II

103D CONGRESS

2D SESSION S. 2122

To improve the public and private financing of long-term care and to strengthen the public safety net for elderly and non-elderly disabled individuals

who lack adequate protection against long-term care expenses, and for

other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 17 (legislative day, MAY 16), 1994

Mr. COHEN introduced the following bill; which was read the first time

A BILL

To improve the public and private financing of long-term

care and to strengthen the public safety net for elderly

and non-elderly disabled individuals who lack adequate

protection against long-term care expenses, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Public/Private Long-Term Care Partnership Act of

6 1994’’.

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

8 as follows:
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Sec. 1. Short title; table of contents.

TITLE I—TAX TREATMENT OF LONG-TERM CARE INSURANCE

Sec. 101. Qualified long-term care services treated as medical care.

Sec. 102. Treatment of long-term care insurance.

Sec. 103. Treatment of benefits under qualified long-term care policies.

Sec. 104. Tax reserves for qualified long-term care insurance policies.

Sec. 105. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 106. Tax treatment of companies issuing qualified accelerated death benefit riders.

TITLE II—STANDARDS FOR LONG-TERM CARE INSURANCE

Sec. 201. Policy requirements.

Sec. 202. Additional requirements for issuers of long-term care insurance policies.

Sec. 203. Coordination with State requirements.

Sec. 204. Uniform language and definitions.

Sec. 205. Effective dates.

TITLE III—INCENTIVES TO ENCOURAGE THE PURCHASE OF

PRIVATE INSURANCE

Sec. 301. Public information and education program.

Sec. 302. Assets or resources disregarded under the medicaid program.

Sec. 303. Distributions from individual retirement accounts for the purchase of

long-term care insurance coverage.

TITLE IV—IMPROVED PUBLIC SAFETY NET FOR LONG-TERM

CARE

Sec. 401. References in title.

Sec. 402. Spenddown eligibility for nursing facility residents.

Sec. 403. Increase in personal needs allowance for institutionalized individuals.

Sec. 404. Increased resource disregard for nursing facility residents.

Sec. 405. Informing nursing home residents about availability of assistance for

home and community-based services.

Sec. 406. Establishment of State programs furnishing home and communitybased services to certain individuals with disabilities.

Sec. 407. Reports by the Secretary on certain issues relating to long-term care.

Sec. 408. Report by the Secretary on long-term care services for chronically ill

individuals.

Sec. 409. Chronic Care Commission.

Sec. 410. Demonstration projects on acute and long-term care integration.
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1 TITLE I—TAX TREATMENT OF

2 LONG-TERM CARE INSURANCE

3 SEC. 101. QUALIFIED LONG-TERM CARE SERVICES TREAT4 ED AS MEDICAL CARE.

5 (a) GENERAL RULE.—Paragraph (1) of section

6 213(d) (defining medical care) is amended by striking

7 ‘‘or’’ at the end of subparagraph (B), by striking subpara8 graph (C), and by inserting after subparagraph (B) the

9 following new subparagraphs:

10 ‘‘(C) for qualified long-term care services

11 (as defined in subsection (f)),

12 ‘‘(D) for insurance covering medical care

13 referred to in—

14 ‘‘(i) subparagraphs (A) and (B), or

15 ‘‘(ii) subparagraph (C), but only if

16 such insurance is provided under a quali17 fied long-term care insurance policy (as de18 fined in section 7702B(b)) and the deduc19 tion under this section for amounts paid

20 for such insurance is not disallowed under

21 section 7702B(d)(4), or

22 ‘‘(E) for premiums under part B of title

23 XVIII of the Social Security Act, relating to

24 supplementary medical insurance for the aged.’’
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1 (b) QUALIFIED LONG-TERM CARE SERVICES DE2 FINED.—Section 213 (relating to the deduction for medi3 cal, dental, etc., expenses) is amended by adding at the

4 end the following new subsection:

5 ‘‘(f) QUALIFIED LONG-TERM CARE SERVICES.—For

6 purposes of this section—

7 ‘‘(1) IN GENERAL.—The term ‘qualified long8 term care services’ means necessary diagnostic, cur9 ing, mitigating, treating, preventive, therapeutic, and

10 rehabilitative services, and maintenance and per11 sonal care services (whether performed in a residen12 tial or nonresidential setting), which—

13 ‘‘(A) are required by an individual during

14 any period the individual is an incapacitated in15 dividual (as defined in paragraph (2)),

16 ‘‘(B) have as their primary purpose—

17 ‘‘(i) the provision of needed assistance

18 with 1 or more activities of daily living (as

19 defined in paragraph (3)), or

20 ‘‘(ii) protection from threats to health

21 and safety due to severe cognitive impair22 ment, and

23 ‘‘(C) are provided pursuant to a continuing

24 plan of care prescribed by a licensed profes25 sional (as defined in paragraph (4)).
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1 ‘‘(2) INCAPACITATED INDIVIDUAL.—The term

2 ‘incapacitated individual’ means any individual who

3 has been certified by a licensed professional as—

4 ‘‘(A) being unable to perform, without sub5 stantial assistance from another individual, at

6 least 2 activities of daily living (as defined in

7 paragraph (3)),

8 ‘‘(B) having moderate cognitive impair9 ment as defined by the Secretary in consulta10 tion with the Secretary of Health and Human

11 Services, or

12 ‘‘(C) having a level of disability similar (as

13 determined by the Secretary in consultation

14 with the Secretary of Health and Human Serv15 ices) to the level of disability described in sub16 paragraph (A).

17 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of

18 the following is an activity of daily living:

19 ‘‘(A) Eating.

20 ‘‘(B) Toileting.

21 ‘‘(C) Transferring.

22 ‘‘(D) Bathing.

23 ‘‘(E) Dressing.

24 ‘‘(F) Continence.

25 ‘‘(4) LICENSED PROFESSIONAL.—
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1 ‘‘(A) IN GENERAL.—The term ‘licensed

2 professional’ means—

3 ‘‘(i) a physician or registered profes4 sional nurse,

5 ‘‘(ii) a qualified community care case

6 manager (as defined in subparagraph (B)),

7 or

8 ‘‘(iii) any other individual who meets

9 such requirements as may be prescribed by

10 the Secretary after consultation with the

11 Secretary of Health and Human Services.

12 ‘‘(B) QUALIFIED COMMUNITY CARE CASE

13 MANAGER.—The term ‘qualified community

14 care case manager’ means an individual or en15 tity which—

16 ‘‘(i) has experience or has been

17 trained in providing case management

18 services and in preparing individual care

19 plans;

20 ‘‘(ii) has experience in assessing indi21 viduals to determine their functional and

22 cognitive impairment; and

23 ‘‘(iii) meets such requirements as may

24 be prescribed by the Secretary after con-
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1 sultation with the Secretary of Health and

2 Human Services.

3 ‘‘(5) CERTAIN SERVICES NOT INCLUDED.—The

4 term ‘qualified long-term care services’ shall not in5 clude any services provided to an individual—

6 ‘‘(A) by a relative (directly or through a

7 partnership, corporation, or other entity) unless

8 the relative is a licensed professional with re9 spect to such services, or

10 ‘‘(B) by a corporation or partnership which

11 is related (within the meaning of section 267(b)

12 or 707(b)) to the individual.

13 For purposes of this paragraph, the term ‘relative’

14 means an individual bearing a relationship to the in15 dividual which is described in paragraphs (1)

16 through (8) of section 152(a).’’.

17 (c) TECHNICAL AMENDMENTS.—Paragraph (6) of

18 section 213(d) is amended—

19 (1) by striking ‘‘subparagraphs (A) and (B)’’

20 and inserting ‘‘subparagraphs (A), (B), and (C)’’,

21 and

22 (2) by striking ‘‘paragraph (1)(C) applies’’ in

23 subparagraph (A) and inserting ‘‘subparagraphs (C)

24 and (D) of paragraph (1) apply’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 102. TREATMENT OF LONG-TERM CARE INSURANCE.

5 (a) GENERAL RULE.—Chapter 79 (relating to defini6 tions) is amended by inserting after section 7702A the fol7 lowing new section:

8 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR9 ANCE.

10 ‘‘(a) IN GENERAL.—For purposes of this title—

11 ‘‘(1) a qualified long-term care insurance policy

12 (as defined in subsection (b)) shall be treated as an

13 accident and health insurance contract,

14 ‘‘(2) any plan of an employer providing cov15 erage under a qualified long-term care insurance pol16 icy shall be treated as an accident and health plan

17 with respect to such coverage,

18 ‘‘(3) amounts (other than policyholder dividends

19 (as defined in section 808) or premium refunds) re20 ceived under a qualified long-term care insurance

21 policy (including nonreimbursement payments de22 scribed in subsection (b)(6)) shall be treated—

23 ‘‘(A) as amounts received for personal in24 juries and sickness, and
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1 ‘‘(B) as amounts received for the perma2 nent loss of a function of the body and as

3 amounts computed with reference to the nature

4 of injury under section 105(c) to the extent

5 that such amounts do not exceed the dollar

6 amount in effect under subsection (g) for the

7 taxable year,

8 ‘‘(4) amounts paid for a qualified long-term

9 care insurance policy described in subsection (b)(6)

10 shall be treated as payments made for insurance for

11 purposes of section 213(d)(1)(D), and

12 ‘‘(5) a qualified long-term care insurance policy

13 shall be treated as a guaranteed renewable contract

14 subject to the rules of section 816(e).

15 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE POL16 ICY.—For purposes of this title—

17 ‘‘(1) IN GENERAL.—The term ‘qualified long18 term care insurance policy’ means any long-term

19 care insurance policy that—

20 ‘‘(A) limits benefits under such policy to

21 incapacitated individuals (as defined in section

22 213(f)(2)), and

23 ‘‘(B) satisfies the requirements of para24 graphs (2), (3), (4), and (5).
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1 ‘‘(2) PREMIUM REQUIREMENTS.—The require2 ments of this paragraph are met with respect to a

3 policy if such policy provides that premium pay4 ments may not be made earlier than the date such

5 payments would have been made if the policy pro6 vided for level annual payments over the life expect7 ancy of the insured or 20 years, whichever is short8 er. A policy shall not be treated as failing to meet

9 the requirements of the preceding sentence solely by

10 reason of a provision in the policy providing for a

11 waiver of premiums if the insured becomes an inca12 pacitated individual (as defined in section

13 219(f)(2)).

14 ‘‘(3) PROHIBITION OF CASH VALUE.—The re15 quirements of this paragraph are met if the policy

16 does not provide for a cash value or other money

17 that can be paid, assigned, pledged as collateral for

18 a loan, or borrowed, other than as provided in para19 graph (4).

20 ‘‘(4) REFUNDS OF PREMIUMS AND DIVI21 DENDS.—The requirements of this paragraph are

22 met with respect to a policy if such policy provides

23 that—

24 ‘‘(A) policyholder dividends are required to

25 be applied as a reduction in future premiums or
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1 to increase benefits described in subsection

2 (a)(2),

3 ‘‘(B) refunds of premiums upon a partial

4 surrender or a partial cancellation are required

5 to be applied as a reduction in future pre6 miums, and

7 ‘‘(C) any refund on the death of the in8 sured, or on a complete surrender or cancella9 tion of the policy, cannot exceed the aggregate

10 premiums paid under the policy.

11 Any refund on a complete surrender or cancellation

12 of the policy shall be includable in gross income to

13 the extent that any deduction or exclusion was allow14 able with respect to the premiums.

