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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1600 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                S. 1600

To amend the Social Security Act to establish long-term care assistance 
           programs for the elderly, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

             October 28 (legislative day, October 13), 1993

Mr. Packwood (for himself, Mr. Dole, Mr. Simpson, and Mr. Durenberger) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To amend the Social Security Act to establish long-term care assistance 
           programs for the elderly, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Secure Choice Act of 1993''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
                   TITLE I--LONG-TERM CARE PROVISIONS

Sec. 101. Long-term care assistance programs established.
Sec. 102. Continuing eligibility of individuals eligible for long-term 
                            care benefits under title XIX under new 
                            title XXI.
Sec. 103. Repeal of long-term care provisions in title XIX of the 
                            Social Security Act.
Sec. 104. Study of formula for payment of long-term care services.
Sec. 105. Long-term care data collection system.
Sec. 106. Creation of new administrative unit for long-term care 
                            program.
Sec. 107. Secretarial submission of legislative proposal for technical 
                            and conforming amendments.
                TITLE II--LONG-TERM CARE TAX PROVISIONS

Sec. 200. Amendment of 1986 Code.
                       Part I--General Provisions

Sec. 201. Qualified long-term care services treated as medical care.
Sec. 202. Treatment of long-term care insurance or plans.
Sec. 203. Effective dates.
                Part II--Consumer Protection Provisions

Sec. 211. Policy requirements.
Sec. 212. Additional requirements for issuers of long-term care 
                            insurance policies.
Sec. 213. Coordination with State requirements.
Sec. 214. Uniform language and definitions.
Sec. 215. Effective dates.

                   TITLE I--LONG-TERM CARE PROVISIONS

SEC. 101. LONG-TERM CARE ASSISTANCE PROGRAMS ESTABLISHED.

    (a) In General.--The Social Security Act (42 U.S.C. 301 et seq.) is 
amended by adding at the end the following new title:

            ``TITLE XXI--LONG-TERM CARE ASSISTANCE PROGRAMS

                      ``TABLE OF CONTENTS OF TITLE

   ``Part A--Grants to States for Long-Term Care Assistance Programs

``Sec. 2101. Appropriation.
``Sec. 2102. State plans for long-term care assistance.
``Sec. 2103. Payment to States.
``Sec. 2104. Operation of State plans.
``Sec. 2105. Observance of religious beliefs.
``Sec. 2106. Indian health service providers.
``Sec. 2107. Assignment of rights of payment.
``Sec. 2108. Hospital providers of nursing facility services.
``Sec. 2109. Withholding of Federal share of payments for certain 
                            medicare and medicaid providers.
``Sec. 2110. Provisions respecting inapplicability of certain 
                            requirements.
``Sec. 2111. Use of deductible, cost sharing, and similar charges.
``Sec. 2112. Transfers of assets, trusts, liens, and adjustments and 
                            recoveries.
``Sec. 2113. Application of provisions of title II relating to 
                            subpoenas.
``Sec. 2114. Treatment of income and resources for certain impaired 
                            spouses.
``Sec. 2115. Definitions.
                ``Part B--Secure Choice Insurance Option

``Sec. 2131. Purpose.
``Sec. 2132. Definitions.
``Sec. 2133. Establishment of program.
``Sec. 2134. Requirements on qualified long-term care insurance 
                            policies.
``Sec. 2135. Benefits under qualified long-term care insurance 
                            policies.
``Sec. 2136. Premiums under qualified long-term care insurance 
                            policies.
``Sec. 2137. Portability requirements.
``Sec. 2138. Payments to qualified providers; benefit subsidies.
``Sec. 2139. Federal contribution.
``Sec. 2140. Resource rules.
``Sec. 2141. Standards and performance organizations.
``Sec. 2142. Educational program.

   ``Part A--Grants to States for Long-Term Care Assistance Programs

                            ``appropriation

    ``Sec. 2101. (a) In General.--For the purpose of enabling each 
State to--
            ``(1) furnish long-term care assistance to any functionally 
        impaired individual, severely functionally impaired individual, 
        or functionally impaired child under this part; and
            ``(2) establish a Secure Choice Insurance Program under 
        part B;
there is hereby authorized to be appropriated and is appropriated for 
each fiscal year a sum sufficient to carry out the purposes of this 
title.
    ``(b) Limitation on Federal Expenditures for Long-term Care 
Assistance.--
            ``(1) In general.--The total amount of payments made by the 
        Federal Government under this part for a fiscal year shall not 
        exceed the sum of the allotments for all States determined 
        under paragraph (2).
            ``(2) State allotments.--The Secretary shall determine an 
        allotment for each State for each fiscal year equal to the sum 
        of the State's allotments for all applicable age groups 
        determined under paragraph (3).
            ``(3) State allotments by applicable age group.--The 
        Secretary shall determine a State allotment for each applicable 
        age group in accordance with the following formula:

                                                                                                                                                                                                                                        
                                                                                     adjusted                                                        adjusted                                                                           
                                State                                               actualper                                                       medianper                                                                           
                              allotment                  applicable                   capita                                                          capita                                 number of                                  
                                 for     =  <5-ln [>  actualpercentage  <5-line (>  amountfor  <5-ln )>  +  applicablemedianpercentage  <5-line (>  amountfor  <5-ln )><5-ln ]>   x   countableindividualsin                            
                             applicable                                              the age                                                         the age                               the age group                                
                              age group                                               group                                                           group                                                                             
                                                                                                                                                                                                                                        

            ``(4) Definitions.--For purposes of this subsection:
                    ``(A) Applicable age group.--The term `applicable 
                age group' means any of the following age groups:
                            ``(i) Individuals who have not attained 65 
                        years of age.
                            ``(ii) Individuals who have attained at 
                        least 65 years of age but have not attained 75 
                        years of age.
                            ``(iii) Individuals who have attained at 
                        least 75 years of age but have not attained 85 
                        years of age.
                            ``(iv) Individuals who have attained at 
                        least 85 years of age.
                    ``(B) Applicable actual percentage.--The term 
                `applicable actual percentage' means--
                            ``(i) for fiscal year 1995, 90 percent; and
                            ``(ii) for each succeeding fiscal year, the 
                        percentage determined under this subparagraph 
                        for the preceding fiscal year reduced by 10 
                        percent, but not less than 0 percent.
                    ``(C) Applicable median percentage.--The term 
                `applicable median percentage' means--
                            ``(i) for fiscal year 1995, 10 percent; and
                            ``(ii) for each succeeding fiscal year, the 
                        percentage determined under this subparagraph 
                        for the preceding fiscal year increased by 10 
                        percent, but not greater than 100 percent.
                    ``(D) Adjusted actual per capita amount.--
                            ``(i) In general.--The term `adjusted 
                        actual per capita amount' for an applicable age 
                        group means--
                                    ``(I) for fiscal year 1995, an 
                                amount equal to the unadjusted actual 
                                per capita amount (as determined under 
                                clause (ii)) for the age group updated 
                                by the inflation percentage (as 
                                determined under clause (iii)); and
                                    ``(II) for fiscal year 1996 and 
                                succeeding fiscal years, an amount 
                                equal to the amount determined under 
                                this subparagraph for the age group for 
                                the previous fiscal year updated by the 
                                inflation percentage.
                            ``(ii) Unadjusted actual per capita 
                        amount.--
                                    ``(I) In general.--The unadjusted 
                                actual per capita amount determined 
                                under this clause for an applicable age 
                                group is an amount equal to the 
                                quotient of--
                                            ``(aa) the total Federal 
                                        payment made to the State under 
                                        section 1903 for long-term care 
                                        services (as defined in 
                                        subclause (II)) furnished to 
                                        individuals in the applicable 
                                        age group for fiscal year 1994, 
                                        divided by
                                            ``(bb) the total number of 
                                        individuals in such applicable 
                                        age group who had incomes below 
                                        the income official poverty 
                                        line (as defined in section 
                                        2115(f)) during fiscal year 
                                        1994.
                                    ``(II) Long-term care services.--
                                For purposes of subclause (I), the term 
                                `long-term care services' means--
                                            ``(aa) nursing facility 
                                        services (as defined in section 
                                        1905(f));
                                            ``(bb) home or community-
                                        based services furnished under 
                                        a waiver under subsection (c) 
                                        or (d) of section 1915;
                                            ``(cc) home and community 
                                        care furnished under section 
                                        1929;
                                            ``(dd) home health care 
                                        services (as referred to in 
                                        section 1905(a)(7));
                                            ``(ee) personal care 
                                        services (as described in 
                                        section 1905(a)(24)); and
                                            ``(ff) private duty nursing 
                                        services (as referred to in 
                                        section 1905(a)(8)).
                            ``(iii) Inflation percentage.--The 
                        inflation percentage determined under this 
                        clause is equal to--
                                    ``(I) the percentage change in the 
                                long-term care inflation index (as 
                                defined in subparagraph (G)) for the 
                                fiscal year; or
                                    ``(II) if the long-term care 
                                inflation index has not been developed, 
                                5 percent.
                    ``(E) Adjusted median per capita amount.--
                            ``(i) In general.--The term `adjusted 
                        median per capita amount' for an applicable age 
                        group means--
                                    ``(I) for fiscal year 1995, an 
                                amount equal to the unadjusted median 
                                per capita amount (as determined under 
                                clause (ii)) for the age group updated 
                                by the inflation percentage (as 
                                determined under subparagraph 
                                (D)(iii)); and
                                    ``(II) for fiscal year 1996 and 
                                succeeding fiscal years, an amount 
                                equal to the amount determined under 
                                this subparagraph for the age group for 
                                the previous fiscal year updated by the 
                                inflation percentage.
                            ``(ii) Unadjusted median per capita 
                        amount.--The unadjusted median per capita 
                        amount determined under this clause for an 
                        applicable age group is an amount equal to the 
                        median of the unadjusted actual per capita 
                        amounts (determined under subparagraph (D)(ii)) 
                        for all States for such age group.
                    ``(F) Countable individuals.--The term `number of 
                countable individuals' for an applicable age group 
                means the number of individuals in the State who are in 
                the age group who have incomes below the income 
                official poverty line during the fiscal year.
                    ``(G) Long-term care inflation index.--The term 
                `long-term care inflation index' means an inflation 
                index developed by the Secretary which is based on the 
                growth in the average annual total wages of 
                individuals--
                            ``(i) who are employed by nursing 
                        facilities or home health agencies, and
                            ``(ii) who are nurses, personal care 
                        attendants, or other individuals providing 
                        long-term care services under this part.
    ``(c) Limitation on State Obligation to Make Expenditures.--A State 
shall not be obligated to make expenditures under this part in excess 
of the amount of expenditures necessary for such State to receive 
payments from the Federal Government under this part equal to the 
amount of such State's allotment determined under subsection (b)(2).

