVE ELIGIBILITY FOR ASSESS22 MENT.—

23 ‘‘(A) IN GENERAL.—The State, at its op24 tion, elects to provide for a period of presump25 tive eligibility for an individual that is limited 
46 

•S 1602 IS 

1 to medical assistance for carrying out the inde2 pendent evaluation and assessment under para3 graph (5) to determine an individual’s eligibility 

4 for home and community-based services, and if 

5 the individual is eligible for such services, the 

6 specific home and community-based services 

7 that the individual will receive. 

8 ‘‘(B) APPLICATION OF EXISTING RULES.— 

9 In the case of a State that makes such an elec10 tion, the State provides for a period of pre11 sumptive eligibility in the same manner as the 

12 State may provide for such a period under sec13 tion 1920B (except that subsection (d)(2) of 

14 that section is applied by substituting ‘section 

15 1903’ for ‘clause (4) of the first sentence of 

16 section 1905(b)’). 

17 ‘‘(b) DEFINITION OF INDIVIDUAL’S REPRESENTA18 TIVE.—In this section, the term ‘individual’s representa19 tive’ means, with respect to an individual, a parent, a fam20 ily member, or a guardian of the individual, an advocate 

21 for the individual, or any other individual who is author22 ized to represent the individual. 

23 ‘‘(c) NO EFFECT ON 1915 OR 1115 WAIVERS.— 

24 Nothing in this section shall be construed as effecting the 

25 option of a State to offer home and community-based serv-
47 

•S 1602 IS 

1 ices under a waiver under subsections (c) or (d) of section 

2 1915 or under section 1115.’’. 

3 (2) CONFORMING AMENDMENT.—Section 

4 1902(a)(10)(C)(iv) of such Act (42 U.S.C. 

5 1396a(a)(10)(C)(iv)) is amended by inserting ‘‘or 

6 (28)’’ after ‘‘(24)’’. 

7 (b) STATE OPTION TO EXPAND HOME AND COMMU8 NITY-BASED SERVICES TO ADDITIONAL AT-RISK INDIVID9 UALS.— 

10 (1) IN GENERAL.—Section 1930A of the Social 

11 Security Act (42 U.S.C. 1396d(y)) (as added by 

12 subsection (a)) is amended— 

13 (A) by redesignating subsection (b) as sub14 section (c); and 

15 (B) by inserting after subsection (a) the 

16 following: 

17 ‘‘(b) HOME AND COMMUNITY-BASED SERVICES FOR

18 AT-RISK INDIVIDUALS.— 

19 ‘‘(1) IN GENERAL.—If a State elects to offer 

20 under the State plan medical assistance for home 

21 and community-based services in accordance with 

22 section 1905(a)(28) and subsection (a), the State 

23 may elect, subject to paragraph (3), to offer such 

24 services to an individual described in paragraph (2) 

25 who is determined on the basis of an independent 
48

•S 1602 IS 

1 evaluation to meet the criteria established under 

2 subsection (a)(1) for eligibility for, and receipt of, 

3 such services. 

4 ‘‘(2) INDIVIDUAL DESCRIBED.—For purposes of 

5 paragraph (1), an individual described in this para6 graph is an individual whose income (as determined 

7 under section 1612, but without regard to subsection 

8 (b) thereof) does not exceed such percent of the sup9 plemental security income benefit rate established by 

10 section 1611(b)(1) as the State may establish (but 

11 not to exceed 300 percent). 

12 ‘‘(3) APPLICATION OF RULES FOR OFFERING

13 HOME AND COMMUNITY-BASED SERVICES AS AN OP14 TIONAL BENEFIT.—The requirements of subsection 

15 (a) shall apply to the provision of home and commu16 nity-based services to eligible individuals under this 

17 subsection.’’. 

18 (2) CONFORMING AMENDMENT.—Section 

19 1903(f)(4) of such Act (42 U.S.C. 1396b(f)(4)) is 

20 amended in the matter preceding subparagraph (A), 

21 by inserting ‘‘1930A(b)’’ after ‘‘1905(p)(1)’’. 

22 (c) QUALITY OF CARE MEASURES.—

23 (1) IN GENERAL.—The Secretary of Health and 

24 Human Services (in this subsection referred to as 

25 the ‘‘Secretary’’), acting through the Director of the 
49

•S 1602 IS 

1 Agency for Healthcare Research and Quality, shall 

2 consult with consumers, health and social service 

3 providers and other professionals knowledgeable 

4 about long-term care services and supports to de5 velop program performance indicators, client func6 tion indicators, and measures of client satisfaction 

7 with respect to home and community-based services 

8 offered under State medicaid programs (under a 

9 waiver approved under section 1115 or 1915 of the 

10 Social Security Act or under section 1930A of such 

11 Act (as added by subsections (a) and (b))). 

12 (2) BEST PRACTICES.—The Secretary shall—

13 (A) use the indicators and measures devel14 oped under paragraph (1) to assess such home 