15 ‘‘(5) COORDINATION WITH OTHER ENTITLE16 MENTS.—The requirements of this paragraph are

17 met with respect to a policy if such policy does not

18 cover expenses incurred to the extent that such ex19 penses are also covered under title XVIII of the So20 cial Security Act.

21 ‘‘(6) NONREIMBURSEMENT PAYMENTS PER22 MITTED.—For purposes of subsection (a)(4), a pol23 icy is described in this paragraph if, under the pol24 icy, payments are made to (or on behalf of) an in25 sured individual on a per diem or other periodic
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1 basis without regard to the expenses incurred or

2 services rendered during the period to which the

3 payments relate.

4 ‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE

5 POLICIES.—For purposes of this title, any amount re6 ceived or coverage provided under a long-term care insur7 ance policy that is not a qualified long-term care insurance

8 policy shall not be treated as an amount received for per9 sonal injuries or sickness or provided under an accident

10 and health plan and shall not be treated as excludable

11 from gross income under any provision of this title.

12 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

13 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

14 provided in regulations, in the case of any long-term care

15 insurance coverage (whether or not qualified) provided by

16 rider on a life insurance contract, the following rules shall

17 apply:

18 ‘‘(1) IN GENERAL.—This section shall apply as

19 if the portion of the contract providing such cov20 erage is a separate contract or policy.

21 ‘‘(2) PREMIUMS AND CHARGES FOR LONG-TERM

22 CARE COVERAGE.—Premium payments for long-term

23 care insurance policy coverage and charges against

24 the life insurance contract’s cash surrender value

25 (within the meaning of section 7702(f)(2)(A)) for
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1 such coverage, shall be treated as premiums for pur2 poses of subsection (b)(2).

3 ‘‘(3) APPLICATION OF 7702.—Section

4 7702(c)(2) (relating to the guideline premium limi5 tation) shall be applied by increasing, as of any date,

6 the guideline premium limitation with respect to a

7 life insurance contract by an amount equal to—

8 ‘‘(A) the sum of any charges (but not pre9 mium payments) described in paragraph (2)

10 made to that date under the contract, reduced

11 by

12 ‘‘(B) any such charges the imposition of

13 which reduces the premiums paid for the con14 tract (within the meaning of section

15 7702(f)(1)).

16 ‘‘(4) APPLICATION OF SECTION 213.—No deduc17 tion shall be allowed under section 213(a) for

18 charges against the life insurance contract’s cash

19 surrender value described in paragraph (2), unless

20 such charges are includable in income as a result of

21 the application of section 72(e)(10) and the coverage

22 provided by the rider is a qualified long-term care

23 insurance policy under subsection (b).

24 For purposes of this subsection, the term ‘portion’ means

25 only the terms and benefits under a life insurance contract
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1 that are in addition to the terms and benefits under the

2 contract without regard to the coverage under a long-term

3 care insurance policy.

4 ‘‘(e) PROHIBITION OF DISCRIMINATION.—

5 ‘‘(1) IN GENERAL.—Notwithstanding subsection

6 (a)(3), any plan of an employer providing coverage

7 under a qualified long-term care insurance policy

8 shall qualify as an accident and health plan with re9 spect to such coverage only if—

10 ‘‘(A) except as provided in paragraph (2),

11 the plan allows all employees to participate, and

12 ‘‘(B) the benefits provided under the plan

13 are identical for all employees that choose to

14 participate.

15 ‘‘(2) EXCLUSION OF CERTAIN EMPLOYEES.—

16 For purposes of paragraph (1), there may be ex17 cluded from consideration—

18 ‘‘(A) employees who have not completed 3

19 years of service;

20 ‘‘(B) employees who have not attained age

21 25;

22 ‘‘(C) part-time or seasonal employees; and

23 ‘‘(D) employees who are nonresident aliens

24 and who receive no earned income (within the

25 meaning of section 911(d)(2)) from the em-
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1 ployer which constitutes income from sources

2 within the United States (within the meaning of

3 section 861(a)(3)).

4 ‘‘(3) APPLICABILITY.—The provisions of this

5 subsection shall not apply to any plan of an em6 ployer providing coverage under a qualified long7 term care insurance policy until the Secretary of

8 Health and Human Services certifies to the Sec9 retary that provisions that are substantially similar

10 to the provisions of this subsection apply to all

11 health benefit plans.

12 ‘‘(f) EMPLOYER PLANS NOT TREATED AS DE13 FERRED COMPENSATION PLANS.—For purposes of this

14 title, a plan of an employer providing coverage under a

15 qualified long-term care insurance policy shall not be

16 treated as a plan which provides for deferred compensa17 tion by reason of providing such coverage.

18 ‘‘(g) DOLLAR AMOUNT FOR PURPOSES OF GROSS IN19 COME EXCLUSION.—

20 ‘‘(1) DOLLAR AMOUNT.—

21 ‘‘(A) IN GENERAL.—The dollar amount in

22 effect under this subsection shall be $150 per

23 day.

24 ‘‘(B) INFLATION ADJUSTMENTS.—In the

25 case of any taxable year beginning in a calendar
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1 year after 1996, the dollar amount contained in

2 subparagraph (A) shall be increased by an

3 amount equal to—

4 ‘‘(i) such dollar amount, multiplied by

5 ‘‘(ii) the cost-of-living adjustment de6 termined under section 1(f)(3) for the cal7 endar year in which the taxable year be8 gins, by substituting ‘calendar year 1995’

9 for ‘calendar year 1992’ in subparagraph

10 (B) thereof.

11 ‘‘(2) AGGREGATION RULE.—For purposes of

12 this subsection, all policies issued with respect to the

13 same taxpayer shall be treated as one policy.

14 ‘‘(h) REGULATIONS.—The Secretary shall prescribe

15 such regulations as may be necessary to carry out the re16 quirements of this section, including regulations to prevent

17 the avoidance of this section by providing long-term care

18 insurance coverage under a life insurance contract and to

19 provide for the proper allocation of amounts between the

20 long-term care and life insurance portions of a contract.’’.

21 (b) CLERICAL AMENDMENT.—The table of sections

22 for chapter 79 is amended by inserting after the item re23 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance.’’.

24 (c) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to policies issued after De3 cember 31, 1995. Solely for purposes of the preced4 ing sentence, a policy issued prior to January 1,

5 1996, that satisfies the requirements of a qualified

6 long-term care insurance policy as set forth in sec7 tion 7702B(b) shall, on and after January 1, 1996,

8 be treated as having been issued after December 31,

9 1995.

10 (2) TRANSITION RULE.—If, after the date of

11 enactment of this Act and before January 1, 1996,

12 a policy providing for long-term care insurance cov13 erage is exchanged solely for a qualified long-term

14 care insurance policy (as defined in section

15 7702B(b)), no gain or loss shall be recognized on

16 the exchange. If, in addition to a qualified long-term

17 care insurance policy, money or other property is re18 ceived in the exchange, then any gain shall be recog19 nized to the extent of the sum of the money and the

20 fair market value of the other property received. For

21 purposes of this paragraph, the cancellation of a pol22 icy providing for long-term care insurance coverage

23 and reinvestment of the cancellation proceeds in a

24 qualified long-term care insurance policy within 60

25 days thereafter shall be treated as an exchange.
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1 (3) ISSUANCE OF CERTAIN RIDERS PER2 MITTED.—For purposes of determining whether sec3 tion 7702 or 7702A of the Internal Revenue Code

4 of 1986 applies to any contract, the issuance, wheth5 er before, on, or after December 31, 1995, of a rider

6 on a life insurance contract providing long-term care

7 insurance coverage shall not be treated as a modi8 fication or material change of such contract.

9 SEC. 103. TREATMENT OF BENEFITS UNDER QUALIFIED

10 LONG-TERM CARE POLICIES.

11 (a) EXCLUSION FROM COBRA CONTINUATION RE12 QUIREMENTS.—Subparagraph (A) of section 4980B(f)(2)

13 of the Internal Revenue Code of 1986 (defining continu14 ation coverage) is amended by adding at the end the fol15 lowing new sentence: ‘‘The coverage shall not include cov16 erage for qualified long-term care services (as defined in

17 section 213(f)).’’.

18 (b) BENEFITS INCLUDED IN CAFETERIA PLANS.—

19 Section 125(f) of the Internal Revenue Code of 1986 (de20 fining qualified benefits) is amended by adding at the end

21 the following new sentence: ‘‘Such term includes coverage

22 under a qualified long-term care insurance policy (as de23 fined in section 7702B(b)) which is includible in gross in24 come only because it exceeds the dollar limitation of sec25 tion 105(c)(2).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 104. TAX RESERVES FOR QUALIFIED LONG-TERM

5 CARE INSURANCE POLICIES.

6 (a) IN GENERAL.—Subparagraph (A) of section

7 807(d)(3) of the Internal Revenue Code of 1986 (relating

8 to tax reserve methods) is amended by redesignating

9 clause (iv) as clause (v) and by inserting after clause (iii)

10 the following new clause:

11 ‘‘(iv) QUALIFIED LONG-TERM CARE

12 INSURANCE POLICIES.—In the case of any

13 qualified long-term care insurance policy

14 (as defined in section 7702B(b))—

15 ‘‘(I) the reserve method pre16 scribed by the National Association of

17 Insurance Commissioners which cov18 ers such policy (as of the date of issu19 ance); or

20 ‘‘(II) if no reserve method has

21 been prescribed by the National Asso22 ciation of Insurance Commissioners

23 which covers such policy, a 1-year full

24 preliminary term method.’’.
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1 (b) CONFORMING AMENDMENT.—Clause (v) of sec2 tion 807(d)(3)(A) of the Internal Revenue Code of 1986

3 (relating to tax reserve methods) is amended in the matter

4 preceding subclause (I) by striking ‘‘(ii) or (iii)’’ and in5 serting ‘‘(ii), (iii), or (iv)’’.

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

7 this section shall apply to taxable years beginning after

8 December 31, 1995.

9 SEC. 105. TAX TREATMENT OF ACCELERATED DEATH BENE10 FITS UNDER LIFE INSURANCE CONTRACTS.

11 (a) GENERAL RULE.—Section 101 (relating to cer12 tain death benefits) is amended by adding at the end the

13 following new subsection:

14 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

15 DEATH BENEFITS.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, any amount distributed to an individual under

18 a life insurance contract on the life of an insured

19 who is a terminally ill individual (as defined in para20 graph (3)) shall be treated as an amount paid by

21 reason of the death of such insured.

22 ‘‘(2) NECESSARY CONDITIONS.—

23 ‘‘(A) Paragraph (1) shall not apply to any

24 distribution unless—
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1 ‘‘(i) the distribution is not less than

2 the present value (determined under sub3 paragraph (B)) of the reduction in the

4 death benefit otherwise payable in the

5 event of the death of the insured, and

6 ‘‘(ii) the percentage derived by divid7 ing the cash surrender value of the con8 tract, if any, immediately after the dis9 tribution by the cash surrender value of

10 the contract immediately before the dis11 tribution is equal to or greater than the

12 percentage derived by dividing the death

13 benefit immediately after the distribution

14 by the death benefit immediately before the

15 distribution.

16 ‘‘(B) The present value of the reduction in

17 the death benefit occurring by reason of the dis18 tribution shall be determined by—

19 ‘‘(i) using as the discount rate a rate

20 not in excess of the highest rate set forth

21 in subparagraph (C), and

22 ‘‘(ii) assuming that the death benefit

23 (or the portion thereof) would have been

24 paid at the end of a period that is no more

25 than the insured’s life expectancy from the
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1 date of the distribution or 12 months,

2 whichever is shorter.

