Calendar No. 514

103D CONGRESS

2D SESSION S. 2205

A BILL

To amend the Social Security Act and the Internal

services, and for other purposes.and personal responsibility in financing suchencourage greater private sector participationmoval of regulatory and legislative barriers, tocost savings through provider incentives and recess to quality long-term care services, to obtainRevenue Code of 1986 to provide improved acJULY 11, 1994

Read the second time and placed on the calendar
II

Calendar No. 514

103D CONGRESS

2D SESSION S. 2205

To amend the Social Security Act and the Internal Revenue Code of 1986

to provide improved access to quality long-term care services, to obtain

cost savings through provider incentives and removal of regulatory and

legislative barriers, to encourage greater private sector participation and

personal responsibility in financing such services, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 16 (legislative day, JUNE 7), 1994

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

JULY 11, 1994

Read the second time and placed on the calendar

A BILL

To amend the Social Security Act and the Internal Revenue

Code of 1986 to provide improved access to quality longterm care services, to obtain cost savings through provider incentives and removal of regulatory and legislative

barriers, to encourage greater private sector participation

and personal responsibility in financing such services,

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,
2

•S 2205 PCS

1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

3 ‘‘Quality Care For Life Act of 1994’’.

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

5 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.

TITLE I—PROSPECTIVE PAYMENT SYSTEM FOR NURSING

FACILITIES

Sec. 100. Short title.

Sec. 101. Definitions.

Sec. 102. Payment objectives.

Sec. 103. Powers and duties of the Secretary.

Sec. 104. Relationship to title XVIII of the Social Security Act.

Sec. 105. Establishment of resident classification system.

Sec. 106. Cost centers for nursing facility payment.

Sec. 107. Resident assessment.

Sec. 108. The per diem rate for nursing service costs.

Sec. 109. The per diem rate for administrative and general costs.

Sec. 110. Payment for fee-for-service ancillary services.

Sec. 111. Reimbursement of selected ancillary services and other costs.

Sec. 112. The per diem rate for property costs.

Sec. 113. Mid-year rate adjustments.

Sec. 114. Exception to payment methods for new and low-volume nursing facilities.

Sec. 115. Appeal procedures.

Sec. 116. Effective date.

TITLE II—SUBACUTE CARE CONTINUUM AMENDMENTS OF 1994

Sec. 200. Short title.

Sec. 201. Findings and purposes.

Sec. 202. Creation of a ‘‘level playing field’’ to encourage the development of

subacute care providers.

Sec. 203. Exception process from medicare routine cost limits.

Sec. 204. Physician visits and consultations for medicare patients in skilled

nursing facilities.

Sec. 205. Coverage of respiratory therapy services in skilled nursing facilities

under the medicare program.

Sec. 206. DRGS appropriate for subacute care in skilled nursing facilities.

Sec. 207. Subacute care services under title XIX.

Sec. 208. Effective date.

TITLE III—LONG-TERM CARE TAX CLARIFICATION

Sec. 301. Short title.

Sec. 302. Treatment of long-term care insurance or plans.

Sec. 303. Qualified long-term services treated as medical care.
3

•S 2205 PCS

Sec. 304. Qualified long-term care insurance contracts permitted to be offered

in cafeteria plans.

Sec. 305. Inclusion in income of excessive long-term care benefits.

Sec. 306. Tax reserves for qualified long-term care insurance contracts.

Sec. 307. Effective date.

TITLE IV—LONG-TERM CARE INSURANCE STANDARDS

Sec. 400. Short title.

Sec. 401. National Long-Term Care Insurance Advisory Council.

Sec. 402. Policy requirements.

Sec. 403. Additional requirements for issuers of long-term care insurance policies.

Sec. 404. Relation to State law.

Sec. 405. Uniform language and definitions.

Sec. 406. Effective dates.

TITLE V—FINANCIAL ELIGIBILITY STANDARDS

Sec. 501. Revisions to financial eligibility provisions.

Sec. 502. Effective date.