              ``state plans for long-term care assistance

    ``Sec. 2102. (a) State Plan Requirements.--A State plan for long-
term care assistance must meet the following requirements:
            ``(1) Administration of the state plan.--The State plan 
        must--
                    ``(A) provide for the establishment or designation 
                of a single State agency to administer or to supervise 
                the administration of the plan;
                    ``(B) provide that the plan shall be in effect in 
                all political subdivisions of the State;
                    ``(C) provide--
                            ``(i) such methods of administration as are 
                        found by the Secretary to be necessary for the 
                        proper and efficient operation of the plan; and
                            ``(ii) that each State or local officer or 
                        employee who is responsible for the expenditure 
                        of substantial amounts of funds under the State 
                        plan, each individual who formerly was such an 
                        officer or employee and each partner of such an 
                        officer or employee shall be prohibited from 
                        committing any act, in relation to any activity 
                        under the plan, the commission of which, in 
                        connection with any activity concerning the 
                        Federal Government, by an officer or employee 
                        of the Federal Government, an individual who 
                        was such an officer or employee, or a partner 
                        of such an officer or employee is prohibited by 
                        section 207 or 208 of title 18, United States 
                        Code;
                    ``(D) provide for financial participation by the 
                State equal to not less than 40 percent of the non-
                Federal share of the expenditures under the plan with 
                respect to which payments under section 2103 are 
                authorized by this part and provide for financial 
                participation by the State equal to all of such non-
                Federal share or provide for distribution of funds from 
                Federal or State sources, for carrying out the State 
                plan, on an equalization or other basis which will 
                assure that the lack of adequate funds from local 
                sources will not result in lowering the amount, 
                duration, scope, or quality of care and services 
                available under the plan;
                    ``(E) provide that all individuals wishing to make 
                application for long-term care assistance under the 
                plan shall have opportunity to do so, and that such 
                assistance shall be furnished with reasonable 
                promptness to all eligible individuals;
                    ``(F) provide for granting an opportunity for a 
                fair hearing before the State agency to any individual 
                whose claim for long-term care assistance under the 
                plan is denied or is not acted upon with reasonable 
                promptness;
                    ``(G) provide that the State will have in effect an 
                appropriate appeals process for determinations under 
                the comprehensive functional assessment (as defined in 
                section 2115(b)) and the individual community care plan 
                (as defined in section 2115(g)) established for such 
                individuals; and
                    ``(H) provide that the State health agency, or 
                other appropriate State agency (whichever is utilized 
                by the Secretary for the purpose specified in the first 
                sentence of section 1864(a)), shall be responsible for 
                establishing and maintaining standards for private or 
                public entities from which recipients of long-term care 
                assistance under the plan may receive care or services.
            ``(2) Individuals eligible for assistance.--The State plan 
        must provide--
                    ``(A)(i) for making long-term care assistance 
                available, including at least the care and services 
                described in subparagraphs (A) and (C) of section 
                2115(h)(1), to functionally impaired individuals 
                described in section 2115(d)(1) who meet the income and 
                resource eligibility requirements of paragraphs (1) and 
                (2) of subsection (f);
                    ``(ii) for making long-term care assistance 
                available, including at least the care and services 
                described in subparagraphs (A), (B), and (C) of section 
                2115(h)(1), to severely functionally impaired 
                individuals described in section 2115(d)(2) who meet 
                the income and resource eligibility requirements of 
                paragraphs (1) and (2) subsection (f); or
                    ``(iii) for making long-term care assistance 
                available, including at least the care and services 
                described in subparagraphs (A), (B), and (C) of section 
                2115(h)(1), to functionally impaired children described 
                in section 2115(d)(3) who meet the income and resource 
                eligibility requirements of paragraphs (1) and (2) 
                subsection (f);
                    ``(B) that the long-term care assistance made 
                available to any individual described in subparagraph 
                (A) shall not be less in amount, duration, or scope 
                than the long-term care assistance made available to 
                any other such individual; and
                    ``(C) for inclusion, to the extent required by 
                regulations prescribed by the Secretary, of provisions 
                conforming to such regulations with respect to the 
                furnishing of long-term care assistance under the plan 
                to individuals who are residents of the State but are 
                absent from the State.
            ``(3) Standards for eligibility.--
                    ``(A) In general.--The State plan must provide for 
                reasonable standards which shall be comparable for all 
                individuals for determining eligibility for and the 
                extent of long-term care assistance under the plan 
                which--
                            ``(i) are consistent with the objectives of 
                        this part;
                            ``(ii) provide for taking into account only 
                        such income and resources as are, as determined 
                        in accordance with standards prescribed by the 
                        Secretary, available to the applicant or 
                        recipient;
                            ``(iii) provide for reasonable evaluation 
                        of any such income or resources;
                            ``(iv) do not take into account the 
                        financial responsibility of any individual for 
                        any applicant or recipient of assistance under 
                        the plan unless such applicant or recipient is 
                        such individual's spouse or such individual's 
                        child who is under age 21; and
                            ``(v) at the option of the State provide 
                        for flexibility in the application of such 
                        standards with respect to income by taking into 
                        account, except to the extent prescribed by the 
                        Secretary, necessary expenditures incurred by 
                        an individual for medical care that are not 
                        reimbursable by any other payor.
                    ``(B) Information regarding income and eligibility 
                verification.--The State plan must provide that 
                information is requested and exchanged for purposes of 
                income and eligibility verification in accordance with 
                a State system which meets the requirements of section 
                1137.
                    ``(C) Post-eligibility application of income to 
                cost of care and personal needs allowances.--The State 
                plan must comply with the provisions of subsection (g) 
                with respect to the application of an individual's 
                income to the cost of care and personal needs 
                allowances.
                    ``(D) Transfer of assets, trusts, liens, and 
                adjustments and recoveries.--The State plan must comply 
                with the provisions of section 2112 with respect to 
                transfers of assets, trusts, liens, and adjustments and 
                recoveries.
                    ``(E) Community spouses.--The State plan must meet 
                the requirements of section 2114 with respect to 
                protection of community spouses.
            ``(4) Quality of care furnished under the plan.--
                    ``(A) Best interests of recipients.--The State plan 
                must provide such safeguards as may be necessary to 
                assure that eligibility for care and services under the 
                plan will be determined, and such care and services 
                will be provided, in a manner consistent with 
                simplicity of administration and the best interests of 
                the recipients.
                    ``(B) Evaluations of individuals receiving care.--
                The State plan must provide that in each case for which 
                payment is made for services under the State plan--
                            ``(i) the individual who receives such 
                        services has received a comprehensive 
                        functional assessment under which a qualified 
                        community care case manager, in consultation 
                        with an individual's primary medical care 
                        provider, determines that the individual is a 
                        functionally impaired individual, a severely 
                        functionally impaired individual, or a 
                        functionally impaired child; and
                            ``(ii) in the case of payment for home and 
                        community based services, such services were 
                        furnished under a written plan of care 
                        established and periodically reviewed and 
                        evaluated by a qualified community care case 
                        manager.
                    ``(C) Community care case managers.--The State plan 
                must provide that any contract with a qualified 
                community care case manager to provide case management 
                services shall include a provision under which such 
                case manager agrees not to provide long-term care 
                services to any individual for whom the case manager 
                provides case management services.
                    ``(D) Appropriateness and quality of care.--The 
                State plan must provide--
                            ``(i) that the State health agency, or 
                        other appropriate State agency, shall be 
                        responsible for establishing a plan, consistent 
                        with regulations prescribed by the Secretary, 
                        for the review by appropriate professional 
                        personnel of the appropriateness and quality of 
                        care and services furnished to recipients of 
                        long-term care assistance under the plan in 
                        order to provide guidance with respect thereto 
                        in the administration of the plan to the State 
                        agency; and
                            ``(ii) that, except as provided in section 
                        1919(g), the State or local agency utilized by 
                        the Secretary for the purpose specified in the 
                        first sentence of section 1864(a), or, if such 
                        agency is not the State agency which is 
                        responsible for licensing institutions, the 
                        State agency responsible for such licensing, 
                        will perform for the State agency administering 
                        or supervising the administration of the plan 
                        approved under this part the function of 
                        determining whether institutions and other 
                        long-term care providers meet the requirements 
                        for participation under such plan, except that, 
                        if the Secretary has cause to question the 
                        adequacy of such determinations, the Secretary 
                        is authorized to validate State determinations 
                        and, on that basis, make independent and 
                        binding determinations concerning the extent to 
                        which individual institutions and agencies meet 
                        the requirements for participation.
                    ``(E) Descriptions of methods used to assure 
                quality.--The State plan must include descriptions of--
                            ``(i) the kinds and numbers of professional 
                        personnel and supporting staff that will be 
                        used in the administration of the plan and of 
                        the responsibilities they will have;
                            ``(ii) the standards, for private or public 
                        entities from which recipients of long-term 
                        care assistance under the plan may receive care 
                        or services, that will be utilized by the State 
                        authority or authorities responsible for 
                        establishing and maintaining such standards;
                            ``(iii) the cooperative arrangements with 
                        State health agencies entered into with a view 
                        to appropriate utilization of and maximum 
                        coordination of the provision of long-term care 
                        assistance with the services administered or 
                        supervised by such agencies; and
                            ``(iv) other standards and methods that the 
                        State will use to assure that care and services 
                        provided to recipients of long-term care 
                        assistance are of high quality.
            ``(5) Nursing facilities.--The State plan must provide--
                    ``(A) that any nursing facility receiving payments 
                under such plan must satisfy all the requirements of 
                subsections (b) through (d) of section 1919 as they 
                apply to such facilities;
                    ``(B) for including in `nursing facility services' 
                at least the items and services specified (or deemed to 
                be specified) by the Secretary under section 1919(f)(7) 
                and making available upon request a description of the 
                items and services so included;
                    ``(C) for procedures to make available to the 
                public the data and methodology used in establishing 
                payment rates for nursing facilities under this part; 
                and
                    ``(D) for compliance (by the date specified in the 
                respective sections) with the requirements of--
                            ``(i) section 1919(e) (relating to State 
                        requirements for nursing facilities);
                            ``(ii) section 1919(g) (relating to 
                        responsibility for survey and certification of 
                        nursing facilities); and
                            ``(iii) sections 1919(h)(2)(B) and 
                        1919(h)(2)(D) (relating to establishment and 
                        application of remedies).
            ``(6) Freedom of choice of provider.--Except as provided in 
        section 2110 and except in the case of Puerto Rico, the Virgin 
        Islands, and Guam, the State plan must provide that any 
        individual eligible for long-term care assistance may obtain 
        such assistance from any institution, agency, or person, 
        qualified to perform the services required, who undertakes to 
        provide the individual with such services.
            ``(7) Agreements with providers and payment for services.--
                    ``(A) Agreements.--The State plan must provide for 
                agreements with every person or institution providing 
                services under the State plan under which such person 
                or institution agrees--
                            ``(i) to keep such records as are necessary 
                        fully to disclose the extent of the services 
                        provided to individuals receiving long-term 
                        care assistance under the State plan; and
                            ``(ii) to furnish the State agency or the 
                        Secretary with such information, regarding any 
                        payments claimed by such person or institution 
                        for providing services under the State plan, as 
                        the State agency or the Secretary may from time 
                        to time request.
                    ``(B) Deductible, cost sharing, and similar 
                charges.--The State plan must provide that deductible, 
                cost sharing, and similar charges may be imposed only 
                as provided in section 2111.
                    ``(C) Payments under the plan.--
                            ``(i) Payments to nursing facilities.--The 
                        State plan must provide for payment (except 
                        where the State agency is subject to an 
                        adjustment under section 2109) for nursing 
                        facility services provided under the plan 
                        through the use of rates (determined in 
                        accordance with methods and standards developed 
                        by the State) which take into account the costs 
                        (including the costs of services required to 
                        attain or maintain the physical, mental, and 
                        psychosocial well-being of each resident 
                        eligible for benefits under this part) of 
                        complying with subsections (b) (other than 
                        paragraph (3)(F) thereof), (c), and (d) of 
                        section 1919 and provide (in the case of a 
                        nursing facility with a waiver under section 
                        1919(b)(4)(C)(ii)) for an appropriate reduction 
                        to take into account the lower costs (if any) 
                        of the facility for nursing care and which the 
                        State finds, and makes assurances satisfactory 
                        to the Secretary, are reasonable and adequate 
                        to meet the costs which must be incurred by 
                        efficiently and economically operated 
                        facilities in order to provide care and 
                        services in conformity with applicable Federal 
                        and State laws, regulations, and quality and 
                        safety standards and to assure that individuals 
                        eligible for long-term care assistance have 
                        reasonable access (taking into account 
                        geographic location and reasonable travel time) 
                        to nursing facility services of adequate 
                        quality.
                            ``(ii) Valuation of capital assets.--The 
                        State plan shall provide assurances 
                        satisfactory to the Secretary that the 
                        valuation of capital assets, for purposes of 
                        determining payment rates for nursing 
                        facilities will not be increased (as measured 
                        from the date of acquisition by the seller to 
                        the date of the change of ownership), solely as 
                        a result of a change of ownership, by more than 
                        the lesser of--
                                    ``(I) one-half of the percentage 
                                increase (as measured over the same 
                                period of time, or, if necessary, as 
                                extrapolated retrospectively by the 
                                Secretary) in the Dodge Construction 
                                Systems Costs for Nursing Homes, 
                                applied in the aggregate with respect 
                                to those facilities which have 
                                undergone a change of ownership during 
                                the fiscal year; or
                                    ``(II) one-half of the percentage 
                                increase (as measured over the same 
                                period of time) in the Consumer Price 
                                Index for All Urban Consumers (United 
                                States city average).
                            ``(iii) Payment for home and community 
                        based services.--The State plan shall provide 
                        for payment for home and community based 
                        services through rates established by the State 
                        in conformance with applicable Federal and 
                        State laws, regulations, and quality and safety 
                        standards.
                    ``(D) Claims payment procedures.--The State plan 
                must provide for claims payment procedures which--
                            ``(i) ensure that 90 percent of claims for 
                        payment (for which no further written 
                        information or substantiation is required in 
                        order to make payment) made for services 
                        covered under the plan are paid within 30 days 
                        after the date of receipt of such claims and 
                        that 99 percent of such claims are paid within 
                        60 days after the date of receipt of such 
                        claims; and
                            ``(ii) provide for procedures of prepayment 
                        and postpayment claims review, including review 
                        of appropriate data with respect to the 
                        recipient and provider of a service and the 
                        nature of the service for which payment is 
                        claimed, to ensure the proper and efficient 
                        payment of claims and management of the 
                        program.
                    ``(E) Consultative services.--The State plan must 
                provide for consultative services by health agencies 
                and other appropriate agencies of the State to nursing 
                facilities and such other long-term care providers as 
                the Secretary may specify in order to assist them--
                            ``(i) to qualify for payments under this 
                        part;
                            ``(ii) to establish and maintain such 
                        fiscal records as may be necessary for the 
                        proper and efficient administration of this 
                        part; and
                            ``(iii) to provide information needed to 
                        determine payments due under this part on 
                        account of care and services furnished to 
                        individuals.
                    ``(F) Methods and procedures relating to 
                utilization and payment.--The State plan must provide 
                such methods and procedures relating to the utilization 
                of, and the payment for, care and services available 
                under the plan as may be necessary to safeguard against 
                unnecessary utilization of such care and services and 
                to assure that payments are consistent with efficiency, 
                economy, and quality of care and are sufficient to 
                enlist enough providers so that care and services are 
                available under the plan at least to the extent that 
                such care and services are available to the general 
                population in the geographic area.
                    ``(G) Disclosing entities.--The State plan must 
                provide that any disclosing entity (as defined in 
                section 1124(a)(2)) receiving payments under such plan 
                complies with the requirements of section 1124.
                    ``(H) Exclusion of certain individuals or 
                entities.--The State plan must provide that the State 
                agency shall exclude any specified individual or entity 
                from participation under the State plan for the period 
                specified by the Secretary, when required by the 
                Secretary to do so pursuant to section 1128 or 1128A or 
                title XVIII, and provide that no payment may be made 
                under the plan with respect to any item or service 
                furnished by such individual or entity during such 
                period.
                    ``(I) Auditing of records.--The State plan must 
                provide that the records of any entity participating in 
                the plan and providing services reimbursable on a cost-
                related basis will be audited as the Secretary 
                determines to be necessary to ensure that proper 
                payments are made under the plan.
            ``(8) Third party liability.--The State plan must provide--
                    ``(A) that the State or local agency administering 
                such plan will take all reasonable measures to 
                ascertain the legal liability of third parties 
                (including entities providing for health or long-term 
                care insurance) to pay for care and services available 
                under the plan, including--
                            ``(i) the collection of sufficient 
                        information (as specified by the Secretary in 
                        regulations) to enable the State to pursue 
                        claims against such third parties, with such 
                        information being collected at the time of any 
                        determination or redetermination of eligibility 
                        for long-term care assistance; and
                            ``(ii) the submission to the Secretary of a 
                        plan (subject to approval by the Secretary) for 
                        pursuing claims against such third parties, 
                        which plan shall--
                                    ``(I) be integrated with, and be 
                                monitored as a part of the Secretary's 
                                review of, the State's mechanized 
                                claims processing and information 
                                retrieval system under section 2103(h), 
                                and
                                    ``(II) be subject to the provisions 
                                of section 2103(h)(4) relating to 
                                reductions in Federal payments for 
                                failure to meet conditions of approval;
                    ``(B) that in any case where such a legal liability 
                is found to exist after long-term care assistance has 
                been made available on behalf of the individual and 
                where the amount of reimbursement the State can 
                reasonably expect to recover exceeds the costs of such 
                recovery, the State or local agency will seek 
                reimbursement for such assistance to the extent of such 
                legal liability;
                    ``(C) that in the case of an individual who is 
                entitled to long-term care assistance under the State 
                plan with respect to a service for which a third party 
                is liable for payment, the person furnishing the 
                service may not seek to collect from the individual (or 
                any financially responsible relative or representative 
                of that individual) payment of an amount for that 
                service--
                            ``(i) if the total of the amount of the 
                        liabilities of third parties for that service 
                        is at least equal to the amount payable for 
                        that service under the plan (disregarding 
                        section 2111); or
                            ``(ii) in an amount which exceeds the 
                        lesser of (I) the amount which may be collected 
                        under section 2111, or (II) the amount by which 
                        the amount payable for that service under the 
                        plan (disregarding section 2111) exceeds the 
                        total of the amount of the liabilities of third 
                        parties for that service; and
                    ``(D) that a person who furnishes services and is 
                participating under the plan may not refuse to furnish 
                services to an individual (who is entitled to have 
                payment made under the plan for the services the person 
                furnishes) because of a third party's potential 
                liability for payment for the service.
            ``(9) Assignment.--The State plan must provide for 
        mandatory assignment of rights of payment for long-term care 
        services owed to recipients, in accordance with section 2107.
            ``(10) Information requirements.--
                    ``(A) Requirements on state.--The State plan must 
                provide--
                            ``(i) that the State agency will make such 
                        reports, in such form and containing such 
                        information, as the Secretary may from time to 
                        time require, and comply with such provisions 
                        as the Secretary may from time to time find 
                        necessary to assure the correctness and 
                        verification of such reports;
                            ``(ii) safeguards which restrict the use or 
                        disclosure of information concerning applicants 
                        and recipients to purposes directly connected 
                        with the administration of the plan;
                            ``(iii) that within 90 days following the 
                        completion of each survey of any facility or 
                        other provider of long-term care services by 
                        the appropriate State agency, such agency shall 
                        (in accordance with regulations of the 
                        Secretary) make public in readily available 
                        form and place the pertinent findings of each 
                        such survey relating to the compliance of each 
                        such facility or other provider with (I) the 
                        statutory conditions of participation imposed 
                        under this part, and (II) the major additional 
                        conditions which the Secretary finds necessary 
                        in the interest of health and safety of 
                        individuals who are furnished care or services 
                        by any such facility or other provider;
                            ``(iv) that whenever a provider of services 
                        or any other person is terminated, suspended, 
                        or otherwise sanctioned or prohibited from 
                        participating under the State plan, the State 
                        agency shall promptly notify the Secretary of 
                        such action;
                            ``(v) a method of making information 
                        evidencing eligibility for long-term care 
                        assistance available to an eligible individual 
                        who does not reside in a permanent dwelling or 
                        does not have a fixed home or mailing address; 
                        and
                            ``(vi) that the State will provide 
                        information and access to certain information 
                        respecting sanctions taken against 
                        practitioners and providers by State licensing 
                        authorities in accordance with section 1921.
                    ``(B) Requirements on providers.--The State plan 
                must--
                            ``(i) require that an entity (other than an 
                        individual practitioner or a group of 
                        practitioners) that furnishes, or arranges for 
                        the furnishing of, services under the plan, 
                        shall supply (within such period as may be 
                        specified in regulations by the Secretary or by 
                        the single State agency which administers or 
                        supervises the administration of the plan) upon 
                        request specifically addressed to such entity 
                        by the Secretary or such State agency, the 
                        information described in section 1128(b)(9);
                            ``(ii) require each facility or other 
                        provider of long-term care services which 
                        receives payments under the plan and of a type 
                        for which a uniform reporting system has been 
                        established under section 1121(a) to make 
                        reports to the Secretary of information 
                        described in such section in accordance with 
                        the uniform reporting system for that type of 
                        facility or provider; and
                            ``(iii) provide for filing of uniform cost 
                        reports by each nursing facility and periodic 
                        audits by the State of such reports.
    ``(b) Conditions of Approval of Plan.--The Secretary shall approve 
any plan which fulfills the conditions specified in subsection (a), 
except that the Secretary shall not approve any plan which imposes, as 
a condition of eligibility for long-term care assistance under the 
plan--
            ``(1) any residence requirement which excludes any 
        individual who resides in the State, regardless of whether or 
        not the residence is maintained permanently or at a fixed 
        address; or
            ``(2) any citizenship requirement which excludes any 
        citizen of the United States.
    ``(c) Sanction.--In addition to any other sanction available to a 
State, a State may provide for a reduction of any payment amount 
otherwise due with respect to a person who furnishes services under the 
plan in an amount equal to up to 3 times the amount of any payment 
sought to be collected by that person in violation of subsection 
(a)(8)(C).
    ``(d) Limited Waiver of Requirements.--Notwithstanding any other 
requirement of this part, the Secretary may waive or modify any 
requirement of this part with respect to the long-term care assistance 
program in American Samoa and the Northern Mariana Islands, other 
than--
            ``(1) a waiver of the Federal long-term care assistance 
        percentage;
            ``(2) the limitation in section 1108(c), or
            ``(3) the requirement that payment may be made for long-
        term care assistance only with respect to amounts expended by 
        American Samoa or the Northern Mariana Islands for care and 
        services described in subparagraphs (A) through (D) of section 
        2115(h)(1).
    ``(e) Waiver Relating to Claims Procedure.--The requirement of 
subsection (a)(7)(D) with respect to a State plan may be waived by the 
Secretary if the Secretary finds that the State has exercised good 
faith in trying to meet such requirement.
    ``(f) Income and Resource Requirements for Eligibility 
Determinations.--
            ``(1) Income requirement.--An individual meets the income 
        requirement of this subsection if--
                    ``(A) the amount of the individual's monthly 
                income, less
                    ``(B) the amount of the individual's incurred costs 
                for long-term care services for the month that are not 
                reimbursed by a third party,
        does not exceed 100 percent of the income official poverty line 
        (as defined in section 2115(f)).
            ``(2) Resource requirement.--An individual meets the 
        resource requirement of this subsection if the individual's 
        resources do not exceed--
                    ``(A) $2,000 for individuals receiving long-term 
                care assistance in a nursing facility; and
                    ``(B) $5,000 for individuals receiving long-term 
                care assistance in a setting other than a nursing 
                facility.
            ``(3) Rounding.--The total amount of the income limitation 
        determined under paragraph (1) shall, if it is not a multiple 
        of $100 or such other amount as the Secretary may prescribe, be 
        rounded to the next higher multiple of $100 or such other 
        amount, as the case may be.
            ``(4) Definitions.--Except as otherwise provided, for 
        purposes of this part, the term `income' has the meaning given 
        such term in section 1612 and the term `resources' has the 
        meaning given such term in section 1613.
    ``(g) Post-eligibility Application of Income to Cost of Care and 
Personal Needs Allowances.--
            ``(1) In general.--Each individual receiving long-term care 
        assistance under this part shall contribute an amount equal to 
        the amount determined under paragraph (2) to the cost of the 
        long-term care services furnished to such individual under this 
        part.
            ``(2) Amount of contribution.--
                    ``(A) In general.--With respect to an individual, 
                the amount determined under this paragraph is an amount 
                equal to such individual's post-eligibility monthly 
                income (as defined in paragraph (3)) less the 
                applicable personal needs allowance determined under 
                subparagraph (B).
                    ``(B) Applicable personal needs allowance.--
                            ``(i) Institutionalized individuals.--In 
                        the case of an institutionalized individual, 
                        the applicable personal needs allowance is an 
                        amount--
                                    ``(I) which is reasonable in amount 
                                for personal needs of the individual 
                                while in an institution, and
                                    ``(II) which is not less (and may 
                                be greater) than $50 per month.
                            ``(ii) Individuals receiving home and 
                        community based services.--In the case of an 
                        individual receiving home and community based 
                        services, the applicable personal needs 
                        allowance is an amount determined appropriate 
                        by the State, including amounts necessary to 
                        pay for food, shelter, and utilities.
                            ``(iii) Definition.--For purposes of this 
                        subparagraph, the term `institutionalized 
                        individual' means an individual--
                                    ``(I) who is an inpatient in a 
                                nursing facility for which payments are 
                                made under this part throughout a 
                                month, and
                                    ``(II) who is determined to be 
                                eligible for long-term care assistance 
                                under the State plan.
            ``(3) Post-eligibility monthly income.--For purposes of 
        this subsection, the term `post-eligibility monthly income' 
        means--
                    ``(A) in the case of an individual whose monthly 
                income is equal to or less than 100 percent of the 
                income official poverty line, an amount equal to such 
                individual's monthly income; and
                    ``(B) in the case of an individual whose monthly 
                income exceeds 100 percent of the income official 
                poverty line, an amount equal to 100 percent of the 
                income official poverty line.