3 ‘‘(C) RATES.—The rates set forth in this

4 subparagraph are the following:

5 ‘‘(i) the 90-day Treasury bill yield,

6 ‘‘(ii) the rate described as Moody’s

7 Corporate Bond Yield Average-Monthly

8 Average Corporates as published by

9 Moody’s Investors Service, Inc., or any

10 successor thereto, for the calendar month

11 ending 2 months before the date on which

12 the rate is determined,

13 ‘‘(iii) the rate used to compute the

14 cash surrender values under the contract

15 during the applicable period plus 1 percent

16 per annum, and

17 ‘‘(iv) the maximum permissible inter18 est rate applicable to policy loans under

19 the contract.

20 ‘‘(3) TERMINALLY ILL INDIVIDUAL.—For pur21 poses of this subsection, the term ‘terminally ill indi22 vidual’ means an individual who, as determined by

23 the insurer on the basis of an acceptable certifi24 cation by a licensed physician, has an illness or

25 physical condition which can reasonably be expected
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1 to result in death within 12 months of the date of

2 certification.

3 ‘‘(4) APPLICATION OF SECTION 72(e)(10).—For

4 purposes of section 72(e)(10) (relating to the treat5 ment of modified endowment contracts), section

6 72(e)(4)(A)(i) shall not apply to distributions de7 scribed in paragraph (1).’’.

8 (b) EFFECTIVE DATE.—The amendment made by

9 subsection (a) shall apply to taxable years beginning after

10 December 31, 1995.

11 SEC. 106. TAX TREATMENT OF COMPANIES ISSUING QUALI12 FIED ACCELERATED DEATH BENEFIT RID13 ERS.

14 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID15 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat16 ing to other definitions and special rules) is amended by

17 adding at the end the following new subsection:

18 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

19 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

20 this part—

21 ‘‘(1) IN GENERAL.—Any reference to a life in22 surance contract shall be treated as including a ref23 erence to a qualified accelerated death benefit rider

24 on such contract.
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1 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE2 FIT RIDERS.—For purposes of this subsection, the

3 term ‘qualified accelerated death benefit rider’

4 means any rider on a life insurance contract which

5 provides for a distribution to an individual upon the

6 insured becoming a terminally ill individual (as de7 fined in section 101(g)(3)).’’.

8 (b) DEFINITIONS OF LIFE INSURANCE AND MODI9 FIED ENDOWMENT CONTRACTS.—Paragraph (5)(A) of

10 section 7702(f) is amended by striking ‘‘or’’ at the end

11 of clause (iv), by redesignating clause (v) as clause (vi),

12 and by inserting after clause (iv) the following new clause:

13 ‘‘(v) any qualified accelerated death

14 benefit rider (as defined in section 818(g)),

15 or’’.

16 (c) EFFECTIVE DATE.—

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

18 this section shall apply to contracts issued after

19 December 31, 1995.

20 (2) TRANSITIONAL RULE.—For purposes of de21 termining whether section 7702 or 7702A of the In22 ternal Revenue Code of 1986 applies to any con23 tract, the issuance, whether before, on, or after De24 cember 31, 1995, of a rider on a life insurance con25 tract permitting the acceleration of death benefits
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1 (as described in section 101(g) of such Code) shall

2 not be treated as a modification or material change

3 of such contract.

4 TITLE II—STANDARDS FOR

5 LONG-TERM CARE INSURANCE

6 SEC. 201. POLICY REQUIREMENTS.

7 (a) APPLICATION OF CONSUMER PROTECTION PRO8 VISIONS TO QUALIFIED POLICIES.—Section

9 7702B(b)(1)(B) (as added by section 102) is amended by

10 inserting ‘‘and of subsection (f)’’ after ‘‘and (5)’’.

11 (b) CONSUMER PROTECTION PROVISIONS.—Section

12 7702B (as added by section 102) is amended by redesig13 nating subsection (f) as subsection (h) and by inserting

14 after subsection (e) the following new subsections:

15 ‘‘(f) CONSUMER PROTECTION PROVISIONS.—

16 ‘‘(1) IN GENERAL.—The requirements of this

17 subsection are met with respect to any long-term

18 care insurance policy if the policy meets—

19 ‘‘(A) the requirements of the model regula20 tion and model Act described in paragraph (2),

21 ‘‘(B) the disclosure requirement of para22 graph (3),

23 ‘‘(C) the requirements relating to

24 nonforfeitability under paragraph (4), and
26

•S 2122 IS

1 ‘‘(D) the requirements relating to rate sta2 bilization under paragraph (5).

3 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

4 AND ACT.—

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

6 this paragraph are met with respect to any

7 long-term care insurance policy if such policy

8 meets—

9 ‘‘(i) MODEL REGULATION.—The fol10 lowing requirements of the model regula11 tion:

12 ‘‘(I) Section 7A (relating to guar13 anteed renewal or noncancellability),

14 and the requirements of section 6B of

15 the model Act relating to such section

16 7A.

17 ‘‘(II) Section 7B (relating to pro18 hibitions on limitations and exclu19 sions).

20 ‘‘(III) Section 7C (relating to ex21 tension of benefits).

22 ‘‘(IV) Section 7D (relating to

23 continuation or conversion of cov24 erage).
27

•S 2122 IS

1 ‘‘(V) Section 7E (relating to dis2 continuance and replacement of poli3 cies).

4 ‘‘(VI) Section 8 (relating to unin5 tentional lapse).

6 ‘‘(VII) Section 9 (relating to dis7 closure), other than section 9F there8 of.

9 ‘‘(VIII) Section 10 (relating to

10 prohibitions against post-claims un11 derwriting).

12 ‘‘(IX) Section 11 (relating to

13 minimum standards).

14 ‘‘(X) Section 12 (relating to re15 quirement to offer inflation protec16 tion), except that any requirement for

17 a signature on a rejection of inflation

18 protection shall permit the signature

19 to be on an application or on a sepa20 rate form.

21 ‘‘(XI) Section 23 (relating to pro22 hibition against preexisting conditions

23 and probationary periods in replace24 ment policies or certificates).
28

•S 2122 IS

1 ‘‘(ii) MODEL ACT.—The following re2 quirements of the model Act:

3 ‘‘(I) Section 6C (relating to pre4 existing conditions).

5 ‘‘(II) Section 6D (relating to

6 prior hospitalization).

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

8 paragraph—

9 ‘‘(i) MODEL PROVISIONS.—The terms

10 ‘model regulation’ and ‘model Act’ mean

11 the long-term care insurance model regula12 tion, and the long-term care insurance

13 model Act, respectively, promulgated by

14 the National Association of Insurance

15 Commissioners (as adopted in January of

16 1993).

17 ‘‘(ii) COORDINATION.—Any provision

18 of the model regulation or model Act listed

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

20 (A) shall be treated as including any other

21 provision of such regulation or Act nec22 essary to implement the provision.

23 ‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re24 quirement of this paragraph is met with respect to
29

•S 2122 IS

1 any long-term care insurance policy if such policy

2 meets the requirements of section 4980C(d)(1).

3 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

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

5 this paragraph are met with respect to any

6 long-term care insurance policy, if the issuer of

7 such policy offers to the policyholder, including

8 any group policyholder, a nonforfeiture provi9 sion.

10 ‘‘(B) REQUIREMENTS OF PROVISION.—The

11 nonforfeiture provision required under subpara12 graph (A) shall meet the following require13 ments:

14 ‘‘(i) The nonforfeiture provision shall

15 be appropriately captioned.

16 ‘‘(ii) The nonforfeiture provision shall

17 provide for a benefit available in the event

18 of a default in the payment of any pre19 miums and the amount of the benefit may

20 be adjusted subsequent to being initially

21 granted only as necessary to reflect

22 changes in claims, persistency, and interest

23 as reflected in changes in rates for pre24 mium paying policies approved by the Sec25 retary for the same policy form.
30

•S 2122 IS

1 ‘‘(iii) The nonforfeiture provision shall

2 provide at least one of the following:

3 ‘‘(I) Reduced paid-up insurance.

4 ‘‘(II) Extended term insurance.

5 ‘‘(III) Shortened benefit period.

6 ‘‘(IV) Other similar offerings ap7 proved by the Secretary.

8 ‘‘(5) RATE STABILIZATION.—

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

10 this paragraph are met with respect to any

11 long-term care insurance policy, including any

12 group master policy, if—

13 ‘‘(i) such policy contains the minimum

14 rate guarantees specified in subparagraph

15 (B), and

16 ‘‘(ii) the issuer of such policy meets

17 the requirements specified in subparagraph

18 (C).

19 ‘‘(B) MINIMUM RATE GUARANTEES.—The

20 minimum rate guarantees specified in this sub21 paragraph are as follows:

22 ‘‘(i) Rates under the policy shall be

23 guaranteed for a period of at least 3 years

24 from the date of issue of the policy.
31

•S 2122 IS

1 ‘‘(ii) After the expiration of the 3-year

2 period required under clause (i), any rate

3 increase shall be guaranteed for a period of

4 at least 2 years from the effective date of

5 such rate increase.

6 ‘‘(iii) In the case of any individual age

7 75 or older who has maintained coverage

8 under a long-term care insurance policy for

9 10 years, rate increases under such policy

10 shall not exceed 10 percent in any 12-

11 month period.

12 ‘‘(C) INCREASES IN PREMIUMS.—The re13 quirements specified in this subparagraph are

14 as follows:

15 ‘‘(i) IN GENERAL.—If an issuer of any

16 long-term care insurance policy, including

17 any group master policy, plans to increase

18 the premium rates for a policy, such issuer

19 shall, at least 90 days before the effective

20 date of the rate increase, offer to each in21 dividual policyholder under such policy the

22 option to remain insured under the policy

23 at a reduced level of benefits which main24 tains the premium rate at the rate in effect
32

•S 2122 IS

1 on the day before the effective date of the

2 rate increase.

3 ‘‘(ii) INCREASES OF MORE THAN 50

4 PERCENT.—If an issuer of any long-term

5 care insurance policy, including any group

6 master policy, increases premium rates for

7 a policy by more than 50 percent in any 3-

8 year period—

9 ‘‘(I) in the case of a group mas10 ter long-term care insurance policy,

11 the issuer shall discontinue issuing all

12 group master long-term care insur13 ance policies in any State in which the

14 issuer issues such policy for a period

15 of 2 years from the effective date of

16 such premium increase; and

17 ‘‘(II) in the case of an individual

18 long-term care insurance policy, the

19 issuer shall discontinue issuing all in20 dividual long-term care policies in any

21 State in which the issuer issues such

22 policy for a period of 2 years from the

23 effective date of such premium in24 crease.
33

•S 2122 IS

1 This clause shall apply to any issuer of

2 long-term care insurance policies or any

3 other person that purchases or otherwise

4 acquires any long-term care insurance poli5 cies from another issuer or person.