15 and community-based services, the outcomes as16 sociated with the receipt of such services (par17 ticularly with respect to the health and welfare 

18 of the recipient of the services), and the overall 

19 system for providing home and community20 based services under the medicaid program 

21 under title XIX of the Social Security Act; and 

22 (B) make publicly available the best prac23 tices identified through such assessment and a 

24 comparative analyses of the system features of 

25 each State. 
50

•S 1602 IS 

1 TITLE III—INTEGRATED ACUTE 

2 AND LONG-TERM CARE SERV3 ICES FOR DUALLY ELIGIBLE 

4 INDIVIDUALS. 

5 SEC. 301. REMOVAL OF BARRIERS TO INTEGRATED ACUTE 

6 AND LONG-TERM CARE SERVICES FOR DU7 ALLY ELIGIBLE INDIVIDUALS. 

8 (a) REGULATIONS AND LEGISLATIVE RECOMMENDA9 TIONS.—Not later than January 1, 2007, the Secretary 

10 of Health and Human Services, in consultation with direc11 tors of State medicaid programs under title XIX of the 

12 Social Security Act, health care insurers, managed care 

13 entities (as defined in section 1932(a)(1)(B) of the Social 

14 Security Act (42 U.S.C. 1396u–2(a)(1)(B)), entities offer15 ing Medicare Advantage plans under part C of title XVIII 

16 of such Act (42 U.S.C. 1395w–21 et seq.) (including spe17 cialized MA plans for special needs individuals (as defined 

18 in section 1859(b)(6) of such Act), PACE providers (as 

19 defined in section 1934(a)(3) of the Social Security Act 

20 (42 U.S.C. 1396u–4(a)(3)), and representatives of individ21 uals who are dually eligible for the medicare and medicaid 

22 programs, shall do the following: 

23 (1) REMOVAL OF ADMINISTRATIVE BARRIERS

24 TO INTEGRATED CARE.—Issue regulations removing 

25 administrative barriers under the medicare and med-
51

•S 1602 IS 

1 icaid programs that impede the offering of inte2 grated acute and long-term care services which com3 bine acute, home and community-based, nursing fa4 cility, and mental health services, and, to the extent 

5 consistent with an enrollee’s coverage for such serv6 ices under part D of title XVIII of the Social Secu7 rity Act, coverage for prescribed drugs, into a single 

8 model of care for individuals who are dually eligible 

9 for such programs. Such regulations shall address 

10 conflicting requirements under such programs for 

11 managed care entities (as defined in section 

12 1932(a)(1)(B) of the Social Security Act (42 U.S.C. 

13 1396u–2(a)(1)(B)), entities offering Medicare Ad14 vantage plans under part C of title XVIII of such 

15 Act (42 U.S.C. 1395w–21 et seq.) (including special16 ized MA plans for special needs individuals (as de17 fined in section 1859(b)(6) of such Act), and PACE 

18 providers (as defined in section 1934(a)(3) of the 

19 Social Security Act (42 U.S.C. 1396u–4(a)(3)) with 

20 respect to identification cards, marketing require21 ments, and such other requirements as the Secretary 

22 shall identify. 

23 (2) SUBMISSION OF RECOMMENDATIONS FOR

24 REMOVAL OF STATUTORY BARRIERS TO INTEGRATED

25 CARE.—Submit to Congress recommendations for re-
52

•S 1602 IS 

1 moval of such statutory barriers to the offering of 

2 such integrated services to individuals dually eligible 

3 under the medicare and medicaid programs as the 

4 Secretary shall identify. 

5 (b) MEDPAC COMMENTS.—Not later than February 

6 1, 2007, the Medicare Payment Advisory Commission 

7 shall submit to Congress comments on the recommenda8 tions submitted by the Secretary of Health and Human 

9 Services under subsection (a)(2). 

10 TITLE IV—EFFECTIVE DATE 

11 SEC. 401. EFFECTIVE DATE. 

12 (a) IN GENERAL.—Except as otherwise provided in 

13 this Act, this Act and the amendments made by this Act 

14 take effect on October 1, 2005. 

15 (b) EXTENSION OF EFFECTIVE DATE FOR STATE

16 LAW AMENDMENT.—In the case of a State plan under 

17 title XIX of the Social Security Act which the Secretary 

18 of Health and Human Services determines requires State 

19 legislation in order for the plan to meet the additional re20 quirements imposed by the amendments made by a provi21 sion of this Act, the State plan shall not be regarded as 

22 failing to comply with the requirements of this Act solely 

23 on the basis of its failure to meet these additional require24 ments before the first day of the first calendar quarter 

25 beginning after the close of the first regular session of the 
53

•S 1602 IS 

1 State legislature that begins after the date of enactment 

2 of this Act. For purposes of the previous sentence, in the 

3 case of a State that has a 2-year legislative session, each 

4 year of the session shall be considered to be a separate 

5 regular session of the State legislature.

Æ