TITLE VI—ESTABLISHMENT OF PROGRAM FOR HOME AND COMMUNITY-BASED SERVICES FOR CERTAIN INDIVIDUALS WITH

DISABILITIES

Sec. 600. Short title.

Sec. 601. Establishment of program.

Sec. 602. Increased resource disregards for nursing facility residents.

TITLE VII—ASSET TRANSFERS

Sec. 701. Transfers of assets.

Sec. 702. Treatment of certain trusts.

Sec. 703. Effective date.

1 SEC. 2. PURPOSES.

2 The purposes of this Act are to—

3 (1) enact a prospective payment system for

4 nursing facility services under all Federal health

5 care programs that promotes quality care, assures

6 equal access for all residents regardless of level of

7 service needed, maintains adequate capital forma8 tion, provides for efficiency incentives for providers,

9 and contains costs;
4

•S 2205 PCS

1 (2) encourage the use of cost-effective subacute

2 care in nursing facilities by providing equitable reim3 bursement under all appropriate Federal health care

4 programs and by eliminating regulatory and legisla5 tive barriers to providing such care;

6 (3) amend the Internal Revenue Code of 1986

7 to clarify the Federal tax treatment of long term

8 care insurance policies to promote the purchase of

9 such policies;

10 (4) amend the Internal Revenue Code of 1986

11 to develop reasonable Federal standards for long

12 term care insurance that promote consumer protec13 tion;

14 (5) modify financial eligibility standards under

15 the medicaid program to ensure an inclusive ac16 counting of individual assets and promote personal

17 responsibility for long term care expenses;

18 (6) establish a program for home and commu19 nity-based services for individuals with disabilities

20 under the medicaid program to provide beneficiaries,

21 whose needs would be determined by functional eligi22 bility standards, with expanded choice of services

23 within a continuum of care, and contain costs by en24 couraging the use of appropriate levels of care; and
5

•S 2205 PCS

1 (7) revise the transfer of asset prohibitions

2 under the medicaid program to make the 60-month

3 look-back period in the case of trusts applicable to

4 all transfers of assets, to require ‘‘income cap

5 trusts’’ and ‘‘nonprofit association trusts’’ to be ir6 revocable, to include the conversion of personal or

7 real property into annuities as an unlawful transfer,

8 and to direct the Secretary, by regulation, to close

9 such other loopholes not covered by the Omnibus

10 Budget Reconciliation Act of 1993 (Public Law

11 103–66).

12 TITLE I—PROSPECTIVE PAY13 MENT SYSTEM FOR NURSING

14 FACILITIES

15 SEC. 100. SHORT TITLE.

16 This title may be cited as the ‘‘Prospective Payment

17 System for Nursing Facilities Amendments of 1994’’.

18 SEC. 101. DEFINITIONS.

19 For purposes of this title:

20 (1) ‘‘Acuity payment’’ means a fixed amount

21 that will be added to the facility-specific prices for

22 certain resident classes designated by the Secretary

23 as requiring heavy care.

24 (2) ‘‘Aggregated resident invoice’’ means a com25 pilation of the per resident invoices of a nursing fa-
6

•S 2205 PCS

1 cility which contain the number of resident days for

2 each resident and the resident class of each resident

3 at the nursing facility during a particular month.

4 (3) ‘‘Allowable costs’’ means costs which HCFA

5 has determined to be necessary for a nursing facility

6 to incur according to the Provider Reimbursement

7 Manual (hereinafter referred to as ‘‘HCFA–Pub.

8 15’’).

9 (4) ‘‘Base year’’ means the most recent cost re10 porting period (consisting of a period which is 12

11 months in length, except for facilities with new own12 ers, in which case the period is not less than 4

13 months nor more than 13 months) for which cost

14 data of nursing facilities is available to be used for

15 the determination of a prospective rate.

16 (5) ‘‘Case mix weight’’ means the total case mix

17 score of a facility calculated by multiplying the resi18 dent days in each resident class by the relative

19 weight assigned to each resident class, and summing

20 the resulting products across all resident classes.