6 ‘‘(D) MODIFICATIONS OR WAIVERS OF RE7 QUIREMENTS.—The Secretary may modify or

8 waive any of the requirements under this para9 graph if—

10 ‘‘(i) such requirements will adversely

11 affect an issuer’s solvency;

12 ‘‘(ii) such modification or waiver is re13 quired for the issuer to meet other State or

14 Federal requirements;

15 ‘‘(iii) medical developments, new dis16 abling diseases, changes in long-term care

17 delivery, or a new method of financing

18 long-term care will result in changes to

19 mortality and morbidity patterns or as20 sumptions;

21 ‘‘(iv) judicial interpretation of a pol22 icy’s benefit features results in unintended

23 claim liabilities; or

24 ‘‘(v) in the case of a purchase or other

25 acquisition of long-term care insurance
34

•S 2122 IS

1 policies of an issuer or other person, the

2 continued sale of other long-term care in3 surance policies by the purchasing issuer

4 or person is in the best interests of individ5 ual consumers.

6 ‘‘(g) LONG-TERM CARE INSURANCE POLICY DE7 FINED.—

8 ‘‘(1) IN GENERAL.—For purposes of this sec9 tion, the term ‘long-term care insurance policy’

10 means any product which is advertised, marketed, or

11 offered as long-term care insurance (as defined in

12 paragraph (2)).

13 ‘‘(2) LONG-TERM CARE INSURANCE.—

14 ‘‘(A) IN GENERAL.—The term ‘long-term

15 care insurance’ means any insurance policy or

16 rider—

17 ‘‘(i) advertised, marketed, offered, or

18 designed to provide coverage for not less

19 than 12 consecutive months for each cov20 ered person on an expense incurred, in21 demnity, prepaid or other basis for one or

22 more necessary or medically necessary di23 agnostic, preventive, therapeutic, rehabili24 tative, maintenance, or personal care serv-
35

•S 2122 IS

1 ices provided in a setting other than an

2 acute care unit of a hospital; and

3 ‘‘(ii) issued by insurers, fraternal ben4 efit societies, nonprofit health, hospital,

5 and medical service corporations, prepaid

6 health plans, health maintenance organiza7 tions or any similar organization to the ex8 tent such organizations are otherwise au9 thorized to issue life or health insurance.

10 Such term includes group and individual annu11 ities and life insurance policies or riders which

12 provide directly or which supplement long-term

13 care insurance and includes a policy or rider

14 which provides for payment of benefits based on

15 cognitive impairment or the loss of functional

16 capacity.

17 ‘‘(B) EXCLUSIONS.—The term ‘long-term

18 care insurance’ shall not include—

19 ‘‘(i) any insurance policy which is of20 fered primarily to provide basic coverage to

21 supplement coverage under the medicare

22 program under title XVIII of the Social

23 Security Act, basic hospital expense cov24 erage, basic medical-surgical expense cov25 erage, hospital confinement coverage,
36

•S 2122 IS

1 major medical expense coverage, disability

2 income or related asset-protection cov3 erage, accident only coverage, specified dis4 ease or specified accident coverage, or lim5 ited benefit health coverage; or

6 ‘‘(ii) life insurance policies—

7 ‘‘(I) which accelerate the death

8 benefit specifically for one or more of

9 the qualifying events of terminal ill10 ness or medical conditions requiring

11 extraordinary medical intervention or

12 permanent institutional confinement;

13 ‘‘(II) which provide the option of

14 a lump-sum payment for such bene15 fits; and

16 ‘‘(III) under which neither such

17 benefits nor the eligibility for the ben18 efits is conditioned upon the receipt of

19 long-term care.’’.

20 SEC. 202. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

21 LONG-TERM CARE INSURANCE POLICIES.

22 (a) IN GENERAL.—Chapter 43 is amended by adding

23 at the end the following new section:
37

•S 2122 IS

1 ‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG2 TERM CARE INSURANCE POLICIES.

3 ‘‘(a) GENERAL RULE.—There is hereby imposed on

4 the issuer of any long-term care insurance policy with re5 spect to which any requirement of subsection (c) or (d)

6 is not met a tax in the amount determined under sub7 section (b).

8 ‘‘(b) AMOUNT OF TAX.—

9 ‘‘(1) IN GENERAL.—The amount of the tax im10 posed by subsection (a) shall be $100 per policy for

11 each day any requirement of subsection (c) or (d) is

12 not met with respect to the policy.

13 ‘‘(2) WAIVER.—In the case of a failure which is

14 due to reasonable cause and not to willful neglect,

15 the Secretary may waive part or all of the tax im16 posed by subsection (a) to the extent that payment

17 of the tax would be excessive relative to the failure

18 involved.

19 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require20 ments of this subsection with respect to any long-term

21 care insurance policy are as follows:

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

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

24 requirements of the model regulation must be

25 met:
38

•S 2122 IS

1 ‘‘(i) Section 13 (relating to application

2 forms and replacement coverage).

3 ‘‘(ii) Section 14 (relating to reporting

4 requirements), except that the issuer shall

5 also report at least annually the number of

6 claims denied during the reporting period

7 for each class of business (expended as a

8 percentage of claims denied), other than

9 claims denied for failure to meet the wait10 ing period or because of any applicable

11 pre-existing condition.

12 ‘‘(iii) Section 20 (relating to filing re13 quirements for marketing).

14 ‘‘(iv) Section 21 (relating to standards

15 for marketing), including inaccurate com16 pletion of medical histories, other than sec17 tion 21C(1) and 21C(6) thereof, except

18 that—

19 ‘‘(I) in addition to such require20 ments, no person shall, in selling or

21 offering to sell a long-term care insur22 ance policy, misrepresent a material

23 fact; and

24 ‘‘(II) no such requirements shall

25 include a requirement to inquire or
39

•S 2122 IS

1 identify whether a prospective appli2 cant or enrollee for long-term care in3 surance has accident and sickness in4 surance.

5 ‘‘(v) Section 22 (relating to appro6 priateness of recommended purchase).

7 ‘‘(vi) Section 24 (relating to standard

8 format outline of coverage).

9 ‘‘(vii) Section 25 (relating to require10 ment to deliver shopper’s guide).

11 ‘‘(B) MODEL ACT.—The following require12 ments of the model Act must be met:

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

14 return), except that such section shall also

15 apply to denials of applications and any re16 fund shall be made within 30 days of the

17 return or denial.

18 ‘‘(ii) Section 6G (relating to outline of

19 coverage).

20 ‘‘(iii) Section 6H (relating to require21 ments for certificates under group plans).

22 ‘‘(iv) Section 6I (relating to policy

23 summary).

24 ‘‘(v) Section 6J (relating to monthly

25 reports on accelerated death benefits).
40

•S 2122 IS

1 ‘‘(vi) Section 7 (relating to incontest2 ability period).

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

4 paragraph, the terms ‘model regulation’ and

5 ‘model Act’ have the meanings given such terms

6 by section 7702B(f)(2)(B).

7 ‘‘(2) DELIVERY OF POLICY.—If an application

8 for a long-term care insurance policy (or for a cer9 tificate under a group long-term care insurance pol10 icy) is approved, the issuer shall deliver to the appli11 cant (or policyholder or certificate-holder) the policy

12 (or certificate) of insurance not later than 30 days

13 after the date of the approval.

14 ‘‘(3) INFORMATION ON DENIALS OF CLAIMS.—

15 If a claim under a long-term care insurance policy

16 is denied, the issuer shall, within 60 days of the date

17 of a written request by the policyholder or certifi18 cate-holder (or representative)—

19 ‘‘(A) provide a written explanation of the

20 reasons for the denial, and

21 ‘‘(B) make available all information di22 rectly relating to such denial.

23 ‘‘(d) DISCLOSURE.—The requirements of this sub24 section are met with respect to any long-term care insur25 ance policy if either of the following statements, whichever
41

•S 2122 IS

1 is applicable, is prominently displayed on the front page

2 of the policy and in the outline of coverage required under

3 subsection (c)(1)(B)(ii):

4 ‘‘(1) A statement that: ‘This policy is intended

5 to be a qualified long-term care insurance contract

6 under section 7702B(b) of the Internal Revenue

7 Code of 1986.’.

8 ‘‘(2) A statement that: ‘This policy is not in9 tended to be a qualified long-term care insurance

10 contract under section 7702B(b) of the Internal

11 Revenue Code of 1986.’.

12 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE13 FINED.—

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, the term ‘long-term care insurance policy’

16 means any product which is advertised, marketed, or

17 offered as long-term care insurance (as defined in

18 paragraph (2)).

19 ‘‘(2) LONG-TERM CARE INSURANCE.—

20 ‘‘(A) IN GENERAL.—The term ‘long-term

21 care insurance’ means any insurance policy or

22 rider—

23 ‘‘(i) advertised, marketed, offered, or

24 designed to provide coverage for not less

25 than 12 consecutive months for each cov-
42

•S 2122 IS

1 ered person on an expense incurred, in2 demnity, prepaid or other basis for one or

3 more necessary or medically necessary di4 agnostic, preventive, therapeutic, rehabili5 tative, maintenance, or personal care serv6 ices provided in a setting other than an

7 acute care unit of a hospital; and

8 ‘‘(ii) issued by insurers, fraternal ben9 efit societies, nonprofit health, hospital,

10 and medical service corporations, prepaid

11 health plans, health maintenance organiza12 tions or any similar organization to the ex13 tent such organizations are otherwise au14 thorized to issue life or health insurance.

15 Such term includes group and individual annu16 ities and life insurance policies or riders which

17 provide directly or which supplement long-term

18 care insurance and includes a policy or rider

19 which provides for payment of benefits based on

20 cognitive impairment or the loss of functional

21 capacity.

22 ‘‘(B) EXCLUSIONS.—The term ‘long-term

23 care insurance’ shall not include—

24 ‘‘(i) any insurance policy which is of25 fered primarily to provide basic coverage to
43

•S 2122 IS

1 supplement coverage under the medicare

2 program under title XVIII of the Social

3 Security Act, basic hospital expense cov4 erage, basic medical-surgical expense cov5 erage, hospital confinement coverage,

6 major medical expense coverage, disability

7 income or related asset-protection cov8 erage, accident only coverage, specified dis9 ease or specified accident coverage, or lim10 ited benefit health coverage; or

11 ‘‘(ii) life insurance policies—

12 ‘‘(I) which accelerate the death

13 benefit specifically for one or more of

14 the qualifying events of terminal ill15 ness or medical conditions requiring

16 extraordinary medical intervention or

17 permanent institutional confinement;

18 ‘‘(II) which provide the option of

19 a lump-sum payment for such bene20 fits; and

21 ‘‘(III) under which neither such

22 benefits nor the eligibility for the ben23 efits is conditioned upon the receipt of

24 long-term care.’’.
44

•S 2122 IS

1 (b) CONFORMING AMENDMENT.—The table of sec2 tions for chapter 43 is amended by adding at the end the

3 following new item:

‘‘Sec. 4980C. Failure to meet requirements for long-term care insurance policies.’’.

4 SEC. 203. COORDINATION WITH STATE REQUIREMENTS.

5 Nothing in this subtitle shall be construed as prevent6 ing a State from applying standards that provide greater

7 protection of policyholders of long-term care insurance

8 policies (as defined in section 7702B(g) of the Internal

9 Revenue Code of 1986).

10 SEC. 204. UNIFORM LANGUAGE AND DEFINITIONS.

11 (a) IN GENERAL.—The National Association of In12 surance Commissioners shall not later than January 1,

13 1995, promulgate standards for the use of uniform lan14 guage and definitions in long-term care insurance policies

15 (as defined in section 7702B(g) of the Internal Revenue

16 Code of 1986).

17 (b) VARIATIONS.—Standards under subsection (a)

18 may permit the use of nonuniform language to the extent

19 required to take into account differences among States in

20 the licensing of nursing facilities and other providers of

21 long-term care.
45

•S 2122 IS

1 SEC. 205. EFFECTIVE DATES.

2 (a) SECTION 201.—The amendments made by section

3 201 shall apply to contracts issued after December 31,

4 1995.