                          ``payment to states

    ``Sec. 2103. (a) In General.--Except as otherwise provided in this 
section, the Secretary shall pay to each State which has a plan 
approved under this part, for each quarter--
            ``(1) an amount equal to the Federal long-term care 
        assistance percentage (as defined in section 2115(c)) of the 
        total amount expended during such quarter as long-term care 
        assistance under the State plan;
            ``(2)(A) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan) as are attributable to compensation or training of 
        skilled professional personnel, and staff directly supporting 
        such personnel, of the State agency or any other public agency;
            ``(B) notwithstanding paragraph (1) or subparagraph (A), 
        with respect to amounts expended during such quarter under this 
        part for nursing aide training and competency evaluation 
        programs described in section 1919(e)(1) (including the costs 
        for nurse aides to complete such competency evaluation 
        programs), regardless of whether the programs are provided in 
        or outside nursing facilities or of the skill of the personnel 
        involved in such programs, an amount equal to 50 percent of so 
        much of the sums expended during such quarter under this part 
        (as found necessary by the Secretary for the proper and 
        efficient administration of the State plan) as are attributable 
        to such programs;
            ``(C) an amount equal to 75 percent of so much of the sums 
        expended during such quarter under this part (as found 
        necessary by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable to 
        preadmission screening and resident review activities conducted 
        by the State under section 1919(e)(7); and
            ``(D) an amount equal to 75 percent of so much of the sums 
        expended during such quarter under this part (as found 
        necessary by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable to State 
        activities under section 1919(g);
            ``(3) an amount equal to--
                    ``(A) 90 percent of so much of the sums expended 
                during such quarter as are attributable to the design, 
                development, or installation of such mechanized claims 
                processing and information retrieval systems as the 
                Secretary determines are likely to provide more 
                efficient, economical and effective administration of 
                the State plan and to be compatible with the claims 
                processing and information retrieval systems utilized 
                in the administration of title XVIII, including the 
                State's share of the cost of installing such a system 
                to be used jointly in the administration of such 
                State's plan and the plan of any other State approved 
                under this part,
                    ``(B) 75 percent of so much of the sums expended 
                during such quarter as are attributable to the 
                operation of systems (whether such systems are operated 
                directly by the State or by another person under a 
                contract with the State) of the type described in 
                subparagraph (A) (whether or not designed, developed, 
                or installed with assistance under such subparagraph) 
                which are approved by the Secretary and which include 
                provision for prompt written notice to each individual 
                who is furnished services covered by the State plan of 
                the specific services (other than confidential 
                services) so covered, the name of the person or persons 
                furnishing the services, the date or dates on which the 
                services were furnished, and the amount of the payment 
                or payments made under the plan on account of the 
                services, and
                    ``(C) 75 percent of the sums expended with respect 
                to costs incurred during such quarter (as found 
                necessary by the Secretary for the proper and efficient 
                administration of the State plan) as are attributable 
                to the performance of utilization review or quality 
                review;
            ``(4) an amount equal to 100 percent of the sums expended 
        during such quarter under this part which are attributable to 
        the costs of the implementation and operation of the 
        immigration status verification system described in section 
        1137(d);
            ``(5) subject to subsection (b) an amount equal to--
                    ``(A) 90 percent of the sums expended during such a 
                quarter within the 12-quarter period beginning with the 
                first quarter in which a payment is made to the State 
                pursuant to this paragraph, and
                    ``(B) 75 percent of the sums expended during each 
                succeeding calendar quarter,
        with respect to costs incurred during such quarter (as found 
        necessary by the Secretary for the elimination of fraud in the 
        provision and administration of long-term care assistance 
        provided under the State plan) which are attributable to the 
        establishment and operation of (including the training of 
        personnel employed by) a State long-term care fraud control 
        unit (as defined in section 2115(m)); and
            ``(6) subject to section 1919(g)(3)(B), an amount equal to 
        50 percent of the remainder of the amounts expended during such 
        quarter as found necessary by the Secretary for the proper and 
        efficient administration of the State plan.
    ``(b) Limit on the Amount of Payment.--The amount of funds which 
the Secretary is otherwise obligated to pay a State during a quarter 
under subsection (a)(5) may not exceed one-quarter of 1 percent of the 
sums expended by the Federal, State, and local governments during the 
previous quarter in carrying out the State's plan under this part.
    ``(c) Estimate of Quarterly Payment to State.--
            ``(1) In general.--Prior to the beginning of each quarter, 
        the Secretary shall estimate the amount to which a State will 
        be entitled under subsection (a) for such quarter. Such 
        estimates shall be based on--
                    ``(A) a report filed by the State containing its 
                estimate of the total sum to be expended in such 
                quarter in accordance with the provisions of such 
                subsections, and stating the amount appropriated or 
                made available by the State and its political 
                subdivisions for such expenditures in such quarter, and 
                if such amount is less than the State's proportionate 
                share of the total sum of such estimated expenditures, 
                the source or sources from which the difference is 
                expected to be derived, and
                    ``(B) such other investigation as the Secretary may 
                find necessary.
            ``(2) Payments.--
                    ``(A) In general.--The Secretary shall pay to the 
                State, in such installments as the Secretary may 
                determine, the amount estimated under paragraph (1), 
                reduced or increased to the extent of any overpayment 
                or underpayment which the Secretary determines was made 
                under this section to such State for any prior quarter 
                and with respect to which adjustment has not already 
                been made under this subsection.
                    ``(B) Third party reimbursements.--Expenditures for 
                which payments were made to the State under subsection 
                (a) shall be treated as an overpayment to the extent 
                that the State or local agency administering such plan 
                has been reimbursed for such expenditures by a third 
                party pursuant to the provisions of its plan in 
                compliance with section 2102(a)(8).
                    ``(C) Overpayment by a state.--
                            ``(i) In general.--For purposes of this 
                        subsection, when an overpayment by a State to a 
                        person or other entity is discovered, the State 
                        shall have a period of 60 days in which to 
                        recover or attempt to recover such overpayment 
                        before adjustment is made in the Federal 
                        payment to such State on account of such 
                        overpayment. Except as otherwise provided in 
                        clause (ii), the adjustment in the Federal 
                        payment shall be made at the end of the 60 
                        days, whether or not recovery was made.
                            ``(ii) Special rule.--In any case where the 
                        State is unable to recover an overpayment (or 
                        any portion of such overpayment) made to a 
                        person or other entity on account of such 
                        overpayment having been a debt discharged in 
                        bankruptcy or otherwise being uncollectible, no 
                        adjustment shall be made in the Federal payment 
                        to such State on account of such overpayment 
                        (or portion of such overpayment).
                            ``(iii) Amounts recovered.--The pro rata 
                        share to which the United States is equitably 
                        entitled, as determined by the Secretary, of 
                        the net amount recovered during any quarter by 
                        the State or any political subdivision of the 
                        State with respect to long-term care assistance 
                        furnished under the State plan shall be 
                        considered an overpayment to be adjusted under 
                        this subsection.
            ``(3) Appropriations deemed obligated.--Upon the making of 
        any estimate by the Secretary under this subsection, any 
        appropriations available for payments under this section shall 
        be deemed obligated.
            ``(4) Overpayments to states.--In any case in which the 
        Secretary estimates that there has been an overpayment under 
        this section to a State on the basis of a claim by such State 
        that has been disallowed by the Secretary under section 
        1116(d), and such State disputes such disallowance, the amount 
        of the Federal payment in controversy shall, at the option of 
        the State, be retained by such State or recovered by the 
        Secretary pending a final determination with respect to such 
        payment amount. If such final determination is to the effect 
        that any amount was properly disallowed, and the State chose to 
        retain payment of the amount in controversy, the Secretary 
        shall offset, from any subsequent payments made to such State 
        under this part, an amount equal to the proper amount of the 
        disallowance plus interest on such amount disallowed for the 
        period beginning on the dates such amount was disallowed and 
        ending on the date of such final determination at the rate 
        (determined by the Secretary) based on the average of the bond 
        equivalent of the weekly 90-day Treasury bill auction rates 
        during such period.
    ``(d) Prohibitions on Payment.--Payment under the preceding 
provisions of this section shall not be made--
            ``(1) with respect to any amount expended for long-term 
        care assistance--
                    ``(A) for nursing facility services to reimburse 
                (or otherwise compensate) a nursing facility for 
                payment of a civil money penalty imposed under this 
                part or title XI, or
                    ``(B) for home and community based services to 
                reimburse (or otherwise compensate) a provider of such 
                services for payment of a civil money penalty imposed 
                under this part or title XI; and
            ``(2) with respect to any amount expended to reimburse (or 
        otherwise compensate) any provider of long-term care services 
        under this part for payment of legal expenses associated with 
        any action initiated by the facility that is dismissed on the 
        basis that no reasonable legal ground existed for the 
        institution of such action.
    ``(e) Adjustment of Payments.--Notwithstanding the preceding 
provisions of this section, the amount determined under subsection 
(a)(1) for any State for any quarter shall be adjusted in accordance 
with section 2109.
    ``(f) Prohibition on Payment in Cases of Exclusion Contracts.--
Notwithstanding the preceding provisions of this section, no payment 
shall be made to a State under the preceding provisions of this section 
for expenditures for long-term care assistance provided for an 
individual under the State's plan approved under this part to the 
extent that a private insurer (as defined by the Secretary by 
regulation) would have been obligated to provide such assistance but 
for a provision of its insurance contract which has the effect of 
limiting or excluding such obligation because the individual is 
eligible for or is provided long-term care assistance under the plan.
    ``(g) Payment for Collection of Support or Payment Under 
Cooperative Arrangement.--
            ``(1) In general.--When a political subdivision of a State 
        makes, for the State of which it is a political subdivision, or 
        one State makes, for another State, the enforcement and 
        collection of rights of support or payment assigned under 
        section 2107, pursuant to a cooperative arrangement under such 
        section (either within or outside of such State), there shall 
        be paid to such political subdivision or such other State from 
        amounts which would otherwise represent the Federal share of 
        payments for long-term care assistance provided to the eligible 
        individuals on whose behalf such enforcement and collection was 
        made, an amount equal to 15 percent of any amount collected 
        which is attributable to such rights of support or payment.
            ``(2) Allocation where multiple jurisdictions involved.--
        Where more than one jurisdiction is involved in an enforcement 
        or collection under paragraph (1), the amount of the incentive 
        payment determined under such paragraph shall be allocated 
        among the jurisdictions in a manner to be prescribed by the 
        Secretary.
    ``(h) Mechanized Claims Processing and Retrieval Systems.--
            ``(1) In general.--In order to receive payments under 
        paragraph (3)(B) of subsection (a) without being subject to 
        percent reductions set forth in paragraph (4)(B) of this 
        subsection, a State must provide that mechanized claims 
        processing and information retrieval systems of the type 
        described in subsection (a)(3)(A) and detailed in an advance 
        planning document approved by the Secretary are operational on 
        or before September 30, 1995.
            ``(2) Approval of systems.--
                    ``(A) In general.--In order to receive payments 
                under paragraph (3)(B) of subsection (a) without being 
                subject to the percent reductions set forth in 
                paragraph (4)(B) of this subsection, a State must have 
                its mechanized claims processing and information 
                retrieval systems, of the type required to be 
                operational under paragraph (1), initially approved by 
                the Secretary in accordance with paragraph (5)(A).
                    ``(B) Deadline.--The deadline for approval of such 
                systems for a State is the last day of the fourth 
                quarter that begins after the date on which the 
                Secretary determines that such systems became 
                operational as required under paragraph (1).
                    ``(C) Deemed approval.--Any State's systems which 
                are approved by the Secretary for purposes of 
                subsection (a)(3)(A) on or before the date of the 
                enactment of this subsection shall be deemed to be 
                initially approved for purposes of this subsection.
            ``(3) Federal match.--When a State's systems are approved, 
        the 75 percent Federal matching provided in subsection 
        (a)(3)(B) shall become effective with respect to such systems, 
        retroactive to the first quarter beginning after the date on 
        which such systems became operational as required under 
        paragraph (1).
            ``(4) Review of systems.--
                    ``(A) In general.--The Secretary shall review all 
                approved systems not less often than once every 3 
                years, and shall reapprove or disapprove any such 
                systems. Systems which fail to meet the current 
                performance standards, system requirements, and any 
                other conditions for approval developed by the 
                Secretary under paragraph (6) shall be disapproved. Any 
                State having systems which are so disapproved shall be 
                subject to a percent reduction under subparagraph (B). 
                The Secretary shall make the determination of 
                reapproval or disapproval and so notify the States not 
                later than the end of the first quarter following the 
                review period. Reviews may, at the Secretary's 
                discretion, constitute reviews of the entire system or 
                only those standards, systems requirements, and other 
                conditions which have demonstrated weakness in previous 
                reviews.
                    ``(B) Disapproval of system.--If the Secretary 
                disapproves a State's systems under subparagraph (A), 
                the Secretary shall, with respect to such State, for 
                quarters beginning after the determination of 
                disapproval and before the first quarter beginning 
                after such systems are reapproved, reduce the percent 
                specified in subsection (a)(3)(B) to a percent of not 
                less than 50 percent and not more than 70 percent as 
                the Secretary determines to be appropriate and 
                commensurate with the nature of noncompliance by such 
                State, except that such percent may not be reduced by 
                more than 10 percentage points in any 4-quarter period 
                by reason of this subparagraph. No State shall be 
                subject to a percent reduction under this paragraph 
                before the fifth quarter beginning after such State's 
                systems were initially approved.
                    ``(C) Waiver.--The Secretary may retroactively 
                waive a percent reduction imposed under subparagraph 
                (B), if the Secretary determines that the State's 
                systems meet all current performance standards and 
                other requirements for reapproval and that such action 
                would improve the administration of the State's plan 
                under this part, except that no such waiver may extend 
                beyond the 4 quarters immediately prior to the quarter 
                in which the State's systems are reapproved.
    ``(5) Requirements for initial approval.--
                    ``(A) In general.--In order to be initially 
                approved by the Secretary, mechanized claims processing 
                and information retrieval systems must be of the type 
                described in subsection (a)(3)(A) and must meet the 
                following requirements:
                            ``(i) The systems must be capable of 
                        developing provider and patient profiles which 
                        are sufficient to provide specific information 
                        as to the use of covered types of services and 
                        items.
                            ``(ii) The State must provide that 
                        information on probable fraud or abuse which is 
                        obtained from, or developed by, the systems, is 
                        made available to the State's long-term care 
                        fraud control unit (if any).
                            ``(iii) The systems must meet all 
                        performance standards and other requirements 
                        for initial approval developed by the Secretary 
                        under paragraph (6).
                    ``(B) Reapproval.--In order to be reapproved by the 
                Secretary, mechanized claims processing and information 
                retrieval systems must meet the requirements of clauses 
                (i) and (ii) of subparagraph (A) and performance 
                standards and other requirements for reapproval 
                developed by the Secretary under paragraph (6).
            ``(6) Development of performance standards.--The Secretary, 
        with respect to State systems, shall--
                    ``(A) develop performance standards, system 
                requirements, and other conditions for approval for use 
                in initially approving such State systems, and shall 
                further develop written approval procedures for 
                conducting reviews for initial approval, including 
                specific criteria for assessing systems in operation to 
                ensure that all such performance standards and other 
                requirements are met;
                    ``(B) develop an initial set of performance 
                standards, system requirements, and other conditions 
                for reapproval for use in reapproving or disapproving 
                State systems, and shall further develop written 
                reapproval procedures for conducting reviews for 
                reapproval, including specific criteria for reassessing 
                systems operations over a period of at least 6 months 
                during each fiscal year to ensure that all such 
                performance standards and other requirements are met on 
                a continuous basis;
                    ``(C) provide that reviews for reapproval shall be 
                for the purpose of developing a systems performance 
                data base and assisting States to improve their 
                systems, and that no percent reduction shall be made 
                under paragraph (4) on the basis of such a review;
                    ``(D) ensure that review procedures, performance 
                standards, and other requirements developed under 
                subparagraph (B) are sufficiently flexible to allow for 
                differing administrative needs among the States, and 
                that such procedures, standards, and requirements are 
                of a nature which will permit their use by the States 
                for self-evaluation;
                    ``(E) notify all States of proposed procedures, 
                standards, and other requirements at least 1 quarter 
                prior to the fiscal year in which such procedures, 
                standards, and other requirements will be used for 
                conducting reviews for reapproval;
                    ``(F) periodically update the systems performance 
                standards, system requirements, review criteria, 
                objectives, regulations, and guides as the Secretary 
                shall from time to time deem appropriate;
                    ``(G) provide technical assistance to States in the 
                development and improvement of the systems so as to 
                continually improve the capacity of such systems to 
                effectively detect cases of fraud or abuse;
                    ``(H) for the purpose of ensuring compatibility 
                between the State systems and the systems utilized in 
                the administration of title XVIII and title XIX--
                            ``(i) develop a uniform identification 
                        coding system (to the extent feasible) for 
                        providers, other persons receiving payments 
                        under the State plans approved under this part 
                        or under title XVIII or XIX, and beneficiaries 
                        of medical services under such plans or title;
                            ``(ii) provide liaison between States and 
                        carriers and intermediaries having agreements 
                        under title XVIII to facilitate timely exchange 
                        of appropriate data; and
                            ``(iii) improve the exchange of data 
                        between the States and the Secretary with 
                        respect to providers and other persons who have 
                        been terminated, suspended, or otherwise 
                        sanctioned under a State plan approved under 
                        this part or under title XVIII or XIX;
                    ``(I) develop and disseminate clear definitions of 
                those types of reasonable costs relating to State 
                systems which are reimbursable under the provisions of 
                subsection (a)(3) of this section; and
                    ``(J) develop and disseminate performance standards 
                for assessing the State's third party collection 
                efforts in accordance with section 2102(a)(8)(A)(ii).
    ``(i) Payment Prohibited for Erroneous Excess Payments Beyond a 
Certain Level.--
            ``(1) In general.--
                    ``(A) Payment prohibited.--Notwithstanding 
                subsection (a)(1), if the ratio of a State's erroneous 
                excess payments for long-term care assistance (as 
                defined in subparagraph (D)) to its total expenditures 
                for long-term care assistance under the State plan 
                approved under this part exceeds 0.03 for any full 
                fiscal year, then the Secretary shall make no payment 
                for such fiscal year with respect to so much of such 
                erroneous excess payments as exceeds such allowable 
                error rate of 0.03.
                    ``(B) Waiver.--The Secretary may waive, in certain 
                limited cases, all or part of the reduction required 
                under subparagraph (A) with respect to any State if 
                such State is unable to reach the allowable error rate 
                for a period or fiscal year despite a good faith effort 
                by such State.
                    ``(C) Estimations.--In estimating the amount to be 
                paid to a State under subsection (c), the Secretary 
                shall take into consideration the limitation on Federal 
                financial participation imposed by subparagraph (A) and 
                shall reduce the estimate the Secretary makes under 
                subsection (c)(1), for purposes of payment to the State 
                under subsection (c)(2), in light of any expected 
                erroneous excess payments for long-term care assistance 
                (estimated in accordance with such criteria, including 
                sampling procedures, as the Secretary may prescribe and 
                subject to subsequent adjustment, if necessary, under 
                subsection (c)(2)).
                    ``(D) Definition.--
                            ``(i) In general.--For purposes of this 
                        subsection, the term `erroneous excess payments 
                        for long-term care assistance' means the total 
                        of--
                                    ``(I) payments under the State plan 
                                with respect to ineligible individuals 
                                and families, and
                                    ``(II) overpayments on behalf of 
                                eligible individuals and families by 
                                reason of error in determining the 
                                amount of expenditures for long-term 
                                care services required of an individual 
                                or a family as a condition of 
                                eligibility.
                            ``(ii) Ineligibles.--In determining the 
                        amount of erroneous excess payments for long-
                        term care assistance to an ineligible 
                        individual or family under clause (i)(I), if 
                        such ineligibility is the result of an error in 
                        determining the amount of the resources of such 
                        individual or family, the amount of the 
                        erroneous excess payment shall be the smaller 
                        of (I) the amount of the payment with respect 
                        to such individual or family, or (II) the 
                        difference between the actual amount of such 
                        resources and the allowance resource level 
                        established under the State plan.
                            ``(iii) Errors.--In determining the amount 
                        of erroneous excess payments for long-term care 
                        assistance to an individual or family under 
                        clause (i)(II), the amount of the erroneous 
                        excess payment shall be the smaller of (I) the 
                        amount of the payment on behalf of the 
                        individual or family, or (II) the difference 
                        between the actual amount incurred for long-
                        term care services by the individual or family 
                        and the amount which should have been incurred 
                        in order to establish eligibility for long-term 
                        care assistance.
                            ``(iv) Third-party liability.--In 
                        determining the amount of erroneous excess 
                        payments, there shall not be included any error 
                        resulting from a failure of an individual to 
                        cooperate or give correct information with 
                        respect to third-party liability as required 
                        under section 2107(a)(1)(B) or 402(a)(26)(C).
                    ``(E) Exclusions.--For purposes of subparagraph 
                (D), there shall be excluded, in determining both 
                erroneous excess payments made for long-term care 
                assistance and total expenditures for long-term care 
                assistance--
                            ``(i) payments with respect to any 
                        individual whose eligibility for long-term care 
                        assistance was determined exclusively by the 
                        Secretary under an agreement pursuant to 
                        section 1634 and such other classes of 
                        individuals as the Secretary may by regulation 
                        prescribe whose eligibility was determined in 
                        part under such an agreement; and
                            ``(ii) payments made as the result of a 
                        technical error.
            ``(2) Provision of information.--The State agency 
        administering the plan approved under this part shall, at such 
        times and in such form as the Secretary may specify, provide 
        information on the rates of erroneous excess payments made (or 
        expected, with respect to future periods specified by the 
        Secretary) in connection with its administration of such plan, 
        together with any other data the Secretary requests that are 
        reasonably necessary for the Secretary to carry out the 
        provisions of this subsection.
            ``(3) State failure to cooperate.--
                    ``(A) In general.--If a State fails to cooperate 
                with the Secretary in providing information necessary 
                to carry out this subsection, the Secretary, directly 
                or through contractual or such other arrangements as 
                the Secretary may find appropriate, shall establish the 
                error rates for that State on the basis of the best 
                data reasonably available to the Secretary and in 
                accordance with such techniques for sampling and 
                estimating as the Secretary finds appropriate.
                    ``(B) Reduction for costs.--In any case in which it 
                is necessary for the Secretary to exercise the 
                Secretary's authority under subparagraph (A) to 
                determine a State's error rates for a fiscal year, the 
                amount that would otherwise be payable to such State 
                under this part for quarters in such year shall be 
                reduced by the costs incurred by the Secretary in 
                making (directly or otherwise) such determination.
            ``(4) Applicability.--This subsection shall not apply with 
        respect to Puerto Rico, Guam, the Virgin Islands, the Northern 
        Mariana Islands, or American Samoa.
    ``(j) Payment Prohibited for Assistance to Nonresident Aliens.--
Notwithstanding the preceding provisions of this section, no payment 
may be made to a State under this section for long-term care assistance 
furnished to an alien who is not lawfully admitted for permanent 
residence or otherwise permanently residing in the United States under 
color of law.
    ``(k) Disallowance of Claims by States.--
            ``(1) In general.--In any case in which the Secretary 
        proposes to disallow under section 1116(d) a claim by a State 
        under this section, the Secretary shall, if the proposed 
        disallowance is described in paragraph (2)(A), follow the 
        procedure described in paragraph (2)(B). The Secretary may 
        disallow such claim only if the State fails to take the action 
        specified in paragraph (2)(B).
            ``(2) Applicable disallowances and procedure.--
                    ``(A) Applicable disallowances.--The procedure 
                described in subparagraph (B) applies to any proposed 
                disallowance where there is no contention by the 
                Secretary that the services rendered were not medically 
                necessary and appropriate, or that the quality of care 
                provided to eligible individuals was deficient and the 
                proposed disallowance is not based upon--
                            ``(i) an erroneous determination of 
                        eligibility of individuals;
                            ``(ii) services of a type that are not 
                        covered by this part;
                            ``(iii) services provided by an ineligible 
                        provider;
                            ``(iv) erroneous computation of a State's 
                        indirect cost allocation rate or an ineligible 
                        provider's rate;
                            ``(v) claims based on an inapplicable 
                        Federal long-term care assistance percentage; 
                        or
                            ``(vi) failure to comply with utilization 
                        control procedures.
                    ``(B) Procedure.--In the case of any proposed 
                disallowance described in subparagraph (A) the 
                Secretary shall notify the State of the Secretary's 
                intent to disallow a claim. Within 60 days of receipt 
                of such notice, the State may inform the Secretary of 
                its intention to alter its program or practices on a 
                prospective basis to satisfy the matters on which the 
                proposed disallowance is based, in which event the 
                Secretary shall review the State's program or 
                practices, as appropriate, to assure that the necessary 
                changes have been made or will be made within a 
                reasonable time.
            ``(3) Determination of amount of disallowance.--Whenever 
        the Secretary disallows any claim by a State under this 
        section, whether or not described in paragraph (2)(A) of this 
        subsection, and the State exercises its right of 
        reconsideration under section 1116(d), the Department Appeals 
        Board established in the Department of Health and Human 
        Services shall, if such Board upholds the basis for the 
        disallowance, determine whether the amount of the disallowance 
        should be reduced. In making this determination, the Board 
        shall take into account (to the extent the State makes a 
        showing) factors which shall include, but not be limited to--
                    ``(A) whether the basis of the disallowance was 
                procedural in nature;
                    ``(B) whether the amount of the disallowance is 
                proportionate to the error or deficiency on which the 
                disallowance is based;
                    ``(C) whether the basis of the disallowance 
                constitutes noncompliance that prevented or materially 
                affected the provision of appropriate services of 
                recipients eligible under this part; or
                    ``(D) whether Federal guidance with respect to the 
                action that is the basis for the proposed disallowance 
                was insufficient and the State made good faith efforts 
                to conform its action to the intent of the applicable 
                Federal statute or regulation.
            ``(4) No disallowance if action consistent with state 
        plan.--No disallowance shall be taken or upheld if action of 
        the State on which the disallowance would be based is 
        consistent with its approved State plan.
            ``(5) Interest.--In any case of a disallowance as to which 
        the State does not elect to retain the amount of the Federal 
        payment in dispute pending a final determination with respect 
        to such payment amount, and such final determination (either by 
        administrative or judicial decision) is to the effect that such 
        payment amount, or any portion thereof, shall not be 
        disallowed, the State shall be entitled to interest on the 
        amount determined not to be disallowed for the period beginning 
        on the date such amount was disallowed and ending on the date 
        of such final determination at the rate specified in subsection 
        (c)(4).
            ``(6) Audit or financial review.--No disallowance of a 
        claim under this section may be taken with respect to any 
        amounts paid to a State unless an audit or financial review 
        with respect to such amounts has been initiated, and the State 
        has been informed that the audit has been initiated, within 3 
        years of the date of filing of the State's claim for such 
        amounts.
    ``(l) Application of Rules Regarding Limitations on Provider-
Related Donations and Health Care Related Taxes.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        provisions of subsection (w) of section 1903 shall apply to 
        payments to States under this section in the same manner as 
        they apply to payments to States under subsection (a) of such 
        section.
            ``(2) Additional health care items and services.--For 
        purposes of paragraph (1), subsection (w)(7)(A) of section 1903 
        shall be applied by adding case management services and home 
        and community based services to the health care items and 
        services listed in such subsection.