21 (6) ‘‘Complex medical equipment’’ means items

22 such as ventilators, intermittent positive pressure

23 breathing (IPPB) machines, nebulizers, suction

24 pumps, continuous positive airway pressure (CPAP)

25 devices, and bead beds such as air fluidized beds.
7

•S 2205 PCS

1 (7) ‘‘Distinct part nursing facility’’ means an

2 institution which has a distinct part that is certified

3 under title XVIII of the Social Security Act and

4 meets the requirements of section 201.1 of the

5 Skilled Nursing Facility Manual published by HCFA

6 (hereinafter referred to as ‘‘HCFA–Pub. 12’’).

7 (8) ‘‘Efficiency incentive’’ means a payment

8 made to a nursing facility in recognition of incurring

9 costs below a prespecified level.

10 (9) ‘‘Fixed equipment’’ means equipment which

11 meets the definition of building equipment in section

12 104.3 of HCFA–Pub. 15. ‘‘Fixed equipment’’ in13 cludes, but is not limited to, attachments to build14 ings such as wiring, electrical fixtures, plumbing,

15 elevators, heating systems, and air conditioning sys16 tems.

17 (10) ‘‘Geographic ceiling’’ means a limitation

18 on payments in any given cost center for nursing fa19 cilities in one of no fewer than 8 geographic regions,

20 further subdivided into rural and urban areas, as

21 designated by the Secretary.

22 (11) ‘‘Heavy care’’ means an exceptionally high

23 level of care which the Secretary has determined is

24 required for residents in certain resident classes.
8

•S 2205 PCS

1 (12) ‘‘HCFA’’ means the Health Care Financ2 ing Administration of the Department of Health and

3 Human Services.

4 (13) ‘‘Indexed forward’’ means an adjustment

5 made to a per diem rate to account for cost in6 creases due to inflation or other factors during an

7 intervening period following the base year and pro8 jecting such cost increases for a future period in

9 which the rate applies. Indexing forward under this

10 title shall be determined from the midpoint of the

11 base year to the midpoint of the rate year.

12 (14) ‘‘Marshall Swift segmented cost method’’

13 means an appraisal method published by the Mar14 shall Swift Valuation Service.

15 (15) ‘‘Minimum Data Set (hereinafter referred

16 to as ‘MDS’)’’ means a resident assessment instru17 ment, currently recognized by HCFA, in addition to

18 any extensions to MDS, such as MDSs, as well as

19 any extensions to accommodate subacute care which

20 contain an appropriate core of assessment items

21 with definitions and coding categories needed to

22 comprehensively assess a nursing facility resident.

23 (16) ‘‘Major movable equipment’’ means equip24 ment which meets the definition of major movable

25 equipment in section 104.4 of HCFA–Pub. 15.
9

•S 2205 PCS

1 ‘‘Major movable equipment’’ includes, but is not lim2 ited to, accounting machines, beds, wheelchairs,

3 desks, vehicles, and X-ray machines.

4 (17) ‘‘Nursing facility’’ means an institution

5 which meets the requirements of a ‘‘skilled nursing

6 facility’’ under section 1819(a) of the Social Security

7 Act (42 U.S.C. 1395i–3(a)) and a ‘‘nursing facility’’

8 under section 1919(a) of the Social Security Act (42

9 U.S.C. 1396r(a)).

10 (18) ‘‘Per bed limit’’ means a per bed ceiling on

11 the fair asset value of a nursing facility for one of

12 the geographic regions designated by the Secretary.

13 (19) ‘‘Per diem rate’’ means a rate of payment

14 for the costs of covered services for a resident day.

15 (20) ‘‘Relative weight’’ means the index of the

16 value of the resources required for a given resident

17 class relative to the value of resources of either a

18 base resident class or the average of all the resident

19 classes.

20 (21) ‘‘R. S. Means Index’’ means the index of

21 the R. S. Means Company, Inc., specific to commer22 cial/industrial institutionalized nursing facilities,

23 which is based upon a survey of prices of common

24 building materials and wage rates for nursing facil25 ity construction.
10

•S 2205 PCS

1 (22) ‘‘Rebase’’ means the process of updating

2 nursing facility cost data for a subsequent rate year

3 using a more recent base year.