5 (b) SECTION 202.—The amendments made by sec6 tion 202 shall apply to actions taken after December 31,

7 1995.

8 TITLE III—INCENTIVES TO EN9 COURAGE THE PURCHASE OF

10 PRIVATE INSURANCE

11 SEC. 301. PUBLIC INFORMATION AND EDUCATION PRO12 GRAM.

13 (a) IN GENERAL.—The Secretary of Health and

14 Human Services shall establish a program designed to

15 educate individuals regarding—

16 (1) the risk of incurring catastrophic long-term

17 care costs;

18 (2) the coverage or lack of coverage of such

19 costs through Federal programs;

20 (3) the importance of planning for such costs;

21 and

22 (4) the benefits of securing long-term care in23 surance coverage.

24 (b) AUTHORIZATION OF APPROPRIATIONS.—There

25 are authorized to be appropriated such sums as may be

26 necessary to carry out the purposes of this section.
46

•S 2122 IS

1 SEC. 302. ASSETS OR RESOURCES DISREGARDED UNDER

2 THE MEDICAID PROGRAM.

3 (a) MEDICAID ESTATE RECOVERIES.—

4 (1) IN GENERAL.—Section 1917(b) of the So5 cial Security Act (42 U.S.C. 1396p(b)) is amend6 ed—

7 (A) in paragraph (1), by striking subpara8 graph (C);

9 (B) in paragraph (3), by striking ‘‘(other

10 than paragraph (1)(C))’’; and

11 (C) in paragraph (4)(B), by striking ‘‘(and

12 shall include, in the case of an individual to

13 whom paragraph (1)(C)(i) applies)’’.

14 (2) EFFECTIVE DATE.—Section 1917(b) of the

15 Social Security Act (42 U.S.C. 1396p(b)) shall be

16 applied and administered as if the provisions strick17 en by paragraph (1) had not been enacted.

18 (b) REPORTING REQUIREMENTS FOR CERTAIN

19 ASSET PROTECTION PROGRAMS.—Section 1902 of the So20 cial Security Act (42 U.S.C. 1396a) is amended by adding

21 at the end the following new subsection:

22 ‘‘(aa)(1) The Secretary shall not approve any State

23 plan amendment providing for an asset protection pro24 gram (as described in paragraph (2)) unless the State re25 quires all insurers participating in such program to submit

26 reports to the State and the Secretary at such times, and
47

•S 2122 IS

1 containing such information, as the Secretary determines

2 appropriate. The information included in the reports re3 quired to be submitted under the preceding sentence shall

4 be submitted in accordance with the data standards estab5 lished by the Secretary under paragraph (3).

6 ‘‘(2) An asset protection program described in this

7 paragraph is a program under which an individual’s assets

8 and resources are disregarded for purposes of the program

9 under this title—

10 ‘‘(A) to the extent that payments are made

11 under a long-term care insurance policy; or

12 ‘‘(B) because an individual has received (or is

13 entitled to receive) benefits under a long-term care

14 insurance policy.

15 ‘‘(3)(A) Not later than 30 days after the date of the

16 enactment of this Act, the Secretary shall select data

17 standards for the information required to be included in

18 reports submitted in accordance with paragraph (1). Such

19 data standards shall be selected from the data standards

20 included in the Long-term Care Insurance Uniform Data

21 Set developed by the University of Maryland Center on

22 Aging and Laguna Research Associates, and used by the

23 States of California, Connecticut, Indiana, and New York

24 for reports submitted by insurers under the asset protec25 tion programs conducted by such States.
48

•S 2122 IS

1 ‘‘(B) The Secretary shall modify the standards se2 lected under subparagraph (A) as the Secretary deter3 mines appropriate.’’.

4 SEC. 303. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

5 ACCOUNTS FOR THE PURCHASE OF LONG6 TERM CARE INSURANCE COVERAGE.

7 (a) EXCLUSION FROM GROSS INCOME FOR CERTAIN

8 INDIVIDUALS.—Subsection (d) of section 408 of the Inter9 nal Revenue Code of 1986 (relating to tax treatment of

10 distributions from individual retirement accounts) is

11 amended by adding at the end the following new para12 graph:

13 ‘‘(8) DISTRIBUTIONS TO PURCHASE LONG-TERM

14 CARE INSURANCE.—

15 ‘‘(A) IN GENERAL.—Paragraph (1) shall

16 not apply to the applicable percentage of any

17 amount paid or distributed out of an individual

18 retirement account or individual retirement an19 nuity to the individual for whose benefit the ac20 count or annuity is maintained if—

21 ‘‘(i) the individual has attained age

591 22 ⁄2 by the date of the payment or dis23 tribution, and

24 ‘‘(ii) the entire amount received (in25 cluding money and any other property) is
49

•S 2122 IS

1 used within 90 days to purchase a quali2 fied long-term care insurance policy (as de3 fined in section 7702B(b)) for the benefit

4 of the individual or the spouse of the individual (if the spouse has attained age 591 5 ⁄2

6 by the date of the payment or distribu7 tion).

8 ‘‘(B) APPLICABLE PERCENTAGE.—For

9 purposes of subparagraph (A), the term ‘appli10 cable percentage’ means 100 percent reduced

11 (but not below zero) by the number of percent12 age points determined by dividing—

13 ‘‘(i) the amount by which the tax14 payer’s adjusted gross income exceeds the

15 minimum amount, by

16 ‘‘(ii) the difference between the maxi17 mum amount and the minimum amount.

18 ‘‘(C) MINIMUM AND MAXIMUM

19 AMOUNTS.—

20 ‘‘(i) IN GENERAL.—For purposes of

21 subparagraph (B), the minimum amount is

22 $45,000 and the maximum amount is

23 $100,000.

24 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

25 In the case of any taxable year beginning
50

•S 2122 IS

1 in any calendar year after 1996, each of

2 the dollar amounts under clause (i) shall

3 be increased by an amount equal to—

4 ‘‘(I) the dollar amount, multi5 plied by

6 ‘‘(II) the cost-of-living adjust7 ment determined under section 1(f)(3)

8 for the calendar year in which the tax9 able year begins, by substituting ‘cal10 endar year 1995’ for ‘calendar year

11 1992’ in subparagraph (B) thereof.

12 ‘‘(iii) ROUNDING.—If any amount de13 termined under clause (ii) is not a multiple

14 of $10, the amount shall be rounded to the

15 nearest multiple of $10 (or if the amount

16 is a multiple of $5 and not a multiple of

17 $10, the amount shall be increased to the

18 next multiple of $10).

19 ‘‘(iv) SPECIAL RULE.—In the case of

20 a married individual filing a separate re21 turn, the minimum and maximum amounts

22 with respect to such individual shall be 50

23 percent of the amounts otherwise in effect

24 for the taxable year.’’.

25 (b) NO PENALTY FOR DISTRIBUTIONS.—
51

•S 2122 IS

1 (1) IN GENERAL.—Subparagraph (B) of section

2 72(t)(2) of the Internal Revenue Code of 1986 (re3 lating to distributions from qualified retirement

4 plans not subject to 10 percent additional tax) is

5 amended to read as follows:

6 ‘‘(B) MEDICAL EXPENSES.—

7 ‘‘(i) IN GENERAL.—Distributions

8 made to the employee (other than distribu9 tions described in clause (ii) or subpara10 graph (A) or (C)) to the extent such dis11 tributions do not exceed the amount allow12 able as a deduction under section 213 to

13 the employee for amounts paid during the

14 taxable year for medical care (determined

15 without regard to whether the employee

16 itemizes deductions for such taxable year).

17 ‘‘(ii) CERTAIN DISTRIBUTIONS TO

18 PURCHASE LONG-TERM CARE INSUR19 ANCE.—Distributions made to the taxpayer

20 out of an individual retirement plan if the

21 entire amount received (including money

22 and any other property) is used within 90

23 days to purchase a qualified long-term care

24 insurance policy (as defined in section
52

•S 2122 IS

1 7702B(b)) for the benefit of the individual

2 or the spouse of the individual.’’.

3 (2) CONFORMING AMENDMENT.—Subparagraph

4 (A) of section 72(t)(3) of the Internal Revenue Code

5 of 1986 is amended by striking ‘‘(B)’’ and inserting

6 ‘‘(B)(i)’’.

7 (c) DEDUCTION FOR EXPENSES TO PURCHASE A

8 QUALIFIED LONG-TERM CARE INSURANCE POLICY.—

9 (1) IN GENERAL.—Paragraph (8) of section

10 408(d) of the Internal Revenue Code of 1986 (relat11 ing to distributions from individual retirement ac12 counts to purchase long-term care insurance), as

13 added by subsection (a), is amended by adding at

14 the end the following new subparagraph:

15 ‘‘(D) APPLICATION OF SECTION 213.—No

16 deduction shall be allowed under section 213(a)

17 for expenses incurred to purchase a qualified

18 long-term care insurance policy (as defined in

19 section 7702B(b)) using amounts paid or dis20 tributed out of an individual retirement account

21 or individual retirement annuity in accordance

22 with this paragraph.’’.

23 (2) CONFORMING AMENDMENT.—Clause (ii) of

24 section 213(d)(1)(D) of the Internal Revenue Code

25 of 1986 (relating to definition of medical care), as
53

•S 2122 IS

1 added by section 101(a), is amended by striking

2 ‘‘section 7702(d)(4)’’ and inserting ‘‘section

3 408(d)(8)(D) or section 7702(d)(4)’’.

4 (d) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 1995.

7 TITLE IV—IMPROVED PUBLIC

8 SAFETY NET FOR LONG-TERM

9 CARE

10 SEC. 401. REFERENCES IN TITLE.

11 Except as otherwise specifically provided, whenever in

12 this title an amendment is expressed in terms of an

13 amendment to or repeal of a section or other provision,

14 the reference shall be considered to be made to that sec15 tion or other provision of the Social Security Act.

16 SEC. 402. SPENDDOWN ELIGIBILITY FOR NURSING FACIL17 ITY RESIDENTS.

18 (a) IN GENERAL.—Section 1902(a)(10)(A)(i) (42

19 U.S.C. 1396a(a)(10)(A)(i)) is amended—

20 (1) by striking ‘‘or’’ at the end of subclause

21 (VI);

22 (2) by striking the semicolon at the end of

23 subclause (VII) and inserting ‘‘, or’’; and

24 (3) by inserting after subclause (VII) the fol25 lowing new subclause:
54

•S 2122 IS

1 ‘‘(VIII) who are individuals who

2 would meet the income and resource

3 requirements of the appropriate State

4 plan described in subclause (I) or the

5 supplemental security income program

6 (as the case may be), if incurred ex7 penses for medical care as recognized

8 under State law were deducted from

9 income;’’.

10 (b) LIMITATION TO BENEFITS FOR NURSING FACIL11 ITY SERVICES.—Section 1902(a)(10) (42 U.S.C.

12 1396a(a)(10)) is amended in the matter following sub13 paragraph (F)—

14 (1) by striking ‘‘and (XIII)’’ and inserting

15 ‘‘(XIII)’’; and

16 (2) by inserting before the semicolon at the end

17 the following: ‘‘, and (XIV) the medical assistance

18 made available to an individual described in sub19 paragraph (A)(i)(VIII) shall be limited to medical

20 assistance for nursing facility services’’.