                       ``operation of state plans

    ``Sec. 2104. If the Secretary, after reasonable notice and 
opportunity for hearing to the State agency administering or 
supervising the administration of the State plan approved under this 
part, finds--
            ``(1) that the plan has been so changed that it no longer 
        complies with the provisions of section 2102; or
            ``(2) that in the administration of the plan there is a 
        failure to comply substantially with any such provision,
the Secretary shall notify such State agency that further payments will 
not be made to the State (or, in the Secretary's discretion, that 
payments will be limited to categories under or parts of the State plan 
not affected by such failure), until the Secretary is satisfied that 
there will no longer be any such failure to comply. Until the Secretary 
is so satisfied, the Secretary shall make no further payments to such 
State (or shall limit payments to categories under or parts of the 
State plan not affected by such failure).

                   ``observance of religious beliefs

    ``Sec. 2105. Nothing in this part shall be construed to require any 
State which has a plan approved under this part to compel any person to 
receive services under the plan (other than for the purpose of 
discovering and preventing the spread of infection or contagious 
disease or for the purpose of protecting environmental health) if such 
person objects to the receipt of such services on religious grounds.

                   ``indian health service providers

    ``Sec. 2106. (a) Eligibility for Payment.--An Indian Health Service 
provider (including a nursing facility, or any other provider of 
services of a type otherwise covered under the State plan), whether 
operated by such Service or by an Indian tribe or tribal organization 
(as those terms are defined in section 4 of the Indian Health Care 
Improvement Act), shall be eligible for reimbursement for long-term 
care assistance provided under a State plan if and for so long as the 
provider meets all of the conditions and requirements which are 
applicable generally to such providers under this part.
    ``(b) Submission of Plan for Eligibility.--Notwithstanding 
subsection (a), an Indian Health Service provider (including a nursing 
facility, or any other provider of services of a type otherwise covered 
under the State plan) which does not meet all of the conditions and 
requirements of this part which are applicable generally to such 
provider, but which submits to the Secretary within 6 months after the 
date of the enactment of this section an acceptable plan for achieving 
compliance with such conditions and requirements, shall be deemed to 
meet such conditions and requirements (and to be eligible for 
reimbursement under this part), without regard to the extent of its 
actual compliance with such conditions and requirements, during the 
first 12 months after the month in which such plan is submitted.

                   ``assignment of rights of payment

    ``Sec. 2107. (a) In General.--For the purpose of assisting in the 
collection of long-term care support payments and other payments for 
long-term care owed to recipients of long-term care assistance under 
the State plan approved under this part, a State plan for long-term 
care assistance shall--
            ``(1) provide that, as a condition of eligibility for long-
        term care assistance under the State plan to an individual who 
        has the legal capacity to execute an assignment on the 
        individual's own behalf, the individual is required--
                    ``(A) to assign the State any rights, of the 
                individual or of any other person who is eligible for 
                long-term care assistance under this part and on whose 
                behalf the individual has the legal authority to 
                execute an assignment of such rights, to support 
                (specified as support for the purpose of long-term care 
                by a court or administrative order) and to payment for 
                long-term care from any third party; and
                    ``(B) to cooperate with the State in identifying, 
                and providing information to assist the State in 
                pursuing, any third party who may be liable to pay for 
                care and services available under the plan, unless such 
                individual has good cause for refusing to cooperate as 
                determined by the State agency in accordance with 
                standards prescribed by the Secretary, which standards 
                shall take into consideration the best interests of the 
                individuals involved; and
            ``(2) provide for entering into cooperative arrangements 
        (including financial arrangements), with any appropriate agency 
        of any State (including, with respect to the enforcement and 
        collection of rights of payment for long-term care by or 
        through a parent, with a State's agency established or 
        designated under section 454(3)) and with appropriate courts 
        and law enforcement officials, to assist the agency or agencies 
        administering the State plan with respect to the enforcement 
        and collection of rights to support or payment assigned under 
        this section, and any other matters of common concern.
    ``(b) Distribution of Amounts Collected.--Such part of any amount 
collected by the State under an assignment made under the provisions of 
this section shall be retained by the State as is necessary to 
reimburse the State for long-term care assistance payments made on 
behalf of an individual with respect to whom such assignment was 
executed (with appropriate reimbursement of the Federal Government to 
the extent of its participation in the financing of such long-term care 
assistance), and the remainder of such amount collected shall be paid 
to such individual.

           ``hospital providers of nursing facility services

    ``Sec. 2108. (a) In General.--Notwithstanding any other provision 
of this part, payment may be made, in accordance with this section, 
under a State plan approved under this part for nursing facility 
services furnished by a hospital which has in effect an agreement under 
section 1883 and which, with respect to the provision of such services, 
meets the requirements of subsections (b) through (d) of section 1919.
    ``(b) Payment for Services.--
            ``(1) In general.--Except as provided in paragraph (3), 
        payment to any such hospital for any nursing facility services 
        furnished pursuant to subsection (a) shall be at a rate equal 
        to the average rate per patient-day paid for routine services 
        during the previous calendar year under the State plan to 
        nursing facilities located in the State in which the hospital 
        is located. The reasonable cost of ancillary services shall be 
        determined in the same manner as the reasonable cost of 
        ancillary services provided for inpatient hospital services.
            ``(2) Allocation of costs.--With respect to any period for 
        which a hospital has an agreement under section 1883, in order 
        to allocate routine costs between hospital and long-term care 
        services, the total reimbursement for routine services due from 
        all classes of long-term care services, the total reimbursement 
        for routine services due from all classes of long-term care 
        patients (including title XVIII, title XIX, and private pay 
        patients) shall be subtracted from the hospital total routine 
        costs before calculations are made to determine reimbursement 
        for routine hospital services under the State plan.
            ``(3) Payment rates.--Payment to any hospital for any 
        nursing facility services furnished pursuant to subsection (a) 
        may be made at a payment rate established by the State in 
        accordance with the requirements of section 2102(a)(7)(C)(i).

  ``withholding of federal share of payments for certain medicare and 
                           medicaid providers

    ``Sec. 2109. (a) In General.--
            ``(1) Medicare program.--The Secretary may adjust, in 
        accordance with this section, the Federal matching payment to a 
        State with respect to expenditures for long-term care 
        assistance for services furnished in any quarter by--
                    ``(A) an institution--
                            ``(i) which has or previously had in effect 
                        an agreement with the Secretary under section 
                        1866; and
                            ``(ii)(I) from which the Secretary has been 
                        unable to recover overpayments made under title 
                        XVIII, or (II) from which the Secretary has 
                        been unable to collect the information 
                        necessary to enable the Secretary to determine 
                        the amount (if any) of the overpayments made to 
                        such institution under title XVIII; and
                    ``(B) any person--
                            ``(i) who (I) has previously accepted 
                        payment on the basis of an assignment under 
                        section 1842(b)(3)(B)(ii), and (II) during the 
                        annual period immediately preceding such 
                        quarter submitted no claims for payment under 
                        title XVIII which aggregated less than the 
                        amount of overpayments made to such person, and
                            ``(ii)(I) from whom the Secretary has been 
                        unable to recover overpayments received in 
                        violation of the terms of such assignment, or 
                        (II) from whom the Secretary has been unable to 
                        collect the information necessary to enable 
                        such person to determine the amount (if any) of 
                        the overpayments made to such person under 
                        title XVIII.
            ``(2) Medicaid program.--The Secretary may adjust, in 
        accordance with this section, the Federal matching payment to a 
        State with respect to expenditures for long-term care 
        assistance for services furnished in any quarter by--
                    ``(A) an institution (i) from which the Secretary 
                has been unable to recover overpayments made under 
                title XIX, or (ii) from which the Secretary has been 
                unable to collect the information necessary to enable 
                the Secretary to determine the amount (if any) of the 
                overpayments made to such institution under title XIX; 
                and
                    ``(B) any person (i) from whom the Secretary has 
                been unable to recover overpayments made under title 
                XIX, or (ii) from whom the Secretary has been unable to 
                collect the information necessary to enable such person 
                to determine the amount (if any) of the overpayments 
                made to such person under title XIX.
    ``(b) Reduction of Payment to States.--The Secretary may (subject 
to the remaining provisions of this section) reduce payment to a State 
under this part for any quarter by an amount equal to the lesser of the 
Federal matching share of payments to any institution or person 
specified in subsection (a), or the total overpayments to such 
institution or person under title XVIII or XIX, and may require the 
State to reduce its payment to such institution or person by such 
amount.
    ``(c) Notice of Reduction.--The Secretary shall not make any 
adjustment in the payment to a State, nor require any adjustment in the 
payment to an institution or person pursuant to subsection (b), until 
after the Secretary has provided adequate notice (which shall be not 
less than 60 days) to the State agency and the institution or person.
    ``(d) Regulatory Procedures.--The Secretary shall by regulation 
provide procedures for implementation of this section. Such procedures 
shall--
            ``(1) determine the amount of the Federal payment to which 
        the institution or person would otherwise be entitled under 
        this section which shall be treated as a setoff against 
        overpayments under title XVIII or XIX; and
            ``(2) assure the restoration to the institution or person 
        of amounts withheld under this section that are ultimately 
        determined to be in excess of overpayments under title XVIII or 
        XIX and to which the institution or person would otherwise be 
        entitled under this part.
    ``(e) Amounts Recovered Restored to Trust Funds.--The Secretary 
shall restore to the trust funds established under sections 1817 and 
1841, as appropriate, amounts recovered under this section as setoffs 
against overpayments under title XVIII.
    ``(f) Certain Amounts Not Recoverable.--Notwithstanding any other 
provision of this part, an institution or person shall not be entitled 
to recover from any State any amount in payment for long-term care 
services under this part that is withheld by the State agency pursuant 
to an order by the Secretary under subsection (b).

    ``provisions respecting inapplicability of certain requirements

    ``Sec. 2110. (a) In General.--A State shall not be deemed to be out 
of compliance with the requirements of paragraph (1)(B), (2), or (6) of 
section 2102(a) solely by reason of the fact that the State (or any 
political subdivision of the State)--
            ``(1) has entered into a contract with an organization 
        which has agreed to provide care and services in addition to 
        those offered under the State plan to individuals eligible for 
        long-term care assistance who reside in the geographic area 
        served by such organization and who elect to obtain such care 
        and services from such organization; or
            ``(2) restricts for a reasonable period of time the 
        provider or providers from which an individual (eligible for 
        long-term care assistance for items or services under the State 
        plan) can receive such items or services, if--
                    ``(A) the State has found, after notice and 
                opportunity for a hearing (in accordance with 
                procedures established by the State), that the 
                individual has utilized such items or services at a 
                frequency or amount not necessary (as determined in 
                accordance with utilization guidelines established by 
                the State), and
                    ``(B) under such restriction, individuals eligible 
                for long-term care assistance for such services have 
                reasonable access (taking into account geographic 
                location and reasonable travel time) to such services 
                of adequate quality.
    ``(b) Case Management Services Exempted From Certain 
Requirements.--A State may provide, as long-term care assistance, case 
management services under the plan without regard to the requirements 
of paragraphs (1)(B) and (2)(B) of section 2102(a). The provision of 
case management services under this subsection shall not restrict the 
choice of the individual to receive long-term care assistance in 
violation of section 2102(a)(6). The State may limit the case managers 
available with respect to case management services for eligible 
individuals in order to ensure that the case managers for such 
individuals are capable of ensuring that such individuals receive 
needed services.

         ``use of deductible, cost sharing, and similar charges

    ``Sec. 2111. (a) In General.--The State plan shall provide that any 
deductible, cost sharing, or similar charge imposed under the plan will 
be nominal in amount (as determined by the Secretary in regulations).
    ``(b) Nondenial of Care.--The State plan shall require that no 
provider participating under the State plan may deny care or services 
to an individual eligible for such care or services under the plan on 
account of such individual's inability to pay a deduction, cost 
sharing, or similar charge. The requirements of this subsection shall 
not extinguish the liability of the individual to whom the care or 
services were furnished for payment of the deductible, cost sharing, or 
similar charge.

  ``transfers of assets, trusts, liens, and adjustments and recoveries

    ``Sec. 2112. (a) Prohibition on Eligibility Under Certain 
Circumstances.--
            ``(1) Required periods of ineligibility.--
                    ``(A) In general.--In order to meet the 
                requirements of this section (for purposes of section 
                2102(a)(3)(D), the State plan must provide for a period 
                of ineligibility for long-term care assistance during 
                the period beginning on the date specified in 
                subparagraph (C) and equal to the number of months 
                specified in subparagraph (D) in the case of an 
                individual who, or whose spouse, at any time on or 
                after the look-back date specified in subparagraph 
                (B)(i)--
                            ``(i) disposed of assets for less than fair 
                        market value;
                            ``(ii) transferred assets (or ownership or 
                        control of such assets) to a trustee, 
                        fiduciary, or other person or entity; or
                            ``(iii) converted countable resources to 
                        noncountable resources.
                    ``(B) Look-back date.--
                            ``(i) In general.--The look-back date 
                        specified in this subparagraph is a date that 
                        is--
                                    ``(I) 36 months (or, in the case of 
                                payments from a trust or portions of a 
                                trust that are treated as assets 
                                disposed of by the individual pursuant 
                                to paragraph (3)(A)(iii) or (3)(B)(ii) 
                                of subsection (b), 60 months) before 
                                the date specified in clause (ii); or
                                    ``(II) at the option of the State, 
                                such earlier date as provided by the 
                                State where there is reasonable cause 
                                to believe that an individual engaged 
                                in the activities described in clause 
                                (i), (ii), or (iii) of subparagraph (A) 
                                solely for the purposes of qualifying 
                                for long-term care assistance under 
                                this part.
                            ``(ii) Date specified.--The date specified 
                        in this clause, with respect to--
                                    ``(I) an institutionalized 
                                individual is the first date as of 
                                which the individual both is an 
                                institutionalized individual and has 
                                applied for long-term care assistance 
                                under the State plan, or
                                    ``(II) a noninstitutionalized 
                                individual is the date on which the 
                                individual applies for long-term care 
                                assistance under the State plan or, if 
                                later, the date on which the individual 
                                disposes of assets for less than fair 
                                market value.
                    ``(C) Beginning date of period of ineligibility.--
                The date specified in this subparagraph is the first 
                day of the first month in which the individual--
                            ``(i) is an institutionalized individual;
                            ``(ii) is (or but for the provisions of 
                        this subsection would be) entitled to long-term 
                        care assistance under the State plan; and
                            ``(iii) is receiving or is an applicant for 
                        such long-term care assistance.
                    ``(D) Period of ineligibility.--
                            ``(i) Institutionalized individuals.--With 
                        respect to an institutionalized individual, the 
                        number of months of ineligibility under this 
                        subparagraph for an individual shall be equal 
                        to--
                                    ``(I) the total, cumulative 
                                uncompensated value of all assets or 
                                resources transferred by the individual 
                                (or individual's spouse) on or after 
                                the look-back date specified in 
                                subparagraph (B)(i), divided by
                                    ``(II) the average monthly cost to 
                                a private patient of nursing facility 
                                services in the State (or, at the 
                                option of the State, in the community 
                                in which the individual is 
                                institutionalized) at the time of 
                                application.
                            ``(ii) Noninstitutionalized individuals.--
                        With respect to a noninstitutionalized 
                        individual, the number of months of 
                        ineligibility under this subparagraph for an 
                        individual shall not be greater than a number 
                        equal to--
                                    ``(I) the total, cumulative 
                                uncompensated value of all assets 
                                transferred by the individual (or 
                                individual's spouse) on or after the 
                                look-back date specified in 
                                subparagraph (B)(i), divided by
                                    ``(II) the average monthly cost to 
                                a private patient of nursing facility 
                                services in the State (or, at the 
                                option of the State, in the community 
                                in which the individual is 
                                institutionalized) at the time of 
                                application.
                            ``(iii) Reduction in period of 
                        ineligibility.--The number of months of 
                        ineligibility otherwise determined under clause 
                        (i) or (ii) with respect to the disposal of an 
                        asset shall be reduced--
                                    ``(I) in the case of periods of 
                                ineligibility determined under clause 
                                (i), by the number of months of 
                                ineligibility applicable to the 
                                individual under clause (ii) as a 
                                result of such disposal, and
                                    ``(II) in the case of periods of 
                                ineligibility determined under clause 
                                (ii), by the number of months of 
                                ineligibility applicable to the 
                                individual under clause (i) as a result 
                                of such disposal.
            ``(2) Exception to ineligibility.--An individual shall not 
        be ineligible for long-term care assistance by reason of 
        paragraph (1) to the extent that--
                    ``(A) ownership of the assets was transferred to--
                            ``(i) the spouse of such individual; or
                            ``(ii) a child of such individual who--
                                    ``(I) is under age 21,
                                    ``(II) with respect to States 
                                eligible to participate in the State 
                                program established under title XVI, is 
                                blind or permanently and totally 
                                disabled, or
                                    ``(III) with respect to States 
                                which are not eligible to participate 
                                in such program, is blind or disabled 
                                as defined in section 1614 who is 
                                determined by the State to be 
                                financially dependent on such 
                                individual;
                    ``(B) the assets--
                            ``(i) were transferred to, or to a trust 
                        (including a trust described in subsection 
                        (b)(4)) established solely for the benefit of, 
                        the individual's child described in 
                        subparagraph (A)(ii)(II), or
                            ``(ii) were transferred to a trust 
                        (including a trust described in subsection 
                        (b)(4)) established solely for the benefit of 
                        an individual under 65 years of age who is 
                        disabled (as defined in section 1614(a)(3));
                    ``(C) a satisfactory showing is made to the State 
                (in accordance with any regulations promulgated by the 
                Secretary) that--
                            ``(i) the individual intended to dispose of 
                        the assets either at fair market value, or for 
                        other valuable consideration;
                            ``(ii) the assets were transferred or 
                        converted in accordance with a court order; or
                            ``(iii) assets transferred for less than 
                        fair market value have been returned to the 
                        individual; or
                    ``(D) the State determines that denial of 
                eligibility would work an undue hardship.
            ``(3) Joint ownership.--For purposes of this subsection, in 
        the case of an asset held by an individual in common with 
        another person or persons in a joint tenancy, tenancy in 
        common, or similar arrangement, the asset (or the affected 
        portion of such asset) shall be considered to be transferred by 
        such individual when any action is taken, either by such 
        individual or by any other person, that reduces or eliminates 
        such individual's ownership or control of such asset.
            ``(4) Periods of ineligibility in accordance with this 
        subsection; apportioning periods of ineligibility.--A State may 
        not provide for any period of ineligibility for an individual 
        due to transfer of assets for less than fair market value 
        except in accordance with this subsection. In the case of a 
        transfer by the spouse of an individual which results in a 
        period of ineligibility for long-term care assistance under a 
        State plan for such individual, a State shall, using a 
        reasonable methodology (as specified by the Secretary), 
        apportion such period of ineligibility (or any portion of such 
        period) among the individual and the individual's spouse if the 
        spouse otherwise becomes eligible for long-term care assistance 
        under the State plan.
    ``(b) Trusts.--
            ``(1) In general.--For purposes of determining an 
        individual's eligibility for, or amount of, benefits under a 
        State plan under this part, subject to paragraph (4), the rules 
        specified in paragraph (3) shall apply to a trust established 
        by such individual.
            ``(2) Establishment of trusts.--
                    ``(A) In general.--For purposes of this subsection, 
                an individual shall be considered to have established a 
                trust if assets of the individual were used to form all 
                or part of the corpus of the trust and if any of the 
                following individuals established such trust other than 
                by will:
                            ``(i) The individual.
                            ``(ii) The individual's spouse.
                            ``(iii) A person, including a court or 
                        administrative body, with legal authority to 
                        act in place of or on behalf of the individual 
                        or the individual's spouse.
                            ``(iv) A person, including any court or 
                        administrative body, acting at the direction or 
                        upon the request of the individual or the 
                        individual's spouse.
                    ``(B) Joint ownership.--In the case of a trust the 
                corpus of which includes assets of an individual (as 
                determined under subparagraph (A)) and assets of any 
                other person or persons, the provisions of this 
                subsection shall apply to the portion of the trust 
                attributable to the assets of the individual.
                    ``(C) Applicability.--Subject to paragraph (4), 
                this subsection shall apply without regard to--
                            ``(i) the purposes for which a trust is 
                        established,
                            ``(ii) whether the trustees have or 
                        exercise any discretion under the trust,
                            ``(iii) any restrictions on when or whether 
                        distributions may be made from the trust, or
                            ``(iv) any restrictions on the use of 
                        distributions from the trust.
            ``(3) Rules applicable to trusts.--
                    ``(A) Revocable trusts.--In the case of a revocable 
                trust--
                            ``(i) the corpus of the trust shall be 
                        considered resources available to the 
                        individual,
                            ``(ii) payments from the trust to or for 
                        the benefit of the individual shall be 
                        considered income of the individual, and
                            ``(iii) any other payments from the trust 
                        shall be considered assets disposed of by the 
                        individual for purposes of subsection (a).
                    ``(B) Irrevocable trusts.--In the case of an 
                irrevocable trust--
                            ``(i) if there are any circumstances under 
                        which payment from the trust could be made to 
                        or for the benefit of the individual, the 
                        portion of the corpus from which, or the income 
                        on the corpus from which, payment to the 
                        individual could be made shall be considered 
                        resources available to the individual, and 
                        payments from that portion of the corpus or 
                        income--
                                    ``(I) to or for the benefit of the 
                                individual, shall be considered income 
                                of the individual, and
                                    ``(II) for any other purpose, shall 
                                be considered a transfer of assets by 
                                the individual subject to subsection 
                                (a); and
                            ``(ii) any portion of the trust from which, 
                        or any income on the corpus from which, no 
                        payment could under any circumstances be made 
                        to the individual shall be considered, as of 
                        the date of establishment of the trust (or, if 
                        later, the date on which payment to the 
                        individual was foreclosed) to be assets 
                        disposed by the individual for purposes of 
                        subsection (a), and the value of the trust 
                        shall be determined for purposes of such 
                        subsection by including the amount of any 
                        payments made from such portion of the trust 
                        after such date.
            ``(4) Exceptions.--This subsection shall not apply to any 
        of the following trusts:
                    ``(A) A trust containing the assets of an 
                individual under age 65 who is disabled (as defined in 
                section 1614(a)(3)) and which is established for the 
                benefit of such individual by a parent, grandparent, 
                legal guardian of the individual, or a court if the 
                State will receive all amounts remaining in the trust 
                upon the death of such individual up to an amount equal 
                to the total long-term care assistance paid on behalf 
                of the individual under a State plan under this part.
                    ``(B) A trust established in a State for the 
                benefit of an individual if--
                            ``(i) the trust is composed only of 
                        pension, Social Security, and other income to 
                        the individual (and accumulated income in the 
                        trust), and
                            ``(ii) the State will receive all amounts 
                        remaining in the trust upon the death of such 
                        individual up to an amount equal to the total 
                        long-term care assistance paid on behalf of the 
                        individual under a State plan under this part.
                    ``(C) A trust containing the assets of an 
                individual who is disabled (as defined in section 
                1614(a)(3)) that meets the following conditions:
                            ``(i) The trust is established and managed 
                        by a non-profit association.
                            ``(ii) A separate account is maintained for 
                        each beneficiary of the trust, but, for 
                        purposes of investment and management of funds, 
                        the trust pools these accounts.
                            ``(iii) Accounts in the trust are 
                        established solely for the benefit of 
                        individuals who are disabled (as defined in 
                        section 1614(a)(3)) by the parent, grandparent, 
                        or legal guardian of such individuals, by such 
                        individuals, or by a court.
                            ``(iv) To the extent that amounts remaining 
                        in the beneficiary's account upon the death of 
                        the beneficiary are not retained by the trust, 
                        the trust pays to the State from such remaining 
                        amounts in the account an amount equal to the 
                        total amount of long-term care assistance paid 
                        on behalf of the beneficiary under the State 
                        plan under this part.
            ``(5) Hardship provision.--The State agency shall establish 
        procedures (in accordance with standards specified by the 
        Secretary) under which the agency waives the application of 
        this subsection with respect to an individual if the individual 
        establishes that such application would work an undue hardship 
        on the individual as determined on the basis of criteria 
        established by the Secretary.
            ``(6) Trust.--For purposes of this subsection, the term 
        `trust' includes any legal instrument or device that is similar 
        to a trust but includes an annuity only to such extent and in 
        such manner as the Secretary specifies.
    ``(c) Imposition of Lien.--
            ``(1) In general.--In order to meet the requirements of 
        this section (for purposes of section 2102(a)(3)(D)) a lien may 
        be imposed against the real property of any individual as a 
        condition of receiving payment for long-term care assistance 
        under the State plan.
            ``(2) Dissolution of lien.--Any lien imposed with respect 
        to an individual pursuant to paragraph (1) shall dissolve 
        (without regard to otherwise applicable State law) upon that 
        individual's--
                    ``(A)(i) not owing any amounts paid as long-term 
                care assistance under the State plan; and
                    ``(ii) no longer receiving long-term care 
                assistance under such plan; or
                    ``(B) discharge from a nursing facility where the 
                individual makes a reasonable showing that such lien 
                imposes an undue hardship.
    ``(d) Recovery of Lien.--
            ``(1) In general.--In order to meet the requirements of 
        this section (for purposes of section 2102(a)(3)(D)), the State 
        shall seek adjustment or recovery of any long-term care 
        assistance correctly paid on behalf of an individual under the 
        State plan (including foreclosure on a lien imposed under 
        subsection (c)).
            ``(2) Conditions where adjustment or recovery permitted.--
        Any adjustment or recovery under paragraph (1) may be made 
        only--
                    ``(A) after the death of the individual and such 
                individual's surviving spouse, if any; and
                    ``(B) at a time when the individual has no 
                surviving child who--
                            ``(i) is under age 21;
                            ``(ii) with respect to States eligible to 
                        participate in the State program established 
                        under title XVI, is blind or permanently and 
                        totally disabled; or
                            ``(iii) with respect to States which are 
                        not eligible to participate in such program, is 
                        blind or disabled as defined in section 1614.
            ``(3) The State agency shall establish procedures (in 
        accordance with standards specified by the Secretary) under 
        which the agency shall waive the application of this subsection 
        (other than paragraph (1)(C)) if such application would work an 
        undue hardship as determined on the basis of criteria 
        established by the Secretary.
    ``(e) Definitions.--For purposes of this section:
            ``(1) Assets.--The term `assets', with respect to an 
        individual, includes all income and resources of the individual 
        and of the individual's spouse, including any income or 
        resources which the individual or such individual's spouse is 
        entitled to but does not receive because of action--
                    ``(A) by the individual or such individual's 
                spouse,
                    ``(B) by a person, including a court or 
                administrative body, with legal authority to act in 
                place of or on behalf of the individual or such 
                individual's spouse, or
                    ``(C) by any person, including any court or 
                administrative body, acting at the direction or upon 
                the request of the individual or such individual's 
                spouse.
            ``(2) Income.--The term `income' has the meaning given such 
        term in section 1612.
            ``(3) Institutionalized individual.--The term 
        `institutionalized individual' means an individual who is an 
        inpatient in a nursing facility.
            ``(4) Noninstitutionalized individual.--The term 
        `noninstitutionalized individual' means an individual receiving 
        home and community based services.
            ``(5) Resources.--The term `resources' has the meaning 
        given such term in section 1613 without regard to the 
        exclusions described in paragraphs (1) and (2)(A) of subsection 
        (a) of such section.