4 (23) ‘‘Rental rate’’ means a percentage that

5 will be multiplied by the fair asset value of property

6 to determine the total annual rental payment in lieu

7 of property costs.

8 (24) ‘‘Resident classification system’’ means a

9 system which categorizes residents into different

10 resident classes according to similarity of the

11 assessed condition and required services of such

12 residents.

13 (25) ‘‘Resident day’’ means the period of serv14 ices for one resident, regardless of payment source,

15 for one continuous 24 hours of services. The day of

16 admission of the resident constitutes a resident day

17 but the day of discharge does not constitute a resi18 dent day. Bed hold days are not to be considered

19 resident days, and bed hold day revenues are not to

20 be offset.

21 (26) ‘‘Resource Utilization Groups, Version III

22 (hereinafter referred to as ‘RUG–III’)’’ means a cat23 egory-based resident classification system used to

24 classify nursing facility residents into mutually ex25 clusive RUG–III groups. Residents in each RUG–III
11

•S 2205 PCS

1 group utilize similar quantities and patterns of

2 resources.

3 (27) ‘‘Secretary’’ means the Secretary of

4 Health and Human Services.

5 SEC. 102. PAYMENT OBJECTIVES.

6 (a) Payment rates under the Prospective Payment

7 System for Nursing Facilities shall reflect the following

8 objectives:

9 (1) To maintain an equitable and fair balance

10 between cost containment and quality of care in

11 nursing facilities.

12 (2) To encourage nursing facilities to admit

13 residents without regard to such residents’ source of

14 payment.

15 (3) To provide an incentive to nursing facilities

16 to admit and provide care to persons in need of com17 paratively greater care.

18 (4) To maintain administrative simplicity, for

19 both nursing facilities and the Secretary.

20 (5) To encourage investment in buildings and

21 improvements to nursing facilities (capital forma22 tion) as necessary to maintain quality and access.
12

•S 2205 PCS

1 SEC. 103. POWERS AND DUTIES OF THE SECRETARY.

2 (a) The Secretary shall establish by regulation the

3 implementation of this title. The rates determined under

4 this title shall reflect the objectives in section 102.

5 (b) The Secretary may require that each nursing fa6 cility file such data, statistics, schedules, or information

7 as required to enable the Secretary to implement this title.

8 SEC. 104. RELATIONSHIP TO TITLE XVIII OF THE SOCIAL

9 SECURITY ACT.

10 (a) No provision in this title shall replace, or other11 wise affect, the skilled nursing facility benefit under title

12 XVIII of the Social Security Act.

13 (b) The provisions of HCFA–Pub. 15 shall apply to

14 the determination of allowable costs under this title except

15 to the extent that such provisions conflict with any other

16 provision in this title.

17 SEC. 105. ESTABLISHMENT OF RESIDENT CLASSIFICATION

18 SYSTEM.

19 (a)(1) The Secretary shall establish a resident classi20 fication system which shall group residents into classes ac21 cording to similarity of the assessed condition and re22 quired services of such residents.

23 (2) The resident classification system shall be mod24 elled after the RUG–III system and all updated versions

25 of that system.
13

•S 2205 PCS

1 (3) The resident classification system shall be reflec2 tive of the necessary professional and paraprofessional

3 nursing staff time and costs required to address the care

4 needs of nursing facility residents.

5 (b)(1) The Secretary shall assign a relative weight for

6 each resident class based on the relative value of the re7 sources required for each resident class. The assignment

8 of relative weights for resident classes shall be performed

9 for each geographic region as determined in accordance

10 with subsection (c).

11 (2) In assigning the relative weights of the resident

12 classes in a geographic region, the Secretary shall utilize

13 information derived from the most recent MDSs of all of

14 the nursing facilities in a geographic region.

15 (3) The relative weights of the resident classes in

16 each geographic region shall be recalibrated every 3 years

17 based on any changes in the cost or amount of resources

18 required for the care of a resident in the resident class.

19 (c)(1) The Secretary shall designate no fewer than

20 8 geographic regions for the total United States. Within

21 each geographic region, the Secretary shall take appro22 priate account of variations in cost between urban and

23 rural areas.