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

22 subsections (a) and (b) shall apply with respect to a State

23 as of January 1, 1996.
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1 SEC. 403. INCREASE IN PERSONAL NEEDS ALLOWANCE FOR

2 INSTITUTIONALIZED INDIVIDUALS.

3 (a) IN GENERAL.—Section 1902(q)(2) (42 U.S.C.

4 1396a(q)(2)) is amended—

5 (1) by striking ‘‘$30’’ and inserting ‘‘$50’’; and

6 (2) by striking ‘‘$60’’ and inserting ‘‘$80’’.

7 (b) FEDERAL REIMBURSEMENT FOR REDUCTIONS IN

8 STATE FUNDS ATTRIBUTABLE TO INCREASED PERSONAL

9 NEEDS ALLOWANCE.—Section 1903(a) (42 U.S.C.

10 1396b(a)) is amended—

11 (1) by striking ‘‘plus’’ at the end of paragraph

12 (6);

13 (2) by striking the period at the end of para14 graph (7) and inserting ‘‘; plus’’; and

15 (3) by adding at the end the following new

16 paragraph:

17 ‘‘(8) an amount equal to 100 percent of the dif18 ference between the amount of expenditures made by

19 the State for nursing facility services and services in

20 an intermediate care facility for the mentally re21 tarded during the quarter and the amount of ex22 penditures that would have been made by the State

23 for such services during the quarter based on the

24 personal needs allowance in effect in the State under

25 section 1902(q) as of April 30, 1994.’’.
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•S 2122 IS

1 (c) CONFORMING SSI PERSONAL NEEDS ALLOW2 ANCE.—Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B))

3 is amended—

4 (1) in clauses (i) and (ii)(I), by striking ‘‘$360’’

5 and inserting ‘‘$600’’; and

6 (2) in clause (iii), by striking ‘‘$720’’ and in7 serting ‘‘$1,200’’.

8 (d) EFFECTIVE DATE.—The amendments made by

9 subsection (a) shall apply with respect to months begin10 ning with January 1996.

11 SEC. 404. INCREASED RESOURCE DISREGARD FOR NURS12 ING FACILITY RESIDENTS.

13 (a) INCREASED DISREGARD FOR RESOURCES.—Sec14 tion 1902(a) (42 U.S.C. 1396a(a)) is amended—

15 (1) by striking ‘‘and’’ at the end of paragraph

16 (61);

17 (2) by striking the period at the end of para18 graph (62) and inserting ‘‘; and’’; and

19 (3) by inserting after paragraph (62) the fol20 lowing new paragraph:

21 ‘‘(63) provide that, in determining the eligibility

22 of any unmarried individual who is an inpatient in

23 a nursing facility or intermediate care facility for the

24 mentally retarded, the first $8,000 of resources may,

25 at the option of the State, be disregarded;’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply with respect to months begin3 ning with January 1996.

4 SEC. 405. INFORMING NURSING HOME RESIDENTS ABOUT

5 AVAILABILITY OF ASSISTANCE FOR HOME

6 AND COMMUNITY-BASED SERVICES.

7 (a) IN GENERAL.—Section 1902(a) (42 U.S.C.

8 1396a(a)), as amended by section 404(a), is amended—

9 (1) by striking ‘‘and’’ at the end of paragraph

10 (62);

11 (2) by striking the period at the end of para12 graph (63) and inserting ‘‘; and’’; and

13 (3) by inserting after paragraph (63) the fol14 lowing new paragraph:

15 ‘‘(64) provide that an individual who is a resi16 dent (or who is applying to become a resident) of a

17 nursing facility or intermediate care facility for the

18 mentally retarded (or a designated representative of

19 such an individual) shall receive, at the time of ap20 plication for medical assistance and periodically

21 thereafter, information on the range of home and

22 community-based services for which assistance is

23 available in the State either under the plan under

24 this title or any other public program.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to quarters beginning on or after

3 January 1, 1996.

4 SEC. 406. ESTABLISHMENT OF STATE PROGRAMS FURNISH5 ING HOME AND COMMUNITY-BASED SERV6 ICES TO CERTAIN INDIVIDUALS WITH DIS7 ABILITIES.

8 (a) STATE PLAN REQUIREMENT.—Section 1902(a)

9 (42 U.S.C. 1396a(a)), as amended by sections 404(a) and

10 405(a), is amended—

11 (1) by striking ‘‘and’’ at the end of paragraph

12 (63);

13 (2) by striking the period at the end of para14 graph (64) and inserting ‘‘; and’’; and

15 (3) by adding at the end the following new

16 paragraph:

17 ‘‘(65) at the option of the State, provide for the

18 establishment of a program under which the State

19 furnishes covered home and community-based serv20 ices (as defined in section 1931(c)(1)) to eligible in21 dividuals with disabilities (as defined in section

22 1931(c)(2)) in accordance with section 1931.’’.

23 (b) ESTABLISHMENT OF PROGRAM.—Title XIX (42

24 U.S.C. 1936 et seq.) is amended by redesignating section
59

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1 1931 as section 1932 and by inserting after section 1930

2 the following new section:

3 ‘‘HOME AND COMMUNITY-BASED SERVICES FOR

4 INDIVIDUALS WITH DISABILITIES

5 ‘‘SEC. 1931. (a) ESTABLISHMENT OF PROGRAM.—

6 Each State with an approved State plan under this title

7 may establish a program under which the State furnishes

8 covered home and community-based services to eligible in9 dividuals with disabilities in accordance with this section

10 to the extent that such services are not provided under

11 any other Federal or State program.

12 ‘‘(b) ASSESSMENTS.—

13 ‘‘(1) INITIAL ASSESSMENT.—A State program

14 under this section shall provide for an initial assess15 ment of all individuals who appear to have a reason16 able likelihood of being an eligible individual with

17 disabilities. Such an assessment may be conducted

18 by a qualified case manager or by any other person

19 or entity designated by the State under criteria spec20 ified by the Secretary.

21 ‘‘(2) INITIAL ASSESSMENT DESCRIBED.—

22 ‘‘(A) IN GENERAL.—Except as provided in

23 subparagraph (B), an initial assessment under

24 this paragraph shall be conducted using a uni25 form protocol specified by the Secretary and

26 shall include an assessment of an individual’s—
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•S 2122 IS

1 ‘‘(i) ability or inability to perform any

2 activities of daily living;

3 ‘‘(ii) health status;

4 ‘‘(iii) mental status;

5 ‘‘(iv) current living arrangement; and

6 ‘‘(v) use of formal and informal long7 term care support systems.

8 ‘‘(B) EXCEPTION.—If a State receives ad9 vance approval from the Secretary, such State

10 may—

11 ‘‘(i) conduct an initial assessment

12 under this paragraph using a protocol

13 other than a uniform protocol specified by

14 the Secretary under subparagraph (A); and

15 ‘‘(ii) collect information in addition to

16 the information required under clauses (i)

17 through (v) of subparagraph (A).

18 ‘‘(3) PERIODIC REASSESSMENT.—A State pro19 gram under this section shall provide for periodic re20 assessments of any eligible individual with disabil21 ities who is receiving covered home and community22 based services under this section. Such periodic reas23 sessments shall be conducted upon any significant

24 change in an individual’s condition that may affect

25 the individual’s need for such services, but at least
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•S 2122 IS

1 within the 6-month period following each assessment

2 of the individual (or within such longer period as de3 termined appropriate by the State in the case of an

4 individual who is unlikely to have a change in condi5 tion that would affect the individual’s need for serv6 ices).

7 ‘‘(c) QUALIFIED CASE MANAGER.—

8 ‘‘(1) IN GENERAL.—A State program under

9 this section shall assign a qualified case manager to

10 any eligible individual with disabilities receiving cov11 ered home and community-based services under this

12 section. Such qualified case manager shall perform

13 the case management services specified in this sub14 section.

15 ‘‘(2) CARE PLAN.—A qualified case manager

16 shall develop, or arrange for the development of, an

17 individualized written plan of care for an eligible in18 dividual with disabilities based upon the assessments

19 conducted under subsection (b). The qualified case

20 manager shall develop the care plan in a timely

21 manner in consultation with the individual or the in22 dividual’s representative, the individual’s family, and

23 the individual’s primary medical care provider, and

24 in accordance with any criteria that may be specified
62

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1 by the State, in consultation with the Secretary. At

2 a minimum, the care plan shall identify—

3 ‘‘(A) the long-term problems and needs of

4 the individual;

5 ‘‘(B) the mix of formal and informal serv6 ices and support systems that are available to

7 meet the long-term care needs of the individual;

8 ‘‘(C) the appropriate covered home and

9 community-based services necessary to meet the

10 long-term care needs of the individual;

11 ‘‘(D) the manner in which covered home

12 and community-based services will be provided;

13 ‘‘(E) the manner in which covered home

14 and community-based services will be integrated

15 with services provided under any other Federal

16 or State program; and

17 ‘‘(F) goals for the individual which, to the

18 extent practicable, shall include goals that are

19 measurable.

20 ‘‘(3) REVISIONS TO CARE PLAN.—A qualified

21 case manager shall revise an individual’s care plan

22 as appropriate based on the assessments performed

23 under subsection (b).

24 ‘‘(4) STATE GUIDELINES WITH RESPECT TO

25 CARE PLANS.—
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1 ‘‘(A) TAKING INTO ACCOUNT INFORMAL

2 CARE.—A State may, at its option, provide

3 guidelines permitting a qualified case manager

4 to take into account the availability of informal

5 care in determining the amount and array of

6 covered home and community-based services

7 made available to an eligible individual with dis8 abilities under such individual’s care plan.

9 ‘‘(B) COORDINATION.—A State shall pro10 vide guidelines for qualified case managers to

11 integrate covered home and community-based

12 services with other Federal and State programs

13 in accordance with paragraph (2)(E).

14 ‘‘(5) PROVISION OF SERVICES.—

15 ‘‘(A) COVERED SERVICES.—The qualified

16 case manager, in consultation with an eligible

17 individual with disabilities or the individual’s

18 representative, such individual’s family, and

19 such individual’s primary medical care provider,

20 shall—

21 ‘‘(i) assist in the implementation of

22 the care plan; and

23 ‘‘(ii) in a manner that is cost-effective

24 and consistent with obtaining quality care,

25 provide, or arrange for the provision of,
64

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1 appropriate covered home and community2 based services.

3 To the extent possible, the case manager shall

4 comply with the choice of an individual with

5 disabilities regarding which covered home and

6 community-based services to receive and the

7 providers who will furnish such services.

8 ‘‘(B) NONCOVERED SERVICES.—The State

9 may require the qualified case manager to as10 sist an eligible individual with disabilities in ob11 taining noncovered services, at the individual’s

12 own expense or through other programs that

13 may be available.

14 ‘‘(6) CARE PLAN MONITORING.—The qualified

15 case manager shall monitor the delivery of services

16 to an eligible individual with disabilities, the quality

17 of care provided, and the status of the individual.