     ``application of provisions of title ii relating to subpoenas

    ``Sec. 2113. The provisions of subsections (d) and (e) of section 
205 shall apply with respect to this part to the same extent as they 
are applicable with respect to title II.

        ``treatment of income and resources for impaired spouses

    ``Sec. 2114. (a) Special Treatment for Impaired Spouses.--
            ``(1) Supersedes other provisions.--In determining the 
        eligibility for long-term care assistance of an impaired spouse 
        (as defined in subsection (f)(1)), the provisions of this 
        section supersede any other provision of this part which is 
        inconsistent with them.
            ``(2) No comparable treatment required.--Any different 
        treatment provided under this section for impaired spouses 
        shall not require such treatment for other individuals.
            ``(3) Does not affect certain determinations.--Except as 
        this section specifically provides, this section does not apply 
        to--
                    ``(A) the determination of what constitutes income 
                or resources, or
                    ``(B) the methodology and standards for determining 
                and evaluating income and resources.
            ``(4) Application in certain states and territories.--
                    ``(A) Application in states operating under 
                demonstration projects.--In the case of any State which 
                is providing long-term care assistance to its residents 
                under waiver granted under section 1115, the Secretary 
                shall require the State to meet the requirements of 
                this section in the same manner as the State would be 
                required to meet such requirement if the State had in 
                effect a plan approved under this part.
                    ``(B) No application in commonwealths and 
                territories.--This section shall only apply to a State 
                that is 1 of the 50 States or the District of Columbia.
            ``(5) Application to individuals receiving services from 
        organizations receiving certain waivers.--This section applies 
        to individuals receiving institutional or noninstitutional 
        services from any organization receiving a frail elderly 
        demonstration project waiver under section 9412(b) of the 
        Omnibus Budget Reconciliation Act of 1986.
    ``(b) Rules for Treatment of Income.--
            ``(1) Separate treatment of income.--During any month in 
        which an impaired spouse is in the institution, except as 
        provided in paragraph (2) no income of the community spouse 
        shall be deemed available to the impaired spouse.
            ``(2) Attribution of income.--In determining the income of 
        an impaired spouse or community spouse, for purposes of the 
        posteligibility income determination described in subsection 
        (d), except as otherwise provided in this section and 
        regardless of any State laws relating to community property or 
        the division of marital property, the following rules apply:
                    ``(A) Nontrust property.--Subject to subparagraphs 
                (C) and (D), in the case of income not from a trust, 
                unless the instrument providing the income otherwise 
                specifically provides--
                            ``(i) if payment of income is made solely 
                        in the name of the impaired spouse or the 
                        community spouse, the income shall be 
                        considered available only to that respective 
                        spouse;
                            ``(ii) if payment of income is made in the 
                        names of the impaired spouse and the community 
                        spouse, one-half of the income shall be 
                        considered available to each of them; and
                            ``(iii) if payment of income is made in the 
                        names of the impaired spouse or the community 
                        spouse, or both, and to another person or 
                        persons, the income shall be considered 
                        available to each spouse in proportion to the 
                        spouse's interest (or, if payment is made with 
                        respect to both spouses and no such interest is 
                        specified, one-half of the joint interest shall 
                        be considered available to each spouse).
                    ``(B) Trust property.--In the case of a trust--
                            ``(i) except as provided in clause (ii), 
                        income shall be attributed in accordance with 
                        the provisions of this part, and
                            ``(ii) income shall be considered available 
                        to each spouse as provided in the trust, or, in 
                        the absence of a specific provision in the 
                        trust--
                                    ``(I) if payment of income is made 
                                solely to the impaired spouse or the 
                                community spouse, the income shall be 
                                considered available only to that 
                                respective spouse;
                                    ``(II) if payment of income is made 
                                to both the impaired spouse and the 
                                community spouse, one-half of the 
                                income shall be considered available to 
                                each of them; and
                                    ``(III) if payment of income is 
                                made to the impaired spouse or the 
                                community spouse, or both, and to 
                                another person or persons, the income 
                                shall be considered available to each 
                                spouse in proportion to the spouse's 
                                interest (or, if payment is made with 
                                respect to both spouses and no such 
                                interest is specified, one-half of the 
                                joint interest shall be considered 
                                available to each spouse).
                    ``(C) Property with no instrument.--In the case of 
                income not from a trust in which there is no instrument 
                establishing ownership, subject to subparagraph (D), 
                one-half of the income shall be considered to be 
                available to the impaired spouse and one-half to the 
                community spouse.
                    ``(D) Rebutting ownership.--The rules of 
                subparagraphs (A) and (C) are superseded to the extent 
                that an impaired spouse can establish, by a 
                preponderance of the evidence, that the ownership 
                interests in income are other than as provided under 
                such subparagraphs.
    ``(c) Rules for Treatment of Resources.--
            ``(1) Computation of spousal share at time of 
        institutionalization.--
                    ``(A) Total joint resources.--There shall be 
                computed (as of the beginning of the first period of 
                eligibility of the impaired spouse)--
                            ``(i) the total value of resources to the 
                        extent either the impaired spouse or the 
                        community spouse has an ownership interest, and
                            ``(ii) a spousal share which is equal to 
                        one-half of such total value.
                    ``(B) Assessment.--At the request of an impaired 
                spouse or community spouse, as of the beginning of the 
                first period of eligibility of the impaired spouse and 
                upon the receipt of relevant documentation of 
                resources, the State shall promptly assess and document 
                the total value described in subparagraph (A)(i) and 
                shall provide a copy of such assessment and 
                documentation to each spouse and shall retain a copy of 
                the assessment for use under this section. If the 
                request is not part of an application for long-term 
                care assistance under this part, the State may, at its 
                option as a condition of providing the assessment, 
                require payment of a fee not exceeding the reasonable 
                expenses of providing and documenting the assessment. 
                At the time of providing the copy of the assessment, 
                the State shall include a notice indicating that the 
                spouse will have a right to a fair hearing under 
                subsection (d)(2).
            ``(2) Attribution of resources at time of initial 
        eligibility determination.--In determining the resources of an 
        impaired spouse at the time of application for benefits under 
        this part, regardless of any State laws relating to community 
        property or the division of marital property--
                    ``(A) except as provided in subparagraph (B), all 
                the resources held by either the impaired spouse, 
                community spouse, or both, shall be considered to be 
                available to the impaired spouse, and
                    ``(B) resources shall be considered to be available 
                to an impaired spouse.
            ``(3) Assignment of support rights.--The impaired spouse 
        shall not be ineligible by reason of resources determined under 
        paragraph (2) to be available for the cost of care where--
                    ``(A) the impaired spouse has assigned to the State 
                any rights to support from the community spouse;
                    ``(B) the impaired spouse lacks the ability to 
                execute an assignment due to physical or mental 
                impairment, but the State has the right to bring a 
                support proceeding against a community spouse without 
                such assignment; or
                    ``(C) the State determines that denial of 
                eligibility would work an undue hardship.
            ``(4) Separate treatment of resources after eligibility for 
        benefits established.--During the continuous period in which an 
        impaired spouse is in an institution and after the month in 
        which an impaired spouse is determined to be eligible for 
        benefits under this part, no resources of the community spouse 
        shall be deemed available to the impaired spouse.
            ``(5) Resources defined.--In this section, the term 
        `resources' has the meaning given such term in section 1613 
        without regard to the exclusions described in paragraphs (1) 
        and (2)(A) of subsection (a) of such section.
    ``(d) Protecting Income for Community Spouse.--
            ``(1) Allowances to be offset from income of impaired 
        spouse.--After an impaired spouse is determined or redetermined 
        to be eligible for long-term care assistance, in determining 
        the amount of the spouse's income that is to be applied monthly 
        to payment for the costs of care in the institution, there 
        shall be deducted from the spouse's monthly income the 
        following amounts in the following order:
                    ``(A) A personal needs allowance in an amount not 
                less than the amount specified in section 
                2102(g)(2)(B).
                    ``(B) A community spouse monthly income allowance 
                (as defined in paragraph (2)), but only to the extent 
                income of the impaired spouse is made available to (or 
                for the benefit of) the community spouse.
                    ``(C) A family allowance, for each family member, 
                equal to at least one-third of the amount by which the 
                amount described in paragraph (3)(A)(i) exceeds the 
                amount of the monthly income of that family member.
        In subparagraph (C), the term `family member' only includes 
        minor or dependent children, dependent parents, or dependent 
        siblings of the institutionalized or community spouse who are 
        residing with the community spouse.
            ``(2) Community spouse monthly income allowance defined.--
        In this section (except as provided in paragraph (5)), the 
        `community spouse monthly income allowance' for a community 
        spouse is an amount by which--
                    ``(A) except as provided in subsection (d), the 
                minimum monthly maintenance needs allowance 
                (established under and in accordance with paragraph 
                (3)) for the spouse, exceeds
                    ``(B) the amount of monthly income otherwise 
                available to the community spouse (determined without 
                regard to such an allowance).
            ``(3) Establishment of minimum monthly maintenance needs 
        allowance.--
                    ``(A) In general.--Each State shall establish a 
                minimum monthly maintenance needs allowance for each 
                community spouse which, subject to subparagraph (B), is 
                equal to or exceeds 150 percent of one-twelfth of the 
                income official poverty line (as defined in section 
                2115(f)) for a family unit of 2 members plus an excess 
                shelter allowance (as defined in paragraph (4)). A 
                revision of the official poverty line shall apply to 
                long-term care services furnished during and after the 
                second calendar quarter that begins after the date of 
                publication of the revision.
                    ``(B) Cap on minimum monthly maintenance needs 
                allowance.--The minimum monthly maintenance needs 
                allowance established under subparagraph (A) may not 
                exceed $1,500 (subject to adjustment under subparagraph 
                (C) and subsection (e)).
                    ``(C) Indexing dollar amount.--The dollar amount 
                specified in subparagraph (B) during a fiscal year 
                after fiscal year 1995 shall be increased by the same 
                percentage as the percentage increase in the consumer 
                price index for all urban consumers (all items; U.S. 
                city average) between September 1994 and the September 
                before the fiscal year involved.
            ``(4) Excess shelter allowance defined.--In paragraph 
        (3)(A)(ii), the term `excess shelter allowance' means, for a 
        community spouse, the amount by which the sum of--
                    ``(A) the spouse's expenses for rent or mortgage 
                payment (including principal and interest), taxes and 
                insurance and, in the case of a condominium or 
                cooperative, required maintenance charge, for the 
                community spouse's principal residence, and
                    ``(B) the standard utility allowance used by the 
                State under section 9(e) of the Food Stamp Act of 1977 
                or, if the State does not use such an allowance, the 
                spouse's actual utility expenses,
        exceeds 30 percent of the amount described in paragraph 
        (3)(A)(i), except that, in the case of a condominium or 
        cooperative, for which a maintenance charge is included under 
        subparagraph (A), any allowance under subparagraph (B) shall be 
        reduced to the extent the maintenance charge includes utility 
        expenses.
            ``(5) Court ordered support.--If a court has entered an 
        order against an impaired spouse for monthly income for the 
        support of the community spouse, the community spouse monthly 
        income allowance for the spouse shall be not less than the 
        amount of the monthly income so ordered.
    ``(e) Notice and Fair Hearing.--
            ``(1) Notice.--Upon--
                    ``(A) a determination of eligibility for long-term 
                care assistance of an impaired spouse, or
                    ``(B) a request by either the impaired spouse, or 
                the community spouse, or a representative acting on 
                behalf of either spouse,
        each State shall notify both spouses (in the case described in 
        subparagraph (A)) or the spouse making the request (in the case 
        described in subparagraph (B)) of the amount of the community 
        spouse monthly income allowance (described in subsection 
        (d)(1)(B), of the amount of any family allowances (described in 
        subsection (d)(1)(C)), and of the spouse's right to a fair 
        hearing under this subsection respecting ownership or 
        availability of income or resources, and the determination of 
        the community spouse monthly income or resource allowance.
            ``(2) Fair hearing.--
                    ``(A) In general.--If either the impaired spouse or 
                the community spouse is dissatisfied with a 
                determination of--
                            ``(i) the community spouse monthly income 
                        allowance;
                            ``(ii) the amount of monthly income 
                        otherwise available to the community spouse (as 
                        applied under subsection (d)(2)(B));
                            ``(iii) the computation of the spousal 
                        share of resources under subsection (c)(1); or
                            ``(iv) the attribution of resources under 
                        subsection (c)(2);
                such spouse is entitled to a fair hearing described in 
                section 2102(a)(1)(F) with respect to such 
                determination if an application for benefits under this 
                part has been made on behalf of the impaired spouse. 
                Any such hearing respecting the determination of the 
                community spouse resource allowance shall be held 
                within 30 days of the date of the request for the 
                hearing.
                    ``(B) Revision of minimum monthly maintenance needs 
                allowance.--If either such spouse establishes that the 
                community spouse needs income, above the level 
                otherwise provided by the minimum monthly maintenance 
                needs allowance, due to exceptional circumstances 
                resulting in significant financial duress, there shall 
                be substituted, for the minimum monthly maintenance 
                needs allowance in subsection (d)(2)(A), an amount 
                adequate to provide such additional income as is 
                necessary.
    ``(f) Definitions.--For purposes of this section:
            ``(1) Impaired spouse.--The term `impaired spouse' means an 
        individual who--
                    ``(A) is receiving services under this part, and
                    ``(B) is married to a spouse who is not a 
                functionally impaired or severely functionally impaired 
                individual;
        but does not include any such individual who does not meet the 
        requirements of subparagraph (A) for at least 30 days.
            ``(2) Community spouse.--The term `community spouse' means 
        the spouse of a functionally impaired or severely functionally 
        impaired individual.