24 (2) There shall be no peer grouping of nursing facili25 ties (e.g., based on whether the nursing facilities are hos-
14

•S 2205 PCS

1 pital-based or not) other than peer-grouping by geographic

2 region.

3 SEC. 106. COST CENTERS FOR NURSING FACILITY PAY4 MENT.

5 (a) Consistent with the objectives established in sec6 tion 102, the Secretary shall determine payment rates for

7 nursing facilities using the following cost-service

8 groupings:

9 (1) The nursing service cost center shall include

10 salaries and wages for the Director of Nursing,

11 Quality Assurance Nurses, registered nurses, li12 censed practical nurses, nurse aides (including wages

13 related to initial and on-going nurse aide training

14 and other on-going or periodic training costs in15 curred by nursing personnel), contract nursing,

16 fringe benefits and payroll taxes associated there17 with, medical records, and nursing supplies.

18 (2) The administrative and general cost center

19 shall include all expenses (including salaries, bene20 fits, and other costs) related to administration, plant

21 operation, maintenance and repair, housekeeping, di22 etary (excluding raw food), central services and sup23 ply (excluding medical supplies), laundry, and social

24 services.
15

•S 2205 PCS

1 (3) Ancillary services to be paid on a fee-for2 service basis shall include physical therapy, occupa3 tional therapy, speech therapy, respiratory therapy,

4 hyperalimentation, and complex medical equipment

5 (CME). These fee-for-service ancillary service pay6 ments under Part A of title XVIII of the Social Se7 curity Act shall not affect the reimbursement of an8 cillary services under part B of title XVIII of the

9 Social Security Act.

10 (4) The cost center for selected ancillary serv11 ices and other costs shall include drugs, raw food,

12 medical supplies, IV therapy, X-ray services, labora13 tory services, property tax, property insurance,

14 minor equipment, and all other costs not included in

15 the other 4 cost/service groupings.

16 (5) The property cost center shall include de17 preciation on the buildings and fixed equipment,

18 major movable equipment, motor vehicles, land im19 provements, amortization of leasehold improvements,

20 lease acquisition costs, and capital leases; interest on

21 capital indebtedness; mortgage interest; lease costs;

22 and equipment rental expense.

23 (b) Nursing facilities shall be paid a prospective, fa24 cility-specific, per diem rate based on the sum of the per

25 diem rates established for the nursing service, administra-
16

•S 2205 PCS

1 tive and general, and property cost centers as determined

2 in accordance with sections 108, 109, and 112.

3 (c) Nursing facilities shall be paid a facility-specific

4 prospective rate for each unit of the fee-for-service ancil5 lary services as determined in accordance with section

6 110.

7 (d) Nursing facilities shall be reimbursed for selected

8 ancillary services and other costs on a retrospective basis

9 in accordance with section 111.

10 SEC. 107. RESIDENT ASSESSMENT.

11 (a) The nursing facility shall perform a resident as12 sessment in accordance with section 1819(b)(3) of the So13 cial Security Act (42 U.S.C. 1395i–3(a)) within 14 days

14 of admission of the resident and at such other times as

15 required by that section.

16 (b) The resident assessment shall be used to deter17 mine the resident class of each resident in the nursing fa18 cility for purposes of determining the per diem rate for

19 the nursing service cost center in accordance with section

20 108.

21 SEC. 108. THE PER DIEM RATE FOR NURSING SERVICE

22 COSTS.

23 (a)(1) The nursing service cost center rate shall be

24 calculated using a prospective, facility-specific per diem
17

•S 2205 PCS

1 rate based on the nursing facility’s case-mix weight and

2 nursing service costs during the base year.

3 (2) The case-mix weight of a nursing facility shall

4 be obtained by multiplying the number of resident days

5 in each resident class at a nursing facility during the base

6 year by the relative weight assigned to each resident class

7 in the appropriate geographic region. Once this calculation

8 is performed for each resident class in the nursing facility,

9 the sum of these products shall constitute the case-mix

10 weight for the nursing facility.