18 ‘‘(d) QUALITY ASSURANCE AND SAFEGUARDS.—

19 ‘‘(1) QUALITY ASSURANCE.—A State shall en20 sure and monitor the quality of covered home and

21 community-based services furnished to eligible indi22 viduals with disabilities by—

23 ‘‘(A) adopting standards which safeguard

24 the health and safety of such individuals;
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•S 2122 IS

1 ‘‘(B) establishing minimum standards for

2 qualified case managers and providers and en3 forcing those standards;

4 ‘‘(C) establishing minimum competency re5 quirements for employees of qualified providers

6 and developing systems for enforcing such com7 petency requirements;

8 ‘‘(D) obtaining meaningful input from eli9 gible individuals with disabilities through sur10 veys or otherwise that measure the extent to

11 which such individuals receive the covered home

12 and community-based services described in the

13 care plan and the extent to which such individ14 uals are satisfied with such services;

15 ‘‘(E) participating in quality assurance ac16 tivities; and

17 ‘‘(F) specifying the role of the State Long18 Term Care Ombudsman (under the Older

19 Americans Act of 1965) and the protection and

20 advocacy system (established under section 142

21 of the Developmental Disabilities Assistance

22 and Bill of Rights Act) of the State in assuring

23 quality of services and protecting the rights of

24 individuals with disabilities.

25 ‘‘(2) SAFEGUARDS.—
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1 ‘‘(A) CONFIDENTIALITY.—The State shall

2 provide safeguards which restrict the use or dis3 closure of information concerning individuals

4 applying for or receiving covered home and

5 community-based services under this section to

6 purposes directly connected with the adminis7 tration of the program.

8 ‘‘(B) SAFEGUARDS AGAINST ABUSE.—The

9 State shall provide safeguards against physical,

10 emotional, or financial abuse or exploitation in

11 the provision of case management services and

12 covered home and community-based services.

13 ‘‘(e) INDIVIDUAL CHOICE.—The acceptance of bene14 fits under this section is a voluntary choice of the eligible

15 individual with disabilities or the individual’s representa16 tive. Nothing in this section shall be construed to require

17 such an individual to accept the services available under

18 this section, or to accept benefits under this section in19 stead of entering a nursing facility or intermediate care

20 facility for the mentally retarded. An eligible individual

21 with disabilities shall not be denied covered home and com22 munity-based services under this section solely because the

23 individual refuses to accept one such service, unless the

24 failure to accept such service would make other services
67

•S 2122 IS

1 ineffective or no alternative is available that is cost-effec2 tive and acceptable to the individual.

3 ‘‘(f) PAYMENT METHODS.—

4 ‘‘(1) IN GENERAL.—A State shall specify the

5 payment methods and rates to be used to reimburse

6 qualified providers and qualified case managers for

7 services furnished under the State’s program under

8 this section. Methods of payment specified by the

9 State may include reimbursement on a fee-for-serv10 ice basis, prepayment on a capitation basis, or a

11 combination of such methods. Payment rates speci12 fied by the State shall be sufficient to ensure that

13 the requirements of section 1902(a)(30)(A) are sat14 isfied. The State, at its option, may permit qualified

15 case managers to negotiate rates with qualified pro16 viders.

17 ‘‘(2) PAYMENT IN FULL.—The State shall re18 strict payment for covered home and community19 based services to qualified providers who agree to ac20 cept the payment rates specified by the State under

21 paragraph (1) as payment in full for such services.

22 ‘‘(3) COST SHARING.—A State may impose

23 nominal cost sharing charges for covered home and

24 community-based services furnished to eligible indi25 viduals with disabilities whose family income (as de-
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1 termined in accordance with section 1902(l)(3)(E))

2 exceeds 100 percent of the income official poverty

3 line (as defined by the Office of Management and

4 Budget, and revised annually in accordance with sec5 tion 673(2) of the Omnibus Budget Reconciliation

6 Act of 1981) applicable to a family of the size in7 volved.

8 ‘‘(g) MAINTENANCE OF EFFORT.—A State program

9 under this section must provide assurances that, in the

10 case of an individual receiving medical assistance for home

11 and community-based services under this title as of the

12 date of the enactment of this section, the State will con13 tinue to make available (either under this title or other14 wise) to such individual an appropriate level of assistance

15 for home and community-based services, taking into ac16 count the level of assistance provided as of such date and

17 the individual’s need for home and community-based

18 services.

19 ‘‘(h) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) COVERED HOME AND COMMUNITY-BASED

21 SERVICES.—

22 ‘‘(A) IN GENERAL.—The term ‘covered

23 home and community-based services’ means

24 case management services and other services
69

•S 2122 IS

1 furnished by a qualified provider, including the

2 following:

3 ‘‘(i) Personal assistance services.

4 ‘‘(ii) Homemaker and chore assist5 ance.

6 ‘‘(iii) Respite services.

7 ‘‘(iv) Assistive devices.

8 ‘‘(v) Adult day services.

9 ‘‘(vi) Habilitation and rehabilitation.

10 ‘‘(vii) Skilled home health care serv11 ices.

12 ‘‘(B) EXCLUSIONS AND LIMITATIONS.—

13 The term ‘covered home and community-based

14 services’ shall not include—

15 ‘‘(i) room and board; 

16 ‘‘(ii) services furnished in a hospital,

17 nursing facility, intermediate care facility

18 for the mentally retarded, or other institu19 tional care setting, as specified by the Sec20 retary;

21 ‘‘(iii) items or services covered under

22 a private insurance policy; or

23 ‘‘(iv) any services specified in a care

24 plan which are not specified in subpara25 graph (A).
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•S 2122 IS

1 ‘‘(C) PERSONAL ASSISTANCE SERVICES.—

2 The term ‘personal assistance services’ means

3 services specified by the State as personal as4 sistance services, and shall include at least

5 hands-on and standby assistance, supervision,

6 and cueing with activities of daily living.

7 ‘‘(2) ELIGIBLE INDIVIDUAL WITH DISABIL8 ITIES.—

9 ‘‘(A) IN GENERAL.—The term ‘eligible in10 dividual with disabilities’ means an individual

11 with disabilities—

12 ‘‘(i)(I) whose family income (as deter13 mined in accordance with section

14 1902(l)(3)(E)) does not exceed the phase15 in eligibility percentage (specified in sub16 paragraph (C)) of the income official pov17 erty line (as defined by the Office of Man18 agement and Budget, and revised annually

19 in accordance with section 673(2) of the

20 Omnibus Budget Reconciliation Act of

21 1981) applicable to a family of the size in22 volved; and

23 ‘‘(II) whose resources (other than re24 sources excluded pursuant to section 1613

25 (a) and (b)) are not more than $8,000 (or,
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•S 2122 IS

1 for a couple, the amount determined under

2 section 1924 with respect to the spouses of

3 institutionalized individuals); or

4 ‘‘(ii) who would meet the income and

5 resource requirements under clause (i) if

6 incurred expenses for services described in

7 clauses (i) through (vii) of paragraph

8 (1)(A) were deducted from income.

9 ‘‘(B) INDIVIDUALS EXCLUDED.—Notwith10 standing subparagraph (A), no individual with

11 disabilities shall be an eligible individual with

12 disabilities for purposes of this section if—

13 ‘‘(i) such individual is eligible for serv14 ices in a nursing facility or an intermediate

15 care facility for the mentally retarded; and

16 ‘‘(ii) a qualified case manager esti17 mates (under methods specified by the Sec18 retary) that the cost of furnishing covered

19 home and community-based services to the

20 individual under this section would be

21 higher than the cost of institutionalizing

22 the individual.

23 ‘‘(C) PHASE-IN ELIGIBILITY PERCENT24 AGE.—For purposes of subparagraph (A), the
72

•S 2122 IS

1 phase-in eligibility percentage for a calendar

2 year shall be—

3 ‘‘(i) for calendar year 1997, 90 per4 cent;

5 ‘‘(ii) for calendar year 1998, 110 per6 cent;

7 ‘‘(iii) for calendar year 1999, 130 per8 cent; and

9 ‘‘(iv) for calendar year 2000 and suc10 ceeding calendar years, 150 percent.

11 ‘‘(3) INDIVIDUAL WITH DISABILITIES.—

12 ‘‘(A) IN GENERAL.—The term ‘individual

13 with disabilities’ means any individual who is

14 described in any of the following categories of

15 individuals:

16 ‘‘(i) INDIVIDUALS REQUIRING HELP

17 WITH ACTIVITIES OF DAILY LIVING.—An

18 individual of any age who—

19 ‘‘(I) requires hands-on or standby

20 assistance, supervision, or cueing (as

21 defined in regulations) to perform two

22 or more activities of daily living (as

23 defined in subparagraph (B)); and
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•S 2122 IS

1 ‘‘(II) is expected to require such

2 assistance, supervision, or cueing over

3 a period of at least 100 days.

4 ‘‘(ii) INDIVIDUALS WITH MODERATE

5 COGNITIVE OR MENTAL IMPAIRMENT.—An

6 individual of any age—

7 ‘‘(I) whose score, on any stand8 ard mental status protocol appropriate

9 for measuring the individual’s particu10 lar condition, as specified by the Sec11 retary, indicates either moderate cog12 nitive impairment or moderate mental

13 impairment, or both;

14 ‘‘(II) who displays symptoms of

15 one or more serious behavioral prob16 lems, contained on a list of such prob17 lems specified by the Secretary, that

18 create a need for supervision to pre19 vent harm to the individual or others;

20 and

21 ‘‘(III) who is expected to meet

22 the conditions of clause (i) or (ii) over

23 a period of at least 100 days.

24 ‘‘(iii) INDIVIDUALS WITH SEVERE OR

25 PROFOUND MENTAL RETARDATION.—An
74

•S 2122 IS

1 individual of any age who has severe or

2 profound mental retardation (as deter3 mined according to a protocol specified by

4 the Secretary).

5 ‘‘(iv) SEVERELY DISABLED CHIL6 DREN.—An individual under 6 years of age

7 who—

8 ‘‘(I) has a severe disability or

9 chronic medical condition,

10 ‘‘(II) but for receiving services

11 under this section, would require insti12 tutionalization in a hospital, nursing

13 facility, or intermediate care facility

14 for the mentally retarded, and

15 ‘‘(III) is expected to have such

16 disability or condition and require

17 such services over a period of at least

18 100 days.

19 ‘‘(B) ACTIVITY OF DAILY LIVING.—The

20 term ‘activity of daily living’ means any of the

21 following:

22 ‘‘(i) Eating.

23 ‘‘(ii) Toileting.

24 ‘‘(iii) Dressing.

25 ‘‘(iv) Bathing.
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•S 2122 IS

1 ‘‘(v) Transferring.

2 ‘‘(vi) Continence.

3 ‘‘(4) QUALIFIED CASE MANAGER.—The term

4 ‘qualified case manager’ means a person who—

5 ‘‘(A) provides case management services to

6 an eligible individual with disabilities;

7 ‘‘(B) is not a relative of such individual;

8 ‘‘(C) has experience in—

9 ‘‘(i) assessing individuals’ functional

10 and cognitive impairment;

11 ‘‘(ii) establishing, periodically review12 ing, and revising individual care plans or

13 has been trained in such activities; and

14 ‘‘(iii) the provision of case manage15 ment services to individuals such as eligible

16 individuals with disabilities; and

17 ‘‘(D) meets such other standards estab18 lished by the Secretary or the State which may

19 include standards which assure—

20 ‘‘(i) the quality of case management

21 services; and

22 ‘‘(ii) that individuals receiving case

23 management services are not at risk of fi24 nancial exploitation.
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•S 2122 IS

1 ‘‘(5) QUALIFIED PROVIDER.—The term ‘quali2 fied provider’ means a provider who is licensed

3 under State law or who meets other criteria as the

4 Secretary or State may specify.

5 ‘‘(6) RELATIVE DEFINED.—The term ‘relative’

6 means an individual bearing a relationship to an7 other individual who is described in paragraphs (1)

8 through (8) of section 152(a) of the Internal Reve9 nue Code of 1986.’’. 