                             ``definitions

    ``Sec. 2115. (a) Case Management Services.--For purposes of this 
part, the term `case management services' means services which--
            ``(1) maximize the independent functioning of individuals 
        eligible for long-term care assistance under the State plan in 
        the least restrictive environment possible;
            ``(2) coordinate the most appropriate mixture of long-term 
        care services for such individuals; and
            ``(3) contain costs through the appropriate organization of 
        the available resources and sequencing of services to respond 
        to the functional and long-term care needs of such individuals.
    ``(b) Comprehensive Functional Assessment Defined.--For purposes of 
this part, the term `comprehensive functional assessment' means an 
assessment which--
            ``(1) is conducted by a qualified community care case 
        manager;
            ``(2) is used to determine whether or not an individual is 
        a functionally impaired individual, a severely functionally 
        impaired individual, or a functionally impaired child;
            ``(3) uses an instrument which has been specified by the 
        State;
            ``(4) is used in establishing, reviewing, and revising an 
        individual's individual community care plan;
            ``(5) is provided free of charge to the individual 
        receiving the assessment;
            ``(6) includes an interview with the individual and such 
        individual's primary caregiver, where appropriate, to determine 
        the individual's--
                    ``(A) ability or inability to perform the 
                activities of daily living described in subsection 
                (c)(4);
                    ``(B) health status;
                    ``(C) mental status;
                    ``(D) current living arrangements; and
                    ``(E) formal and informal long-term care support 
                systems;
            ``(7) includes a schedule for reassessment of the 
        individual within a reasonable period after the initial 
        assessment if the physical or cognitive status of the 
        individual is determined to be likely to change significantly;
            ``(8) for each individual who is determined to be a 
        functionally impaired individual, severely functionally 
        impaired individual, or a functionally impaired child, includes 
        a periodic review of such individual's status and assessment 
        and a revision of such individual's individual community care 
        plan by the qualified community care case manager as 
        appropriate, but no less often than once every 6 months;
            ``(9) includes the development of an individual community 
        care plan; and
            ``(10) includes arrangement by the qualified community care 
        case manager, in consultation with the individual's primary 
        medical care provider, for the provision of appropriate care 
        and services.
    ``(c) Federal Long-Term Care Assistance Percentage Defined.--
            ``(1) In general.--The term `Federal long-term care 
        assistance percentage' for any State shall be 100 percent less 
        the State percentage, and the State percentage shall be that 
        percentage which bears the same ratio to 45 percent as the 
        square of the per capita income of such State bears to the 
        square of the per capita income of the continental United 
        States (including Alaska and Hawaii).
            ``(2) Special rules.--Notwithstanding paragraph (1)--
                    ``(A) the Federal long-term care assistance 
                percentage shall in no case be less than 50 percent or 
                more than 80 percent,
                    ``(B) the Federal long-term care assistance 
                percentage for Puerto Rico, the Virgin Islands, Guam, 
                the Northern Mariana Islands, and American Samoa shall 
                be 50 percent, and
                    ``(C) the Federal long-term care assistance 
                percentage shall be 100 percent with respect to amounts 
                expended as long-term care assistance for services 
                which are received through an Indian Health Service 
                facility whether operated by the Indian Health Service 
                or by an Indian tribe or tribal organization (as 
                defined in section 4 of the Indian Health Care 
                Improvement Act).
            ``(3) Determination.--The Federal long-term care assistance 
        percentage for any State shall be determined and promulgated in 
        accordance with the provisions of section 1101(a)(8)(B).
    ``(d) Functionally Impaired Defined.--
            ``(1) Functionally impaired individual.--For purposes of 
        this part, the term `functionally impaired individual' means an 
        individual 6 years of age or older who is certified by a 
        licensed health care practitioner (other than a relative of 
        such individual) as being unable to perform at least 3 of the 
        activities of daily living described in subparagraph (A) of 
        paragraph (4) on a daily basis for a period of at least 60 
        consecutive days, without substantial assistance from another 
        individual (including assistance involving verbal reminding, 
        physical cueing, or substantial supervision).
            ``(2) Severely functionally impaired individual.--For 
        purposes of this part, the term `severely functionally impaired 
        individual' means an individual 6 years of age or older who is 
        certified by a licensed health care practitioner (other than a 
        relative of such individual) as being unable to perform more 
        than 3 of the activities of daily living described in 
        subparagraph (A) of paragraph (4) on a daily basis for a period 
        of at least 60 consecutive days, without substantial assistance 
        from another individual (including assistance involving verbal 
        reminding, physical cueing, or substantial supervision).
            ``(3) Functionally impaired child.--
                    ``(A) In general.--For purposes of this part, the 
                term `functionally impaired child' means an individual 
                under 6 years of age who is certified by a licensed 
                health care practitioner (other than a relative of such 
                individual) as having comparable levels of functional 
                impairment which would entitle such individual to 
                benefits under this part.
                    ``(B) Comparable levels of functional impairment.--
                In subparagraph (A), the term `comparable levels of 
                functional impairment' means physical, cognitive, or 
                other impairments that limit the ability of an 
                individual who is under 6 years of age to perform 
                activities of daily living appropriate for the age of 
                the individual on a daily basis for a period of at 
                least 60 consecutive days and that are comparable to 
                the physical, cognitive or other impairments of a 
                functionally impaired individual or a severely 
                functionally impaired individual.
            ``(4) Activities of daily living.--
                    ``(A) Description.--The activities of daily living 
                described in this paragraph are--
                            ``(i) eating;
                            ``(ii) transferring;
                            ``(iii) toileting;
                            ``(iv) dressing; and
                            ``(v) bathing.
                    ``(B) Requirements on the secretary.--The Secretary 
                shall develop definitions and standards for measuring 
                the ability to perform the activities of daily living 
                described in subparagraph (A) in conjunction with--
                            ``(i) experts in gerontology, pediatrics, 
                        and functional impairment research;
                            ``(ii) representatives from appropriate 
                        State agencies that are involved in the 
                        provision of long-term care services;
                            ``(iii) representatives of providers of 
                        long-term care services;
                            ``(iv) representatives of insurance 
                        companies offering long-term care insurance;
                            ``(v) representatives of consumers; and
                            ``(vi) other individuals determined 
                        appropriate by the Secretary.
            ``(5) Licensed health care practitioner.--For purposes of 
        this part, the term `licensed health care practitioner' means--
                    ``(A) a physician or registered professional nurse, 
                or
                    ``(B) a qualified community care case manager.
    ``(e) Home and Community Based Services Defined.--For purposes of 
this part, the term `home and community based services' means services 
furnished in a home or other location (but not including such services 
furnished to an inpatient or resident of a nursing facility) required 
to meet the individual's activities of daily living-related needs 
including the following:
            ``(1) Homemaker services.
            ``(2) Personal care services.
            ``(3) Home health care.
            ``(4) Adult day health care.
            ``(5) Nursing services provided by or under the supervision 
        of a registered nurse.
            ``(6) Physical therapy and related services.
            ``(7) Respite care.
    ``(f) Income Official Poverty Line.--For purposes of this part, the 
term `income official poverty line' means the income official poverty 
line (as defined by the Office of Management and Budget, and revised 
annually in accordance with section 673(2) of the Omnibus Budget 
Reconciliation Act of 1981).
    ``(g) Individual Community Care Plan Defined.--For purposes of this 
part, the term `individual community care plan' means a written plan 
which--
            ``(1) is in accordance with the long-term care service 
        needs of the individual and the availability of the appropriate 
        care and services;
            ``(2) identifies--
                    ``(A) the long-term care problems and needs of the 
                individual;
                    ``(B) the mix of formal and informal services and 
                support systems that are available to meet the long-
                term care service needs of the individual;
                    ``(C) the goals for the individual;
                    ``(D) the appropriate services necessary to meet 
                such needs; and
                    ``(E) the arrangements made for appropriate care 
                and services;
            ``(3) is established, and is periodically reviewed and 
        revised, by a qualified community care case manager in 
        consultation with the individual's primary medical care 
        provider, after a face-to-face interview with the individual 
        and such individual's spouse or primary caregiver, where 
        appropriate, and based upon the most recent comprehensive 
        functional assessment of such individual;
            ``(4) specifies, within any amount, duration, and scope, 
        limitations imposed on care and services provided under the 
        State plan, and indicates the individual's preferences for the 
        types and providers of services;
            ``(5) may specify other services required by such 
        individual; and
            ``(6) does not restrict or otherwise limit the specific 
        persons or individuals (who are competent and authorized by the 
        State to provide home and community based services under the 
        State plan) who will provide the home and community based 
        services described, except as otherwise described in this part.
    ``(h) Long-Term Care Assistance Defined.--
            ``(1) In general.--For purposes of this part, the term 
        `long-term care assistance' means payment of part or all of the 
        cost of the following care and services for individuals 
        described in section 2102(a)(2)(A):
                    ``(A) Case management services provided by a 
                qualified community care case manager.
                    ``(B) Nursing facility services (other than 
                services in an institution for mental diseases).
                    ``(C) Home and community based services.
                    ``(D) Any other type of long-term care service 
                (other than room and board) recognized under State law 
                as specified by the Secretary.
            ``(2) Special rule.--The term `long-term care assistance' 
        does not include any payment of part or all of the cost of the 
        care and services described in paragraph (1) for an individual 
        described in section 2102(a)(2)(A) who is an inmate of a public 
        institution.
    ``(i) Nursing Facility Defined.--For purposes of this part, the 
term `nursing facility' has the meaning given such term under section 
1919 and which meets the requirements for such a facility described in 
such section.
    ``(j) Nursing Facility Services Defined.--For purposes of this 
part, the term `nursing facility services' means services which are or 
were required to be given an individual who needs or needed, on a daily 
basis, nursing care (provided directly by or requiring the supervision 
of nursing personnel) which as a practical matter can only be provided 
in a nursing facility on an inpatient basis.
    ``(k) Qualified Community Care Case Manager.--For purposes of this 
part, the term `qualified community care case manager' means a person 
or entity which--
            ``(1) provides case management services to an individual 
        who is eligible for long-term care assistance under the State 
        plan;
            ``(2) is not a relative of the individual receiving such 
        case management services;
            ``(3) has experience in assessing individuals' functional 
        and cognitive impairment;
            ``(4) has experience or has been trained in establishing, 
        and in periodically reviewing and revising, individual 
        community care plans and in the provision of case management 
        services to individuals who are eligible for long-term care 
        assistance under this part;
            ``(5) completes the individual community care plan in a 
        timely manner and reviews and discusses new and revised 
        individual community care plans with the individual or such 
        individual's primary caregiver or both; and
            ``(6) meets such other standards established by the 
        Secretary or the State which may include standards which 
        assure--
                    ``(A) the quality of case management services; and
                    ``(B) that individuals whose home and community 
                based services they manage are not at risk of financial 
                exploitation due to such a manager.
    ``(l) Relative Defined.--For purposes of this part, the term 
`relative' means an individual bearing a relationship to another 
individual which is described in paragraphs (1) through (8) of section 
152(a) of the Internal Revenue Code of 1986.
    ``(m) State Long-Term Care Fraud Control Unit Defined.--For 
purposes of this part, the term `State long-term care fraud control 
unit' means an identifiable entity of the State government which the 
Secretary certifies (and annually recertifies) as meeting the 
requirements described in section 1903(q), and such entity may be the 
same entity as the medicaid fraud unit described in such section.

               ``Part B--Secure Choice Insurance Program

                               ``purpose

    ``Sec. 2131. This part establishes a public-private partnership to 
provide long-term care assistance to individuals through the expanded 
availability of long-term care insurance policies which cover care and 
services that are subsidized by Federal and State funding.

                             ``definitions

    ``Sec. 2132. For purposes of this part:
            ``(1) Activities of daily living.--The term `activities of 
        daily living' refers to the activities described in section 
        2115(d)(4).
            ``(2) Benefit subsidy.--The term `benefit subsidy' means 
        the amount determined under section 2138(b)(2).
            ``(3) Case management services.--The term `case management 
        services' has the meaning provided in section 2115(a).
            ``(4) Elimination period.--The term `elimination period' 
        means the period of time beginning on the date on which a 
        policyholder qualifies for benefits under a qualified long-term 
        care insurance policy issued under this part during which no 
        benefits under such policy will be paid.
            ``(5) Functionally impaired individual.--The term 
        `functionally impaired individual' has the meaning provided in 
        section 2115(d)(1).
            ``(6) Severely functionally impaired individual.--The term 
        `severely functionally impaired individual' has the meaning 
        provided in section 2115(d)(2).
            ``(7) Home and community based services.--The term `home 
        and community based services' has the meaning provided in 
        section 2115(e).
            ``(8) Income official poverty line.--The term `income 
        official poverty line' has the meaning provided in section 
        2115(f).
            ``(9) Nursing facility services.--The term `nursing 
        facility services' has the meaning provided in section 2115(j).
            ``(10) Policyholder.--The term `policyholder' means an 
        individual who purchases a qualified long-term care insurance 
        policy.
            ``(11) Qualified case manager.--The term `qualified case 
        manager' means a qualified community care case manager as 
        defined in section 2115(k).
            ``(12) Qualified insurer.--The term `qualified insurer' 
        means an entity that is certified by the Standard and 
        Performance Organization of a State (established under section 
        2141) as an entity that--
                    ``(A) is licensed or certified under applicable 
                State law to sell insurance in the State;
                    ``(B) complies with State laws and meets or exceeds 
                insurance standards of the National Association of 
                Insurance Commissioners, adopted as of January of 1993;
                    ``(C) uses case management services to monitor the 
                needs of policyholders;
                    ``(D) guarantees a loss ratio of not less than 60 
                percent for individual and group long-term care 
                policies;
                    ``(E) provides the Standards and Performance 
                Organization with the underwriting criteria used by the 
                insurer and such other information as may be required 
                by such Organization; and
                    ``(F) meets any other requirements established by 
                the State insurance commission.
            ``(13) Qualified long-term care insurance policy.--The term 
        `qualified long-term care insurance policy' means an insurance 
        policy that meets the requirements of section 2134.
            ``(14) Qualified provider.--The term `qualified provider' 
        means an individual or entity--
                    ``(A) that provides long-term care services for 
                which reimbursement is available under a qualified 
                long-term care insurance policy; and
                    ``(B) is in compliance with licensure and 
                certification standards established by the State under 
                part A.

                       ``establishment of program

    ``Sec. 2133. There is established a program (to be known as the 
`Secure Choice Insurance Program') under which--
            ``(1) each State shall--
                    ``(A) ensure that qualified insurers, qualified 
                long-term care insurance policies, and qualified 
                providers within the State meet the requirements under 
                this part;
                    ``(B) ensure that individuals have access to 
                qualified long-term care insurance policies;
                    ``(C) ensure that care and services provided under 
                any long-term care insurance policy comply with the 
                requirements of this part;
                    ``(D) pay the benefit subsidy for the costs of care 
                and services provided under qualified long-term care 
                insurance policies as provided in section 2138(b)(2);
                    ``(E) establish a Standards and Performance 
                Organization in accordance with section 2141;
                    ``(F) prepare and submit to the Secretary such 
                reports as the Secretary may require, in such form, 
                containing such information, and complying with such 
                requirements as the Secretary determines necessary to 
                assure the soundness, correctness, nonduplicative 
                nature, and verification of such reports; and
                    ``(G) otherwise comply with the requirements of 
                this part; and
            ``(2) the Federal government shall contribute funds to 
        reimburse the State for a portion of the expenditures by the 
        State, in accordance with section 2139.

     ``requirements on qualified long-term care insurance policies

    ``Sec. 2134. (a) In General.--An insurance policy shall be treated 
as a qualified long-term care insurance policy meeting the requirements 
of this section if the policy--
            ``(1) is approved for sale in the State by the State 
        insurance commission;
            ``(2) offers benefits that meet the requirements of section 
        2135;
            ``(3) offers premiums that meet the requirements of section 
        2136;
            ``(4) meets the portability requirements of section 2137;
            ``(5) provides payment for care and services furnished 
        under such policy in accordance with section 2138(a);
            ``(6) provides for no more than a 30 cumulative day 
        elimination period; and
            ``(7) meets the standards for long-term care insurance 
        policies under subsection (h) of section 7702B of the Internal 
        Revenue Code of 1986 and subsections (c), (d), and (e) of 
        section 4980C of such Code.

      ``benefits under qualified long-term care insurance policies

    ``Sec. 2135. (a) Services.--
            ``(1) Minimum benefits.--
                    ``(A) In general.--Qualified long-term care 
                insurance policies shall cover at least--
                            ``(i) with respect to policyholders who are 
                        functionally impaired individuals, home and 
                        community based services and case management 
                        services; and
                            ``(ii) with respect to policyholders who 
                        are severely functionally impaired individuals, 
                        nursing facility services, home and community 
                        based services, and case management services.
                    ``(B) Limitations.--Qualified long-term care 
                insurance policies shall pay only for services 
                described in subparagraph (A)--
                            ``(i) that are appropriate to assist a 
                        policyholder in performing activities of daily 
                        living, as determined by a qualified case 
                        manager and specified under a written plan of 
                        care; and
                            ``(ii) that are provided by qualified 
                        providers.
            ``(2) Additional benefits.--Qualified insurers may offer 
        qualified long-term care insurance policies that provide for 
        benefits in addition to those required under paragraph (1) if 
        such policies are approved by the State insurance commission as 
        meeting the requirements of this section.
            ``(3) Requirements on case management services.--Any case 
        management services furnished under a qualified long-term care 
        insurance policy shall be provided in accordance with paragraph 
        (4) and the standards established by the Standards and 
        Performance Organization for the State.
            ``(4) Provision of case management services.--
                    ``(A) Assignment.--Upon a preliminary determination 
                that a policyholder may be in need of care and services 
                under a qualified long-term care insurance policy, the 
                qualified insurer shall ensure that a qualified case 
                manager is assigned to provide case management services 
                for such policyholder.
                    ``(B) Activities.--
                            ``(i) Benefits assessment.--An assessment 
                        shall be made by a qualified case manager to 
                        determine whether the policyholder is in need 
                        of care and services under the qualified long-
                        term care insurance policy. In making such 
                        assessment, the qualified case manager shall 
                        conduct an interview with the policyholder to 
                        determine the functional level (in terms of 
                        performance of activities of daily living) and 
                        cognitive impairment status of the 
                        policyholder. Such benefits assessment shall 
                        include an assessment of the policyholder's--
                                    ``(I) ability or inability to 
                                perform any activities of daily living;
                                    ``(II) health status;
                                    ``(III) mental status;
                                    ``(IV) current living arrangements; 
                                and
                                    ``(V) use of formal and informal 
                                long-term care support systems.
                        If the health or mental condition of the 
                        policyholder is determined to be likely to 
                        change, the qualified case manager shall 
                        reassess such policyholder within a reasonable 
                        period of time after such initial assessment, 
                        as determined appropriate by the qualified case 
                        manager in consultation with the appropriate 
                        qualified insurer.
                            ``(ii) Care plan development.--After the 
                        qualified case manager conducts the benefits 
                        assessment of the policyholder, the case 
                        manager shall develop a written care plan that 
                        is in accordance with the care and service 
                        needs of the policyholder and the availability 
                        of the appropriate care and services. The care 
                        plan shall identify--
                                    ``(I) the long-term care problems 
                                and needs of the policyholder;
                                    ``(II) the mix of formal and 
                                informal services and support systems 
                                that are available to meet the long-
                                term care and service needs of the 
                                policyholder;
                                    ``(III) the goals for the 
                                policyholder; and
                                    ``(IV) the appropriate services 
                                necessary to meet such needs.
                            ``(iii) Care plan implementation.--After a 
                        face-to-face interview with the policyholder 
                        and such policyholder's spouse or primary 
                        caregiver, where appropriate, the qualified 
                        case manager, in consultation with the 
                        policyholder's primary medical care provider, 
                        shall arrange for the provision of appropriate 
                        care and services. The qualified case manager 
                        shall assist in making the necessary service 
                        arrangements for the implementation of the care 
                        plan to the extent that the policyholder 
                        consents.
                            ``(iv) Care plan monitoring.--The qualified 
                        case manager shall monitor the delivery of 
                        services to the policyholder, the quality of 
                        care provided, and the status of the 
                        policyholder. Periodic reassessments of the 
                        status and needs of the policyholder, and 
                        revisions of the care plan, shall be made by 
                        the qualified case manager as appropriate. Such 
                        reassessments shall be conducted not less than 
                        every 6 months. If the policyholder is no 
                        longer eligible for benefits as a result of 
                        improved health conditions, death, or depletion 
                        of the maximum lifetime benefit, the qualified 
                        case manager, in consultation with the 
                        policyholder's primary medical care provider, 
                        shall discharge the case.
    ``(b) Maximum Daily and Lifetime Benefits.--
            ``(1) Maximum daily benefits.--
                    ``(A) In general.--Each qualified long-term care 
                insurance policy shall provide for a maximum daily 
                benefit payable for nursing facility services and a 
                maximum daily benefit payable for home and community 
                based services.
                    ``(B) Increases in maximum daily benefits.--The 
                maximum daily benefits under subparagraph (A) shall be 
                increased at a compounded rate of 5 percent per year.
            ``(2) Maximum lifetime benefit.--
                    ``(A) In general.--Each qualified long-term care 
                insurance policy shall offer a maximum lifetime benefit 
                equal to the amount determined under subparagraph (B). 
                The maximum lifetime benefit shall be increased at a 
                compounded rate of 5 percent per year.
                    ``(B) Amount of maximum lifetime benefit.--The 
                amount determined under this subparagraph shall be an 
                amount equal to--
                            ``(i) for qualified long-term care 
                        insurance policies issued during fiscal year 
                        1995, an amount equal to $60,000 increased or 
                        decreased by the percentage by which the cost 
                        of furnishing services under such policies in 
                        the State is greater or lesser than median cost 
                        of furnishing such services in all States, as 
                        determined by the Secretary; and
                            ``(ii) for qualified long-term care 
                        insurance policies issued during fiscal year 
                        1996 and succeeding fiscal years, an amount 
                        equal to the amount determined under this 
                        subparagraph for the preceding fiscal year 
                        updated by the estimated percentage change in 
                        the Consumer Price Index from the midpoint of 
                        the preceding fiscal year through the midpoint 
                        of such succeeding fiscal year, with 
                        appropriate adjustments to reflect previous 
                        underestimations or overestimations in the 
                        estimated percentage change in that index.
                    ``(C) Use.--The maximum lifetime benefit under 
                subparagraph (A) may be used to pay for case management 
                services, nursing facility services, and home and 
                community based services.
                    ``(D) Term of policy.--Coverage under a qualified 
                long-term care insurance policy shall continue for the 
                life of the policyholder or until the maximum lifetime 
                benefit has been depleted.