11 (3) A facility nursing unit value for the nursing facil12 ity for the base year shall be obtained by dividing the nurs13 ing service costs for the base year, which shall be indexed

14 forward from the midpoint of the base period to the mid15 point of the rate period using the DRI McGraw-Hill

16 HCFA Nursing Home Without Capital Market Basket, by

17 the case-mix weight of the nursing facility for the base

18 year.

19 (4) A facility-specific nursing services price for each

20 resident class shall be obtained by multiplying the lower

21 of the indexed facility unit value of the nursing facility

22 during the base year or the geographic ceiling, as deter23 mined in accordance with subsection (b), by the relative

24 weight of the resident class.
18

•S 2205 PCS

1 (5) The Secretary shall designate certain resident

2 classes as requiring heavy care. An acuity payment of 3

3 percent of the facility-specific nursing services price shall

4 be added on to the facility-specific price for each resident

5 class which the Secretary has designated as requiring

6 heavy care. The acuity payment is intended to provide an

7 incentive to nursing facilities to admit residents requiring

8 heavy care.

9 (6) The per diem rate for the nursing service cost

10 center for each resident in a resident class shall constitute

11 the facility-specific price, plus the acuity payment where

12 appropriate.

13 (7) The per diem rate for the nursing service cost

14 center, including the facility-specific price and the acuity

15 payment, shall be rebased annually.

16 (8) To determine the payment amount to a nursing

17 facility for the nursing service cost center, the Secretary

18 shall multiply the per diem rate (including the acuity pay19 ment) for a resident class by the number of resident days

20 for each resident class based on aggregated resident in21 voices which each nursing facility shall submit on a month22 ly basis.

23 (b)(1) The facility unit value identified in subsection

24 (a)(3) shall be subjected to geographic ceilings established
19

•S 2205 PCS

1 for the geographic regions designated by the Secretary in

2 section 105(c).

3 (2) The geographic ceiling shall be determined by

4 first creating an array of indexed facility unit values in

5 a geographic region from lowest to highest. Based on this

6 array, the Secretary shall identify a fixed proportion be7 tween the indexed facility unit value of the nursing facility

8 which contained the medianth resident day in the array

9 (except as provided in subsection (b)(4)) and the indexed

10 facility unit value of the nursing facility which contained

11 the 95th percentile resident day in that array during the

12 first year of operation of the Prospective Payment System

13 For Nursing Facilities. The fixed proportion (e.g., 1.1

14 times the median or 110 percent of the median) shall re15 main the same in subsequent years.

16 (3) To obtain the geographic ceiling on the indexed

17 facility unit value for nursing facilities in a geographic re18 gion in each subsequent year, the fixed proportion identi19 fied pursuant to subsection (b)(2) shall be multiplied by

20 the indexed facility unit value of the nursing facility which

21 contained the medianth resident day in the array of facil22 ity unit values for the geographic region during the base

23 year.

24 (4) The Secretary shall exclude low-volume and new

25 nursing facilities, as defined in subsections (a) and (b) of
20

•S 2205 PCS

1 section 113, respectively, for purposes of determining the

2 geographic ceiling for the nursing service cost center.

3 (c) The Secretary shall establish by regulation, proce4 dures for allowing exceptions to the geographic ceiling im5 posed on the nursing service cost center. The procedure

6 shall permit exceptions based on the following factors:

7 (1) Local supply and/or labor shortages which

8 substantially increase costs to specific nursing facili9 ties.

10 (2) Higher per resident day usage of contract

11 nursing personnel, if utilization of contract nursing

12 personnel is warranted by local circumstances, and

13 the provider has taken all reasonable measures to

14 minimize contract personnel expense.

15 (3) Extraordinarily low proportion of distinct

16 part nursing facilities in a geographic region result17 ing in a geographic ceiling which unfairly restricts

18 the reimbursement of distinct part facilities.

19 (4) Regulatory changes that increase costs to

20 only a subset of the nursing facility industry.