10 (c) PAYMENT TO STATES.—

11 (1) IN GENERAL.—Section 1903(a) (42 U.S.C.

12 1396b(a)), as amended by section 403(b), is amend13 ed—

14 (A) by striking ‘‘plus’’ at the end of para15 graph (7);

16 (B) by striking the period at the end of

17 paragraph (8) and inserting ‘‘; plus’’; and

18 (C) by adding at the end the following new

19 paragraph:

20 ‘‘(9) an amount equal to the Federal home and

21 community-based services matching percentage (as

22 defined in section 1905(t)) of the total amount ex23 pended during such quarter for covered home and

24 community-based services furnished under section

25 1931.’’.
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1 (2) FEDERAL HOME AND COMMUNITY-BASED

2 SERVICES MATCHING PERCENTAGE.—Section 1905

3 (42 U.S.C. 1396d) is amended by adding at the end

4 the following new subsection:

5 ‘‘(t) The term ‘Federal home and community-based

6 services matching percentage’ means, with respect to a

7 State, the State’s Federal medical assistance percentage

8 (as defined in subsection (b)) increased by 20 percentage

9 points, except that the Federal home and community10 based services matching percentage shall in no case be less

11 than 75 percent or more than 88 percent.’’.

12 (d) EFFECTIVE DATE.—The amendments made by

13 this section shall be effective with respect to calendar

14 quarters beginning on or after January 1, 1997.

15 SEC. 407. REPORTS BY THE SECRETARY ON CERTAIN IS16 SUES RELATING TO LONG-TERM CARE.

17 The Secretary shall submit a report to Congress an18 nually on—

19 (1) the effectiveness of State programs to fur20 nish home and community-based services to individ21 uals with disabilities under section 1931 of the So22 cial Security Act; and

23 (2) the growth and development of the market

24 for long-term care insurance.
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1 SEC. 408. REPORT BY THE SECRETARY ON LONG-TERM

2 CARE SERVICES FOR CHRONICALLY ILL INDI3 VIDUALS.

4 (a) IN GENERAL.—Not later than July 1, 1997, the

5 Secretary shall submit a report to Congress on the fea6 sibility and cost of including long-term care services for

7 chronically ill individuals as a benefit under a standard

8 benefit package to be offered under a reformed health care

9 system.

10 (b) CHRONICALLY ILL INDIVIDUAL.—The term

11 ‘‘chronically ill individual’’ means an individual with a se12 rious and persistent chronic health condition.

13 SEC. 409. CHRONIC CARE COMMISSION.

14 (a) ESTABLISHMENT.—There is established a com15 mission to be known as the Chronic Care Commission

16 (hereafter referred to in this section as the ‘‘Commis17 sion’’).

18 (b) MEMBERSHIP.—

19 (1) IN GENERAL.—The Commission shall con20 sist of—

21 (A) the Secretary of Health and Human

22 Services (hereafter referred to in this section as

23 the ‘‘Secretary’’); and

24 (B) 10 other members to be appointed by

25 the President, in consultation with the Majority

26 and Minority Leaders of the House of Rep-
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1 resentatives and the Senate, not later than 30

2 days after the date of the enactment of this sec3 tion.

4 (2) CHAIR.—The Secretary shall serve as the

5 Chair of the Commission.

6 (3) EXPERTISE.—The members of the Commis7 sion appointed under paragraph (1)(B) shall include

8 representatives of—

9 (A) chronically ill individuals;

10 (B) health care providers who furnish—

11 (i) primary care services;

12 (ii) acute care services;

13 (iii) institutional services; and

14 (iv) home and community-based serv15 ices;

16 (C) the health insurance industry; and

17 (D) Federal and State health programs.

18 (4) TERMS.—Members of the Commission shall

19 be appointed for the life of the Commission. A va20 cancy on the Commission shall be filled in the man21 ner in which the original appointment was made and

22 shall be subject to any conditions which applied with

23 respect to the original appointment.

24 (c) DUTIES.—Not later than July 1, 1997, the Com25 mission shall submit to Congress legislative recommenda-
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1 tions to simplify and improve chronic care services fur2 nished to chronically ill individuals. Such recommenda3 tions shall—

4 (1) encourage health care providers to establish

5 community based networks which furnish chronic

6 care services to chronically ill individuals;

7 (2) result in a reduction in the growth of the

8 cumulative costs of furnishing chronic care services

9 to such individuals across time and setting;

10 (3) outline chronic care service delivery reform

11 which simplifies systems for administration, financ12 ing, and delivery of such services to such individuals;

13 (4) identify barriers to integration of chronic

14 care services as established by existing legislative,

15 regulatory, and administrative practices; and

16 (5) provide for a private sector, community17 based approach to furnishing chronic care services to

18 such individuals.

19 (d) CONSULTATION WITH CERTAIN ENTITIES.—In

20 developing its legislative recommendations under sub21 section (c), the Commission shall consult with qualified en22 tities participating in the demonstration projects on acute

23 and long-term care integration conducted by the Secretary

24 under section 410.

25 (e) MEETINGS.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the Commission shall meet at the call of

3 the Chair.

4 (2) INITIAL MEETING.—Not later than 30 days

5 after the date on which all members of the Commis6 sion have been appointed, the Commission shall hold

7 its first meeting.

8 (3) QUORUM.—A majority of the members of

9 the Commission shall constitute a quorum, but a

10 lesser number of members may hold hearings.

11 (f) POWER OF THE COMMISSION TO HOLD HEAR12 INGS.—The Commission may hold such hearings, sit and

13 act at such times and places, take such testimony, and

14 receive such evidence as the Commission considers advis15 able to carry out the purposes of this section.

16 (g) COMMISSION PERSONNEL MATTERS.—

17 (1) COMPENSATION OF MEMBERS.—Each mem18 ber of the Commission who is not an officer or em19 ployee of the Federal Government shall be com20 pensated at a rate equal to the daily equivalent of

21 the annual rate of basic pay prescribed for level IV

22 of the Executive Schedule under section 5315 of title

23 5, United States Code, for each day (including travel

24 time) during which such member is engaged in the

25 performance of the duties of the Commission. All
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1 members of the Commission who are officers or em2 ployees of the United States shall serve without com3 pensation in addition to that received for their serv4 ices as officers or employees of the United States.

5 (2) TRAVEL EXPENSES.—The members of the

6 Commission shall be allowed travel expenses, includ7 ing per diem in lieu of subsistence, at rates author8 ized for employees of agencies under subchapter I of

9 chapter 57 of title 5, United States Code, while

10 away from their homes or regular places of business

11 in the performance of services for the Commission.

12 (3) DETAIL OF GOVERNMENT EMPLOYEES.—

13 Any Federal Government employee may be detailed

14 to the Commission without reimbursement, and such

15 detail shall be without interruption or loss of civil

16 service status or privilege.

17 (h) TERMINATION OF THE COMMISSION.—The Com18 mission shall terminate 90 days after the date on which

19 the Commission submits its legislative recommendations

20 under subsection (c).

21 (i) DEFINITIONS.—For purposes of this section—

22 (1) CHRONIC CARE SERVICES.—The term

23 ‘‘chronic care services’’ means a full range of indi24 vidualized services for chronically ill individuals, in25 cluding primary care, hospital, nursing home, and
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1 community-based services which satisfy the func2 tional, psychological, environmental, social, and med3 ical needs of such individuals and which enable such

4 individuals to optimize functional independence and

5 well being.

6 (2) CHRONICALLY ILL INDIVIDUAL.—The term

7 ‘‘chronically ill individual’’ means an individual with

8 a serious and persistent chronic health condition.

9 (j) AUTHORIZATION OF APPROPRIATIONS.—

10 (1) IN GENERAL.—There are authorized to be

11 appropriated such sums as may be necessary to

12 carry out the purposes of this section.

13 (2) AVAILABILITY.—Any sums appropriated

14 under the authorization contained in this subsection

15 shall remain available, without fiscal year limitation,

16 until expended.

17 SEC. 410. DEMONSTRATION PROJECTS ON ACUTE AND

18 LONG-TERM CARE INTEGRATION.

19 (a) PROJECTS AUTHORIZED.—Not later than Janu20 ary 1, 1996, the Secretary of Health and Human Services

21 (hereafter referred to in this section as the ‘‘Secretary’’)

22 shall begin to conduct demonstration projects under which

23 qualified entities test the effectiveness of various ap24 proaches to financing and providing integrated acute and

25 long-term care services to chronically ill individuals (as de-
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1 fined in section 408(h)(2)) and individuals with disabilities

2 (as defined in section 1931(h)(3) of the Social Security

3 Act).

4 (b) DEMONSTRATION PROJECTS DESCRIBED.—Dem5 onstration projects conducted under this section shall es6 tablish an approach to financing and providing integrated

7 acute and long-term care services to chronically ill individ8 uals and individuals with disabilities which—

9 (1) improves quality through—

10 (A) management of ongoing chronic condi11 tions rather than treatment of episodes;

12 (B) increasing the competency of individ13 uals furnishing care; and

14 (C) providing care which produces the best

15 outcomes;

16 (2) increases the satisfaction of individuals re17 ceiving care by—

18 (A) offering unified care over the duration

19 of an individual’s condition;

20 (B) simplifying access and transfer proce21 dures; and

22 (C) permitting such individuals to partici23 pate in decision making regarding their care;

24 and

25 (3) contains cumulative costs by—
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1 (A) managing costs as an individual’s con2 dition progresses;

3 (B) allowing providers of care to have con4 trol and flexibility; and

5 (C) financing and fostering prevention and

6 functional independence.

7 (c) APPLICATIONS.—Each qualified entity desiring to

8 conduct a demonstration project under this section shall

9 submit an application at such time as the Secretary deter10 mines appropriate containing—

11 (1) assurances that the acute and long-term

12 care services furnished by the entity to chronically ill

13 individuals and individuals with disabilities under

14 the demonstration project will cost less than if such

15 services were furnished to such individuals other

16 than under the demonstration project; and

17 (2) such other information as the Secretary de18 termines appropriate.

19 (d) NUMBER AND DURATION OF DEMONSTRATION

20 PROJECTS.—

21 (1) NUMBER.—The Secretary shall authorize

22 not more than 7 demonstration projects under this

23 section.
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1 (2) DURATION.—A demonstration project under

2 this section shall be conducted for a period of 7

3 years.

4 (e) EVALUATION AND REPORTS.—The Secretary

5 shall evaluate the demonstration projects conducted under

6 this section and shall submit to Congress—

7 (1) an interim report, not later than 3 years

8 after the date on which the first demonstration

9 project begins, describing the status of the dem10 onstration projects; and

11 (2) a final report, not later than 1 year after

12 the last of the demonstration projects is completed,

13 evaluating the effectiveness of the demonstration

14 projects.

15 (f) DEFINITION OF QUALIFIED ENTITY.—For pur16 poses of this section, the term ‘‘qualified entity’’ means

17 an entity meeting the eligibility criteria established by the

18 Secretary.

19 (g) AUTHORIZATION OF APPROPRIATIONS.—

20 (1) IN GENERAL.—There are authorized to be

21 appropriated such sums as may be necessary to

22 carry out the purposes of this section.

23 (2) AVAILABILITY.—Any sums appropriated

24 under the authorization contained in this subsection
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1 shall remain available, without fiscal year limitation,

2 until expended.

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