      ``premiums under qualified long-term care insurance policies

    ``Sec. 2136. (a) Amount.--
            ``(1) In general.--The amount of the premium to be charged 
        by a qualified insurer for a qualified long-term care insurance 
        policy shall be determined by each qualified insurer, subject 
        to State insurance regulations.
            ``(2) Premium rate structure.--The State insurance 
        commission shall ensure that the premium rate structure 
        applicable to a qualified long-term care insurance policy 
        remains level throughout the life of the policy.
            ``(3) Reduced premiums.--
                    ``(A) In general.--A policyholder shall be eligible 
                for reduced premiums under the policyholder's qualified 
                long-term care insurance policy if the policyholder's 
                income during any period determined appropriate by the 
                State Standards and Performance Organization does not 
                equal or exceed 400 percent of the income official 
                poverty line for such period. Such reduced premiums 
                shall remain in effect for a period determined 
                appropriate by such Organization.
                    ``(B) Determination of amount of reduction.--The 
                amount of the premium reduction under subparagraph (A) 
                shall be based on a sliding scale established by the 
                State Standards and Performance Organization. The 
                maximum amount of a premium reduction shall be an 
                amount equal to 75 percent of the premium amount and 
                shall apply in the case of a policyholder with an 
                income at or below 100 percent of the income official 
                poverty line.
    ``(b) Cessation of Premium Payments.--A qualified long-term care 
insurance policy shall provide that, after the expiration of a 30-
consecutive day period during which nursing facility service or home 
and community based service benefits are paid under the policy, the 
policyholder shall no longer be required to pay the premium due under 
such policy if the policyholder remains continuously eligible for and 
receives benefits for which reimbursement is available under the 
policy.
    ``(c) Review of Premium Rate Structures.--
            ``(1) In general.--The State insurance commission, at least 
        once during each consecutive 3-year period, shall review the 
        premium rate structure applicable to a qualified long-term care 
        insurance policy for the purpose of determining whether to 
        permit adjustments to be made by a qualified insurer to such 
        premium rate structure.
            ``(2) Approvals of premium rate structure change.--
                    ``(A) Approval required.--A qualified insurer may 
                not adjust the premium rate structure for a qualified 
                long-term care insurance policy unless such adjustment 
                is approved by the State insurance commission.
                    ``(B) Review under part a.--For purposes of 
                determining whether an adjustment in a premium rate 
                structure should be approved under subparagraph (A), 
                the State insurance commission, at least once during 
                each consecutive 3-year period, shall review the 
                payment rates applicable to services provided under 
                part A of this title. The State insurance commission 
                may approve a change in the premium rate structure 
                applicable to a qualified long-term care insurance 
                policy for qualified insurers if the rate of increase 
                in payment rates for services provided under part A 
                differs significantly from the rate of increase for 
                maximum daily benefit amounts under section 
                2135(b)(1)(B).
                    ``(C) Additional requirements for group policy 
                premium rate structure adjustments.--Premium rate 
                structure adjustments for group qualified long-term 
                care insurance policies shall be permitted under this 
                section only--
                            ``(i) on a class basis;
                            ``(ii) if such adjustment is applied to all 
                        individuals in the particular enrollment class; 
                        and
                            ``(iii) if such adjustment meets all 
                        appropriate State requirements for premium rate 
                        structure adjustments required under applicable 
                        State law.
    ``(d) Policy Lapses for Failure to Pay Premium.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        qualified long-term care insurance policy shall provide that if 
        a scheduled premium for such policy is not paid, the policy 
        will not lapse prior to the expiration of a 60-day period 
        beginning on the date on which such premium is due for failure 
        to pay premiums and such policy shall remain in force during 
        such 60-day period.
            ``(2) Reinstatement.--A qualified insurer may elect to 
        reinstate a qualified long-term care insurance policy that has 
        lapsed. The acceptance of a premium payment by a qualified 
        insurer, after the expiration of the period referred to in 
        paragraph (1), shall constitute a reinstatement of the policy 
        to which such premium is applied and no application for such 
        reinstatement shall be required. No underwriting or new age-
        related premiums shall be permitted in the case of such 
        reinstatements.

                       ``portability requirements

    ``Sec. 2137. (a) Group Policies.--In the case of a qualified long-
term care insurance policy that is offered in the form of a group 
insurance policy, the qualified insurer providing such policy shall 
ensure that the policy includes a continuation and conversion of 
coverage provision that permits a policyholder who is no longer part of 
the group to make direct premium payments to the insurer, as provided 
under this part, to keep such policy from lapsing. For the 18-month 
period beginning on the date a policyholder leaves a group, the premium 
amount required to be paid by such policyholder shall be the amount in 
effect on such date.
    ``(b) Policyholders Who Change State of Residence.--
            ``(1) In general.--If a policyholder residing in a State 
        has purchased a qualified long-term care insurance policy under 
        this part and such policyholder at a later date changes the 
        policyholder's residence to another State, such policyholder 
        shall convert to a qualified long-term care insurance policy 
        offered by a qualified insurer in the State of new residence as 
        provided in this part.
            ``(2) Responsibilities of state of new residence.--In the 
        case of a policyholder who converts the policyholder's 
        qualified long-term care insurance policy under paragraph (1), 
        the State of new residence shall--
                    ``(A) upon the application of the policyholder, 
                accept such policyholder into the Secure Choice 
                Insurance Program of the State; or
                    ``(B) in the case of a policyholder who is 
                receiving services under the policy at the time of the 
                change in residence, reimburse the qualified insurer 
                for the benefit subsidy amount under section 
                2138(b)(2).

          ``payments to qualified providers; benefit subsidies

    ``Sec. 2138. (a) Payments to qualified providers.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        qualified insurer shall pay a qualified provider for the costs 
        of furnishing services covered under a qualified long-term care 
        insurance policy.
            ``(2) Limitations.--
                    ``(A) Maximum daily benefits.--A qualified insurer 
                shall not be liable for costs of furnishing services 
                described in section 2135(a)(1) under a qualified long-
                term care insurance policy which are in excess of the 
                maximum daily benefits described in section 2135(b)(1).
                    ``(B) Maximum lifetime benefit.--A qualified 
                insurer shall not be liable for costs of furnishing 
                services described in section 2135(a)(1) under a 
                qualified long-term care insurance policy which are in 
                excess of the maximum lifetime benefit described in 
                section 2135(b)(2).
    ``(b) Reimbursement by State to Qualified Insurer.--
            ``(1) In general.--Upon receipt of a claim from a qualified 
        insurer in connection with payments described in subsection 
        (a)(1), a State shall pay to the qualified insurer the benefit 
        subsidy amount determined in accordance with paragraph (2). A 
        State shall make payment under a claim submitted by a qualified 
        insurer under this paragraph not later than 30 days after the 
        State receives such claim.
            ``(2) Benefit subsidy amount.--For purposes of paragraph 
        (1), the benefit subsidy amount for a payment under subsection 
        (a)(1) is an amount equal to the amount of such payment less 
        the amount for which the qualified insurer is liable as 
        determined under paragraph (3) and the amount for which the 
        policyholder is liable as determined under paragraph (4).
            ``(3) Liability of qualified insurer.--
                    ``(A) In general.--A qualified insurer shall be 
                liable for a portion of the amount paid under 
                subsection (a)(1) for any services equal to the sum 
                of--
                            ``(i) the additional benefit amount 
                        determined under subparagraph (B); and
                            ``(ii) the premium related amount 
                        determined under subparagraph (C).
                    ``(B) Additional benefit amount.--The additional 
                benefit amount determined under this subparagraph is an 
                amount equal to the portion of the amount paid under 
                subsection (a)(1) for any services attributable to 
                payments for benefits that are in addition to the 
                benefits required under section 2135(a)(1).
                    ``(C) Premium related amount.--
                            ``(i) In general.--The premium related 
                        amount determined under this subparagraph is an 
                        amount equal to the product of the amount paid 
                        under subsection (a)(1) for the services and 
                        the ratio of the actual premium payment amount 
                        determined under clause (ii) to the estimated 
                        premium payment amount determined under clause 
                        (iii).
                            ``(ii) Actual premium payment amount.--The 
                        actual premium payment amount determined under 
                        this clause is an amount equal to the 
                        accumulated value of the actual premiums paid 
                        by a policyholder under a qualified long-term 
                        care insurance policy with respect to the 
                        benefits required under section 2135(a)(1).
                            ``(iii) Estimated premium payment amount.--
                        The estimated premium payment amount determined 
                        under this clause is an amount equal to the 
                        estimated accumulated value of the premiums 
                        that would have been paid by a policyholder 
                        under a qualified long-term care insurance 
                        policy with respect to the benefits required 
                        under section 2135(a)(1) if no premium 
                        reductions occurred with respect to such policy 
                        under section 2136(a)(3). The estimated premium 
                        payment amount under this clause shall be 
                        determined using the same assumptions and 
                        methodologies used to determine the actual 
                        premium payment amount under clause (ii).
            ``(4) Liability of policyholder.--
                    ``(A) In general.--A policyholder shall be liable 
                for a portion of the amount paid under subsection 
                (a)(1) for any services equal to the excess amount 
                determined under subparagraph (B).
                    ``(B) Excess amount.--
                            ``(i) In general.--The excess amount 
                        determined under this subparagraph for any 
                        services is the amount by which--
                                    ``(I) the amount paid under 
                                subsection (a)(1), less the additional 
                                benefit amount determined under 
                                paragraph (3)(B) and the premium 
                                related amount determined under 
                                paragraph (3)(C), exceeds
                                    ``(II) the limitation amount 
                                determined under clause (ii).
                            ``(ii) Limitation amount.--The limitation 
                        amount determined under this clause for any 
                        services is an amount equal to the product of--
                                    ``(I) the limited cost of services 
                                amount determined under clause (iii) 
                                for the services; and
                                    ``(II) the number of days for which 
                                the services were provided.
                            ``(iii) Limited cost of services amount.--
                        The limited cost of services amount determined 
                        under this clause is--
                                    ``(I) in the case of nursing 
                                facility services, the amount that is 
                                equal to the 80th percentile nursing 
                                facility resident per diem rate paid 
                                under part A in the State on the date 
                                an individual becomes eligible to have 
                                payments made on such individual's 
                                behalf under a qualified long-term care 
                                insurance policy, or
                                    ``(II) in the case of home and 
                                community based services, the amount 
                                that is equal to 60 percent of the 
                                amount determined under subclause (I).

                         ``federal contribution

    ``Sec. 2139. The Secretary shall pay to each State for each quarter 
beginning with the first quarter after the date of the enactment of 
this part an amount that is equal to the sum of--
            ``(1) an amount equal to the product of the Federal long-
        term care assistance percentage for the State under part A and 
        the State's expenditures for benefit subsidies under section 
        2138(b) for such quarter; and
            ``(2) an amount equal to 75 percent of the amount expended 
        during such quarter as the Secretary determines to be necessary 
        for the proper and efficient administration of the State plan.

                            ``resource rules

    ``Sec. 2140. (a) In General.--The minimum resource requirement 
under part A that applies to a policyholder shall be increased by an 
amount equal to $5,000 for each year during which a qualified long-term 
care insurance policy is in effect, up to $100,000 above such minimum 
resource requirement.
    ``(b) Eligibility Under Part A.--A policyholder shall not be 
eligible for services under part A until the policyholder--
            ``(1) has exhausted the maximum lifetime benefit under a 
        qualified long-term care insurance policy purchased under this 
        part; and
            ``(2) meets the eligibility requirements under part A 
        (except that with respect to the minimum resource requirement, 
        the provisions of subsection (a) shall be substituted for the 
        provisions under part A).

               ``standards and performance organizations

    ``Sec. 2141. (a) Requirement.--Each State shall establish a 
Standards and Performance Organization in accordance with this section.
    ``(b) Establishment.--In establishing the Standards and Performance 
Organization under subsection (a), the chief executive officer of the 
State shall consult with representatives of appropriate State agencies, 
as identified by the chief executive officer. The chief executive 
officer of the State may create a new entity to operate as the 
Standards and Performance Organization within the State or may 
designate an existing State entity as such Organization. The chief 
executive officer shall appoint representatives of appropriate State 
agencies to serve as the board of directors of the Standards and 
Performance Organization.
    ``(c) Functions.--The Standards and Performance Organization 
shall--
            ``(1) ensure that the qualified long-term care insurance 
        policies under this part cover at least the care and services 
        described in section 2135(a)(1);
            ``(2) ensure that qualified insurers comply with the 
        insurance laws and regulations established by the State;
            ``(3) ensure that information concerning the program 
        established under this part is made available to individuals 
        within the State in accordance with section 2142;
            ``(4) ensure the quality and appropriateness of the case 
        management services provided to policyholders under any 
        qualified long-term care insurance policy;
            ``(5) ensure that qualified providers meet standards 
        established by the State;
            ``(6) develop and submit to the State insurance commission 
        standards applicable to qualified insurers regarding rejection 
        rates for underwriting;
            ``(7) on an annual basis, verify the income of the 
        policyholders and determine eligibility for any premium 
        reductions as provided for under section 2136(a)(3);
            ``(8) provide written notice to insurers of any changes in 
        the income of policyholders which result in such policyholders 
        being eligible for a premium reduction;
            ``(9) carry out the educational program implemented under 
        section 2142 in the State;
            ``(10) establish appropriate appeals procedures for the 
        appeals described in subsection (d); and
            ``(12) carry out such other functions as the Secretary or 
        the chief executive officer of the State may require.
    ``(d) Appeals of Certain Denials.--A policyholder may appeal to the 
Standards and Performance Organization any decision of a qualified 
insurer to deny such policyholder coverage, to refuse to pay a claim or 
to refuse to provide the policyholder with access to benefits.

                         ``educational program

    ``Sec. 2142. (a) In General.--The Standards and Performance 
Organization of the State shall implement a comprehensive public 
information and education program that shall be targeted to individuals 
age 45 and above but which shall attempt to educate the general public 
as a whole concerning the need for long-term care insurance.
    ``(b) Requirements.--The public information and education program 
implemented in a State under subsection (a) shall include--
            ``(1) the development and distribution of brochures and 
        other written materials that describe--
                    ``(A) the growing elderly population of the United 
                States and the State, and its anticipated impact on 
                financial resources and available long-term care 
                services;
                    ``(B) the current methods of financing long-term 
                care (including Government programs);
                    ``(C) the need for long-term care insurance;
                    ``(D) the eligibility requirements for 
                participation in the program implemented under this 
                part;
                    ``(E) the basic minimum benefit package, 
                limitations, and qualifications for qualified long-term 
                care insurance policies; and
                    ``(F) the appropriateness of purchasing qualified 
                long-term care insurance policies;
            ``(2) the convening of educational forums dealing with the 
        program implemented under the State plan throughout the State;
            ``(3) mass media advertisements;
            ``(4) programs to assist employers in providing information 
        to their employees concerning the program established in the 
        State under this part; and
            ``(5) other public information and education strategies 
        that are determined appropriate by the Standards and 
        Performance Organization.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1994.

SEC. 102. CONTINUING ELIGIBILITY OF INDIVIDUALS ELIGIBLE FOR LONG-TERM 
              CARE BENEFITS UNDER TITLE XIX UNDER NEW TITLE XXI.

    The Secretary of Health and Human Services shall provide that 
individuals eligible for services provided under title XIX of the 
Social Security Act which effective upon the date of enactment of this 
Act are provided under title XXI of the Social Security Act shall 
continue to be eligible to receive such services in the same amount, 
duration, and scope as such individuals would have been eligible to 
receive but for the provisions of this Act.

SEC. 103. REPEAL OF LONG-TERM CARE PROVISIONS IN TITLE XIX OF THE 
              SOCIAL SECURITY ACT.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1901 et seq.) is amended--
            (1) in section 1902 by repealing subsection (a)(13)(F); and
            (2) by repealing section 1929.
    (b) Effective Date.--The amendments made by this section shall 
become effective on October 1, 1994.

SEC. 104. STUDY OF FORMULA FOR PAYMENT OF LONG-TERM CARE SERVICES.

    The Comptroller General shall study, and report to Congress on such 
study no later than 1 year after the date of enactment of this Act, on 
the appropriateness and adequacy of using the Federal medical 
assistance percentage utilized under title XIX of the Social Security 
Act for payment of services provided under title XXI of the Social 
Security Act. Such study shall consider the following factors in 
determining a payment formula:
            (1) The average income of the elderly in the State compared 
        to the average income of the elderly in the Nation.
            (2) The percent of elderly in the State under the income 
        official poverty line (as determined by the Office of 
        Management and Budget and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981) compared to the percent of elderly under such income line 
        in the Nation.
            (3) The percentage of elderly in the State with income 
        above the income official poverty line (as described in 
        paragraph (2)) but below 240 percent of such income line (and 
        various intervals in between) compared to national statistics.
            (4) The percent of elderly over 75 years of age in the 
        State compared to the percent of elderly over 75 in the Nation.
            (5) Other appropriate issues, including measures of State 
        fiscal capacity.

SEC. 105. LONG-TERM CARE DATA COLLECTION SYSTEM.

    (a) In General.--The Secretary of Health and Human Services, in 
collaboration with the National Association of Insurance Commissioners, 
shall establish a data collection system for public and private long-
term care services to be utilized--
            (1) to assess the costs of long-term care services and 
        predict the future costs of such services;
            (2) to determine the types of long-term care services 
        provided and predict the future need for such services;
            (3) to determine how long-term care relates to the medical 
        problems experienced by the elderly; and
            (4) in other matters determined appropriate by such 
        Secretary.
    (b) Report.--Not later than 2 years after the date of enactment of 
this Act and annually thereafter, the Secretary of Health and Human 
Services shall prepare and submit to the appropriate committees of 
Congress a report that shall include--
            (1) a description of the data collection system described 
        in subsection (a);
            (2) a description of the types of data collected using such 
        system and an analysis of such data;
            (3) a description of the sources of the data;
            (4) a description of the manner in which the data was 
        collected; and
            (5) any other information determined appropriate by such 
        Secretary.

SEC. 106. CREATION OF NEW ADMINISTRATIVE UNIT FOR LONG-TERM CARE 
              PROGRAM.

    The Secretary of Health and Human Services shall establish a new 
organizational unit to administer the new long-term care assistance 
program established by this Act.

SEC. 107. SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL FOR TECHNICAL 
              AND CONFORMING AMENDMENTS.

    The Secretary of Health and Human Services shall, within 90 days of 
the date of enactment of this Act, submit to the appropriate committees 
of the Congress, a legislative proposal providing for such technical 
and conforming amendments in the law as are required by the provisions 
of this Act.

                TITLE II--LONG-TERM CARE TAX PROVISIONS

SEC. 200. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

                       PART I--GENERAL PROVISIONS

SEC. 201. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by redesignating subparagraph (C) as subparagraph (D), and by 
inserting after subparagraph (B) the following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in subsection (f)), or''.
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to deduction for medical, dental, etc. expenses), as amended 
by section 13131(d)(3) of the Omnibus Budget Reconciliation Act of 
1993, is amended by adding at the end the following new subsection:
    ``(f) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, preventive, therapeutic, 
        rehabilitative, and maintenance (including personal care) 
        services--
                    ``(A) which are required by an individual during 
                any period during which such individual is a 
                functionally impaired individual,
                    ``(B) which have as their primary purpose the 
                provision of needed assistance with 1 or more 
                activities of daily living which a functionally 
                impaired individual is certified as being unable to 
                perform under paragraph (2)(A), and
                    ``(C) which are provided pursuant to a continuing 
                plan of care prescribed by a licensed health care 
                practitioner (other than a relative of such 
                individual).
            ``(2) Functionally impaired individual.--
                    ``(A) In general.--The term `functionally impaired 
                individual' means any individual who is certified by a 
                licensed health care practitioner (other than a 
                relative of such individual) as being unable to 
                perform, without substantial assistance from another 
                individual (including assistance involving verbal 
                reminding, physical cueing, or substantial 
                supervision), at least 3 activities of daily living 
                described in paragraph (3).
                    ``(B) Special rule for home health care services.--
                In the case of services which are provided during any 
                period during which an individual is residing within 
                the individual's home (whether or not the services are 
                provided within the home), subparagraph (A) shall be 
                applied by substituting `2' for `3'. For purposes of 
                this subparagraph, a nursing home or similar facility 
                shall not be treated as a home.
            ``(3) Activities of daily living.--
                    ``(A) In general.--Each of the following is an 
                activity of daily living:
                            ``(i) Eating.
                            ``(ii) Transferring.
                            ``(iii) Toileting.
                            ``(iv) Dressing.
                            ``(v) Bathing.
                    ``(B) Requirement on the secretary.--For purposes 
                of this section, the Secretary shall utilize the 
                definitions and standards for measuring the ability to 
                perform the activities of daily living described in 
                subparagraph (A) developed by the Secretary of Health 
                and Human Services under section 2115(d)(4)(B) of the 
                Social Security Act.
            ``(4) Licensed health care practitioner.--The term 
        `licensed health care practitioner' means--
                    ``(A) a physician or registered professional nurse,
                    ``(B) a qualified community care case manager (as 
                defined in section 2115(k) of the Social Security Act), 
                or
                    ``(C) any other individual who meets such 
                requirements as may be prescribed by the Secretary 
                after consultation with the Secretary of Health and 
                Human Services.
            ``(5) Relative.--The term `relative' means an individual 
        bearing a relationship to another individual which is described 
        in paragraphs (1) through (8) of section 152(a).''
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
        by subsection (a)) is amended to read as follows:
                    ``(D) for insurance (including amounts paid as 
                premiums under part B of title XVIII of the Social 
                Security Act, relating to supplementary medical 
                insurance for the aged)--
                            ``(i) covering medical care referred to in 
                        subparagraphs (A) and (B), or
                            ``(ii) covering medical care referred to in 
                        subparagraph (C), but only if such insurance is 
                        provided under a qualified long-term care 
                        insurance contract (as defined in section 
                        7702B(b)).''
            (2) Paragraph (6) of section 213(d) is amended--
                    (A) by striking ``subparagraphs (A) and (B)'' in 
                the matter preceding subparagraph (A), and inserting 
                ``subparagraphs (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.