21 (5) The offering of a new institutional health

22 service or treatment program by a nursing facility

23 (in order to account for initial start-up costs).
21

•S 2205 PCS

1 (6) Disproportionate usage of part-time employ2 ees, where adequate numbers of full-time employees

3 cannot reasonably be obtained.

4 (7) Other cost producing factors, to be specified

5 by the Secretary in regulations that are specific to

6 a subset of facilities in a geographic region (except

7 case-mix variation).

8 SEC. 109. THE PER DIEM RATE FOR ADMINISTRATIVE AND

9 GENERAL COSTS.

10 (a)(1) Payment relative to the administrative and

11 general cost center shall be a facility-specific, prospective,

12 per diem rate.

13 (2) The Secretary shall assign a per diem rate to a

14 nursing facility by applying 2 standards which shall be cal15 culated as follows:

16 (A) Standard A shall be derived for each geo17 graphic region by first creating an array of indexed

18 nursing facility administrative and general per diem

19 costs from lowest to highest. The Secretary shall

20 then identify a fixed proportion by dividing the in21 dexed administrative and general per diem costs of

22 the nursing facility which contained the medianth

23 resident day of the array (except as provided in sub24 section (a)(4)) into the indexed administrative and

25 general per diem costs of the nursing facility which
22

•S 2205 PCS

1 contained the 75th percentile resident day in that

2 array. Standard A for each base year shall con3 stitute the product of this fixed proportion (e.g., 1.1

4 times the median or 110 percent of the median) and

5 the administrative and general indexed per diem

6 costs of the nursing facility which contained the

7 medianth resident day in the array of such costs

8 during the base year.

9 (B) Standard B shall be derived using the same

10 calculation as in subparagraph (A) except that the

11 fixed proportion shall use the indexed administrative

12 and general costs of the nursing facility containing

13 the 85th percentile, rather than the 75th percentile,

14 resident day in the array of such costs.

15 (3) The Secretary shall use the geographic regions

16 identified in section 105(c) for purposes of determining

17 Standard A and Standard B.

18 (4) The Secretary shall exclude low-volume and new

19 nursing facilities, as defined in subsections (a) and (b) of

20 section 113, respectively, for purposes of determining

21 Standard A and Standard B.

22 (5) To determine a nursing facility’s per diem rate

23 for the administrative and general cost center, Standard

24 A and Standard B shall be applied to a nursing facility’s

25 administrative and general per diem costs, indexed for-
23

•S 2205 PCS

1 ward using the DRI McGraw-Hill HCFA Nursing Home

2 Without Capital Market Basket, as follows:

3 (A) Each nursing facility having indexed costs

4 which fall below the median shall be assigned a rate

5 equal to such facility’s individual indexed costs plus

6 an ‘‘efficiency incentive’’ equal to one half of the dif7 ference between the median and Standard A.

8 (B) Each nursing facility having indexed costs

9 which fall below Standard A but at or above the me10 dian shall be assigned a per diem rate equal to such

11 facility’s individual indexed costs plus an ‘‘efficiency

12 incentive’’ equal to one-half of the difference be13 tween such facility’s indexed costs and Standard A.

14 (C) Each nursing facility having indexed costs

15 which fall between Standard A and Standard B shall

16 be assigned a rate equal to Standard A plus one-half

17 of the difference between such facility’s indexed

18 costs and Standard A.

19 (D) Each nursing facility having indexed costs

20 which exceed Standard B shall be assigned a rate as

21 if such facility’s costs equaled Standard B. These

22 nursing facilities shall be assigned a per diem rate

23 equal to Standard A plus one-half of the difference

24 between Standard A and Standard B.
24

•S 2205 PCS

1 (E) For purposes of subparagraphs (A) through

2 (D), the median represents the indexed administra3 tive and general per diem costs of the nursing facil4 ity which contained the medianth resident day in the

5 array of such costs during the base year in the geo6 graphic region.

7 (b) Rebasing of the payment rates for administrative

8 and general costs shall occur no less frequently than once

9 a year.

10 SEC. 110. PAYMENT FOR FEE-FOR-SERVICE ANCILLARY

11 SERVICES.

12 (a) Payment for each ancillary service enumerated in

13 section 106(a)(3), such as physical therapy, shall be cal14 culated and paid on a prospective fee-for-service basis.