SEC. 202. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    ``(a) General Rule.--For purposes of this title--
            ``(1) a qualified long-term care insurance contract shall 
        be treated as an accident or health insurance contract,
            ``(2) any plan of an employer providing coverage of 
        qualified long-term care services shall be treated as an 
        accident or health plan with respect to such services,
            ``(3) amounts received under such a contract or plan with 
        respect to qualified long-term care services shall be treated 
        as amounts received for personal injuries or sickness, and
            ``(4) payments described in subsection (b)(5) shall be 
        treated as payments made with respect to qualified long-term 
        care services.
    ``(b) Qualified Long-Term Care Insurance Contract.--
            ``(1) In general.--For purposes of this title, the term 
        `qualified long-term care insurance contract' means any 
        insurance contract if--
                    ``(A) the only insurance protection provided under 
                such contract is coverage of qualified long-term care 
                services,
                    ``(B) such contract meets the requirements of 
                paragraphs (2), (3), and (4), and
                    ``(C) such contract is issued by a qualified 
                issuer.
            ``(2) Premium requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a contract if such 
                contract provides that--
                            ``(i) premium payments may not be made 
                        earlier than the date such payments would have 
                        been made if the contract provided for level 
                        annual payments over the life of the contract 
                        (or, if shorter, 20 years), and
                            ``(ii) all refunds of premiums, and all 
                        policyholder dividends or similar amounts, 
                        under such contract are to be applied as a 
                        reduction in future premiums or to increase 
                        future benefits.
                A contract shall not be treated as failing to meet the 
                requirements of clause (i) solely by reason of a 
                provision providing for a waiver of premiums if the 
                policyholder becomes a functionally impaired 
                individual.
                    ``(B) Refunds upon death or complete surrender or 
                cancellation.--Subparagraph (A)(ii) shall not apply to 
                any refund on the death of the policyholder, or on any 
                complete surrender or cancellation of the contract, if, 
                under the contract, the amount refunded may not exceed 
                the amount of the premiums paid under the contract. For 
                purposes of this title, any refund described in the 
                preceding sentence shall be includible in gross income 
                to the extent that any deduction or exclusion was 
                allowed with respect to the refund.
            ``(3) Borrowing, pledging, or assigning prohibited.--The 
        requirements of this paragraph are met with respect to a 
        contract if such contract provides that no money may be 
        borrowed under such contract and that such contract (or any 
        portion thereof) may not be assigned or pledged as collateral 
        for a loan.
            ``(4) Prohibition of duplicate payment.--The requirements 
        of this paragraph are met with respect to a contract if such 
        contract does not cover expenses incurred to the extent that 
        such expenses are reimbursable under title XVIII of the Social 
        Security Act.
            ``(5) Per diem and other periodic payments permitted.--
                    ``(A) In general.--For purposes of subsection 
                (a)(4), and except as provided in subparagraph (B), 
                payments are described in this paragraph for any 
                calendar year if, under the contract, such payments are 
                made to (or on behalf of) a functionally impaired 
                individual on a per diem or other periodic basis 
                without regard to the expenses incurred or services 
                rendered during the period to which the payments 
                relate.
                    ``(B) Exception where aggregate payments exceed 
                limit.--If the aggregate payments under the contract 
                for any period (whether on a periodic basis or 
                otherwise) exceed the dollar amount in effect for such 
                period--
                            ``(i) subparagraph (A) shall not apply for 
                        such period, and
                            ``(ii) the requirements of paragraph (1)(A) 
                        shall be met only if such payments are made 
                        with respect to qualified long-term care 
                        services provided during such period.
                    ``(C) Dollar amount.--The dollar amount in effect 
                under this paragraph shall be $150 per day (or the 
                equivalent amount in the case of payments on another 
                periodic basis).
                    ``(D) Adjustments for increased costs.--
                            ``(i) In general.--In the case of any 
                        calendar year after 1993, the dollar amount in 
                        effect under subparagraph (C) for any period 
                        occurring during such calendar year shall be 
                        equal to the sum of--
                                    ``(I) the amount in effect under 
                                subparagraph (C) for the preceding 
                                calendar year (after application of 
                                this subparagraph), plus
                                    ``(II) the applicable percentage of 
                                the amount under subclause (I).
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the term `applicable percentage' 
                        means, with respect to any calendar year, the 
                        greater of--
                                    ``(I) 5 percent, or
                                    ``(II) the cost-of-living 
                                adjustment for such calendar year.
                            ``(iii) Cost-of-living adjustment.--For 
                        purposes of clause (ii), the cost-of-living 
                        adjustment for any calendar year is the 
                        percentage (if any) by which the cost index 
                        under clause (iv) for the preceding calendar 
                        year exceeds such index for the second 
                        preceding calendar year. In the case of any 
                        calendar year beginning before 1995, this 
                        clause shall be applied by substituting the 
                        Consumer Price Index (as defined in section 
                        1(f)(5)) for the cost index under clause (iv).
                            ``(iv)  Cost index.--The Secretary, in 
                        consultation with the Secretary of Health and 
                        Human Services, shall before January 1, 1995, 
                        establish a cost index to measure increases in 
                        costs of nursing home and similar facilities. 
                        The Secretary may from time to time revise such 
                        index to the extent necessary to accurately 
                        measure increases or decreases in such costs.
                    ``(E) Aggregation rule.--For purposes of this 
                paragraph, all contracts issued with respect to the 
                same policyholder by the same company shall be treated 
                as 1 contract.
    ``(c) Qualified Issuer.--For purposes of this section, the term 
`qualified issuer' means any person which at the time of the issuance 
of a long-term care insurance contract--
            ``(1) uses a one year preliminary term method for setting 
        up reserves, and
            ``(2) maintains a capital ratio equal to not less than 25 
        percent of long-term care insurance premium receivables.
    ``(d) Special Rules for Tax Treatment of Policyholders.--For 
purposes of this title, solely with respect to the policyholder under 
any qualified long-term care insurance contract--
            ``(1) Aggregate payments in excess of limits.--If the 
        aggregate payments under all qualified long-term care insurance 
        contracts with respect to a policyholder for any period 
        (whether on a periodic basis or otherwise) exceed the dollar 
        amount in effect for such period under subsection (b)(5)--
                    ``(A) subsection (b)(5) shall not apply for such 
                period, and
                    ``(B) such payments shall be treated as made for 
                qualified long-term care services only if made with 
                respect to such services provided during such period.
            ``(2) Assignment or pledge.--Such contract shall not be 
        treated as a qualified long-term care insurance contract during 
        any period on or after the date on which the contract (or any 
        portion thereof) is assigned or pledged as collateral for a 
        loan.
    ``(e) Treatment of Coverage as Part of a Life Insurance Contract.--
            ``(1) In general.--Except as provided in regulations, in 
        the case of coverage of qualified long-term care services 
        provided as part of a life insurance contract, the requirements 
        of this section shall apply as if the portion of the contract 
        providing such coverage was a separate contract.
            ``(2) Portion defined.--For purposes of paragraph (1), the 
        term `portion' means only the terms and benefits under a life 
        insurance contract (whether provided by a rider to, addendum 
        on, or other provision of, such contract) that are in addition 
        to the terms and benefits under the contract without regard to 
        the coverage of qualified long-term care services.
    ``(f) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' has the meaning given such term by section 213(f).
            ``(2) Recertification.--If an individual has been certified 
        as a functionally impaired individual under section 
        213(f)(2)(A), services shall not be treated as qualified long-
        term care services with respect to the individual unless such 
        individual is recertified no less frequently than annually as a 
        functionally impaired individual in the same manner as under 
        such section, except that such recertification may be made by 
        any licensed health care practitioner (as defined in section 
        213(f)(4)), other than a relative (as defined by section 
        213(f)(5)) of such individual.
    ``(g) Continuation Coverage Excise Tax Not To Apply.--Section 4980B 
shall not apply to--
            ``(1) qualified long-term care insurance contracts, or
            ``(2) plans described in subsection (a)(2).
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing qualified long-term care services under a life insurance 
contract.''
    (b) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

                              ``Sec. 7702B. Treatment of long-term care 
                                        insurance or plans.''

SEC. 203. EFFECTIVE DATES.

    (a) Section 201.--The amendments made by section 201 shall apply to 
taxable years beginning after the date of the enactment of this Act.
    (b) Section 202.--The amendments made by section 202 shall apply to 
contracts issued after the date of the enactment of this Act.
    (c) Transition Rule.--If, after the date of the enactment of this 
Act and before January 1, 1996, a contract providing coverage for 
services which are similar to qualified long-term care services (as 
defined in section 213(f) of the Internal Revenue Code of 1986) and 
issued on or before January 1, 1994, is exchanged for a qualified long-
term care insurance contract (as defined in section 7702B(b) of such 
Code), such exchange shall be treated as an exchange to which section 
1035 of such Code applies.

                PART II--CONSUMER PROTECTION PROVISIONS

SEC. 211. POLICY REQUIREMENTS.

    (a) In General.--Section 7702B (as added by section 202) is amended 
by redesignating subsection (h) as subsection (i) and by inserting 
after subsection (g) the following new subsection:
    ``(h) Consumer Protection Provisions.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to any contract if any long-term care 
        insurance policy issued under the contract meets--
                    ``(A) the requirements of the model regulation and 
                model Act described in paragraph (2),
                    ``(B) the disclosure requirement of paragraph (3),
                    ``(C) the requirements relating to 
                nonforfeitability under paragraph (4), and
                    ``(D) the requirements relating to rate 
                stabilization under paragraph (5).
            ``(2) Requirements of model regulation and act.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any policy if such 
                policy meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 7A (relating to 
                                guaranteed renewal or 
                                noncancellability), and the 
                                requirements of section 6B of the model 
                                Act relating to such section 7A.
                                    ``(II) Section 7B (relating to 
                                prohibitions on limitations and 
                                exclusions).
                                    ``(III) Section 7C (relating to 
                                extension of benefits).
                                    ``(IV) Section 7D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 7E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 8 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 9 (relating to 
                                disclosure), other than section 9F 
                                thereof.
                                    ``(VIII) Section 10 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 11 (relating to 
                                minimum standards).
                                    ``(X) Section 12 (relating to 
                                requirement to offer inflation 
                                protection), except that any 
                                requirement for a signature on a 
                                rejection of inflation protection shall 
                                permit the signature to be on an 
                                application or on a separate form.
                                    ``(XI) Section 23 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Model provisions.--The terms `model 
                        regulation' and `model Act' mean the long-term 
                        care insurance model regulation, and the long-
                        term care insurance model Act, respectively, 
                        promulgated by the National Association of 
                        Insurance Commissioners (as adopted in January 
                        of 1993).
                            ``(ii) Coordination.--Any provision of the 
                        model regulation or model Act listed under 
                        clause (i) or (ii) shall be treated as 
                        including any other provision of such 
                        regulation or Act necessary to implement the 
                        provision.
            ``(3) Tax disclosure requirement.--The requirement of this 
        paragraph is met with respect to any policy if such policy 
        meets the requirements of section 4980C(e)(1).
            ``(4) Nonforfeiture requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any level premium 
                long-term care insurance policy, if the issuer of such 
                policy offers to the policyholder, including any group 
                policyholder, a nonforfeiture provision.
                    ``(B) Requirements of provision.--The nonforfeiture 
                provision required under subparagraph (A) shall meet 
                the following requirements:
                            ``(i) The nonforfeiture provision shall be 
                        appropriately captioned.
                            ``(ii) The nonforfeiture provision shall 
                        provide for a benefit available in the event of 
                        a default in the payment of any premiums and 
                        the amount of the benefit may be adjusted 
                        subsequent to being initially granted only as 
                        necessary to reflect changes in claims, 
                        persistency, and interest as reflected in 
                        changes in rates for premium paying policies 
                        approved by the Secretary for the same policy 
                        form.
                            ``(iii) The nonforfeiture provision shall 
                        provide at least one of the following:
                                    ``(I) Reduced paid-up insurance.
                                    ``(II) Extended term insurance.
                                    ``(III) Shortened benefit period.
                                    ``(IV) Other similar offerings 
                                approved by the Secretary.
            ``(5) Rate stabilization.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any long-term care 
                insurance policy, including any group master policy, 
                if--
                            ``(i) such policy contains the minimum rate 
                        guarantees specified in subparagraph (B), and
                            ``(ii) the issuer of such policy meets the 
                        requirements specified in subparagraph (C).
                    ``(B) Minimum rate guarantees.--The minimum rate 
                guarantees specified in this subparagraph are as 
                follows:
                            ``(i) Rates under the policy shall be 
                        guaranteed for a period of at least 3 years 
                        from the date of issue of the policy.
                            ``(ii) After the expiration of the 3-year 
                        period required under clause (i), any rate 
                        increase shall be guaranteed for a period of at 
                        least 2 years from the effective date of such 
                        rate increase.
                            ``(iii) In the case of any individual age 
                        75 or older who has maintained coverage under a 
                        long-term care insurance policy for 10 years, 
                        rate increases under such policy shall not 
                        exceed 10 percent in any 12-month period.
                    ``(C) Increases in premiums.--The requirements 
                specified in this subparagraph are as follows:
                            ``(i) In general.--If an issuer of any 
                        long-term care insurance policy, including any 
                        group master policy, plans to increase the 
                        premium rates for a policy, such issuer shall, 
                        at least 90 days before the effective date of 
                        the rate increase, offer to each individual 
                        policyholder under such policy the option to 
                        remain insured under the policy at a reduced 
                        level of benefits which maintains the premium 
                        rate at the rate in effect on the day before 
                        the effective date of the rate increase.
                            ``(ii) Increases of more than 50 percent.--
                                    ``(I) In general.--If an issuer of 
                                any long-term care insurance policy, 
                                including any group master policy, 
                                increases premium rates for a policy by 
                                more than 50 percent in any 3-year 
                                period--
                                            ``(aa) in the case of a 
                                        group master long-term care 
                                        insurance policy, the issuer 
                                        shall discontinue issuing all 
                                        group master long-term care 
                                        insurance policies in any State 
                                        in which the issuer issues such 
                                        policy for a period of 2 years 
                                        from the effective date of such 
                                        premium increase; and
                                            ``(bb) in the case of an 
                                        individual long-term care 
                                        insurance policy, the issuer 
                                        shall discontinue issuing all 
                                        individual long-term care 
                                        policies in any State in which 
                                        the issuer issues such policy 
                                        for a period of 2 years from 
                                        the effective date of such 
                                        premium increase.
                                    ``(II) Applicability.--Subclause 
                                (I) shall apply to any issuer of long-
                                term care insurance policies or any 
                                other person that purchases or 
                                otherwise acquires any long-term care 
                                insurance policies from another issuer 
                                or person.
                    ``(C) Modifications or waivers of requirements.--
                The Secretary may modify or waive any of the 
                requirements under this paragraph if--
                            ``(i) such requirements will adversely 
                        affect an issuer's solvency;
                            ``(ii) such modification or waiver is 
                        required for the issuer to meet other State or 
                        Federal requirements;
                            ``(iii) medical developments, new disabling 
                        diseases, changes in long-term care delivery, 
                        or a new method of financing long-term care 
                        will result in changes to mortality and 
                        morbidity patterns or assumptions;
                            ``(iv) judicial interpretation of a 
                        policy's benefit features results in unintended 
                        claim liabilities; or
                            ``(v) in the case of a purchase or other 
                        acquisition of long-term care insurance 
                        policies of an issuer or other person, the 
                        continued sale of other long-term care 
                        insurance policies by the purchasing issuer or 
                        person is in the best interests of individual 
                        consumers.
            ``(6) Long-term care insurance policy defined.--For 
        purposes of this subsection, the term `long-term care insurance 
        policy' has the meaning given such term by section 4980C(f).''.
    (b) Conforming Amendment.--Section 7702B(b)(1)(B) (as added by 
section 202) is amended by inserting ``and of subsection (h)'' after 
``and (4)''.

SEC. 212. ADDITIONAL REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
              INSURANCE POLICIES.

    (a) In General.--Chapter 43 is amended by adding at the end the 
following new section:

``SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG-TERM CARE INSURANCE 
              POLICIES.

    ``(a) General Rule.--There is hereby imposed on any person failing 
to meet the requirements of subsection (c), (d), or (e) a tax in the 
amount determined under subsection (b).
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be $100 per policy for each day any 
        requirements of subsection (c), (d), or (e) are not met with 
        respect to each long-term care insurance policy.
            ``(2) Waiver.--In the case of a failure which is due to 
        reasonable cause and not to willful neglect, the Secretary may 
        waive part or all of the tax imposed by subsection (a) to the 
        extent that payment of the tax would be excessive relative to 
        the failure involved.
    ``(c) Prohibition of Sale or Issuance To Beneficiaries Under Part A 
of Title XXI of the Social Security Act.--The requirement of this 
subsection is met if a person does not knowingly sell or issue a long-
term care insurance policy to an individual who is eligible for medical 
assistance under part A of title XXI of the Social Security Act.
    ``(d) Additional Responsibilities.--The requirements of this 
subsection are as follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation must be met:
                            ``(i) Section 13 (relating to application 
                        forms and replacement coverage).
                            ``(ii) Section 14 (relating to reporting 
                        requirements), except that the issuer shall 
                        also report at least annually the number of 
                        claims denied during the reporting period for 
                        each class of business (expended as a 
                        percentage of claims denied), other than claims 
                        denied for failure to meet the waiting period 
                        or because of any applicable pre-existing 
                        condition.
                            ``(iii) Section 20 (relating to filing 
                        requirements for marketing).
                            ``(iv) Section 21 (relating to standards 
                        for marketing), including inaccurate completion 
                        of medical histories, other than section 21C(1) 
                        and 21C(6) thereof, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a long-term 
                                care insurance policy, misrepresent a 
                                material fact; and
                                    ``(II) no such requirements shall 
                                include a requirement to inquire or 
                                identify whether a prospective 
                                applicant or enrollee for long-term 
                                care insurance has accident and 
                                sickness insurance.
                            ``(v) Section 22 (relating to 
                        appropriateness of recommended purchase).
                            ``(vi) Section 24 (relating to standard 
                        format outline of coverage).
                            ``(vii) Section 25 (relating to requirement 
                        to deliver shopper's guide).
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return), except that such section shall also 
                        apply to denials of applications and any refund 
                        shall be made within 30 days of the return or 
                        denial.
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6I (relating to policy 
                        summary).
                            ``(v) Section 6J (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(g)(2)(B).
            ``(2) Delivery of policy.--If an application for a long-
        term care insurance policy (or for a certificate under a group 
        long-term care insurance policy) is approved, the issuer shall 
        deliver to the applicant (or policyholder or certificate-
        holder) the policy (or certificate) of insurance not later than 
        30 days after the date of the approval.
            ``(3) Information on denials of claims.--If a claim under a 
        long-term care insurance policy is denied, the issuer shall, 
        within 60 days of the date of a written request by the 
        policyholder or certificate-holder (or representative)--
                    ``(A) provide a written explanation of the reasons 
                for the denial, and
                    ``(B) make available all information directly 
                relating to such denial.
    ``(e) Disclosure.--The requirements of this subsection are met if 
either of the following statements, whichever is applicable, is 
prominently displayed on the front page of any long-term care insurance 
policy and in the outline of coverage required under subsection 
(d)(1)(B)(ii):
            ``(1) A statement that: `This policy is intended to be a 
        qualified long-term care insurance contract under section 
        7702B(b) of the Internal Revenue Code of 1986.'.
            ``(2) A statement that: `This policy is not intended to be 
        a qualified long-term care insurance contract under section 
        7702B(b) of the Internal Revenue Code of 1986.'.
    ``(f) Long-Term Care Insurance Policy Defined.--For purposes of 
this section, the term `long-term care insurance policy' means any 
product which is advertised, marketed, or offered as long-term care 
insurance.''
    (b) Conforming Amendment.--The table of sections for chapter 43 is 
amended by adding at the end the following new item:

                              ``Sec. 4980C. Failure to meet 
                                        requirements for long-term care 
                                        insurance policies.''

SEC. 213. COORDINATION WITH STATE REQUIREMENTS.

    Nothing in this title shall be construed as preventing a State from 
applying standards that provide greater protection of policyholders of 
long-term care insurance policies (as defined in section 4980C(f) of 
the Internal Revenue Code of 1986).

SEC. 214. UNIFORM LANGUAGE AND DEFINITIONS.

    (a) In General.--The National Association of Insurance 
Commissioners shall not later than January 1, 1995, promulgate 
standards for the use of uniform language and definitions in long-term 
care insurance policies (as defined in section 4980C(f) of the Internal 
Revenue Code of 1986).
    (b) Variations.--Standards under subsection (a) may permit the use 
of nonuniform language to the extent required to take into account 
differences among States in the licensing of nursing facilities and 
other providers of long-term care.

SEC. 215. EFFECTIVE DATES.

    (a) Section 211.--The amendments made by section 211 shall apply to 
contracts issued after the date of the enactment of this Act, except 
that the provisions of section 203(c) of this Act shall apply to such 
contracts.
    (b) Section 212.--The amendments made by section 212 shall apply to 
actions taken after December 31, 1993.

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