15 (b) The Secretary shall identify the fee for each of

16 the fee-for-service ancillary services for a particular nurs17 ing facility by dividing the nursing facility’s actual costs,

18 including overhead allocated through the cost finding proc19 ess, of providing each particular service, indexed forward

20 using the DRI McGraw-Hill HCFA Nursing Home With21 out Capital Market Basket, by the units of the particular

22 service provided by the nursing facility during the cost

23 year.
25

•S 2205 PCS

1 (c) The fee for each of the fee-for-service ancillary

2 services shall be calculated at least once a year for each

3 facility and ancillary service.

4 SEC. 111. REIMBURSEMENT OF SELECTED ANCILLARY

5 SERVICES AND OTHER COSTS.

6 (a) Reimbursement of selected ancillary services and

7 other costs identified in section 106(a)(4), such as drugs

8 and medical supplies, shall be reimbursed on a retrospec9 tive basis as pass-through costs, including overhead allo10 cated through the cost-finding process.

11 (b) The Secretary shall set charge-based interim rates

12 for selected ancillary services and other costs for each

13 nursing facility providing such services. Any overpayments

14 or underpayments resulting from the difference between

15 the interim and final settlement rates shall be either re16 funded by the nursing facility or paid to the nursing facil17 ity following submission of a timely filed medicare cost

18 report.

19 SEC. 112. THE PER DIEM RATE FOR PROPERTY COSTS.

20 (a)(1) The basis for payment within the property cost

21 center for nursing facilities shall be calculated and paid

22 on a prospective (except as provided for newly constructed

23 facilities in subsection (d)(2)), facility-specific, per resi24 dent day rate based on the fair asset value of the property.
26

•S 2205 PCS

1 (2)(A) The fair asset value of the property shall con2 stitute the sum of the market value of the land (including

3 site preparation costs), a reconstruction cost appraised

4 value for the buildings and fixed equipment, and the prod5 uct of the number of beds in the nursing facility and a

6 per bed allowance for major movable equipment.

7 (B) The land, buildings, and fixed equipment which

8 are included in determining the fair asset value must be

9 used in connection with the care of residents.

10 (C) Appraisals for the buildings and fixed equipment

11 shall be performed using the Marshall-Swift segmented

12 cost method. A nursing facility shall be appraised every

13 4 years.

14 (D) The Secretary shall utilize an annual allowance

15 of $3,500 per bed for major movable equipment for a

16 nursing facility. The Secretary shall review the annual al17 lowance for major movable equipment every 5 years to de18 termine its accuracy.

19 (E) If a nursing facility has commenced a renovation

20 to a building and fixed equipment between appraisals the

21 cost of which constitutes at least 5 percent of the total

22 value of the existing building and the fixed equipment,

23 such facility may submit documentation as to the cost of

24 the renovation during the previous year. The Secretary

25 shall add the reasonable costs of the major renovation for
27

•S 2205 PCS

1 the previous year to the fair asset value of the facility.

2 This new asset value is to be the base for indexing until

3 the next full appraisal.

4 (F) The value of the assets is determined through

5 appraisals, indexing, and the application of allowances,

6 and is, therefore, unaffected by sales transactions, refi7 nancing, or other changes in financing. Accordingly, the

8 concept of recapture of depreciation is inapplicable to fa9 cilities whose payment is established under this title.

10 (3) The value of the land, buildings, and fixed equip11 ment shall be indexed annually between reappraisals as

12 follows:

13 (A) The land shall be indexed using Consumer

14 Price Index Urban.

15 (B) The buildings and fixed equipment shall be

16 indexed annually using the R. S. Means Index.

17 (4) The annual allowance for major movable equip18 ment shall be indexed annually using the hospital equip19 ment index of the Marshall Swift Valuation Service.

20 (5) The Secretary shall adjust the indexes used for

21 the land, buildings and fixed equipment, and major mov22 able equipment for the different geographic regions.

23 (b)(1) The Secretary shall establish a per bed limit

24 on the fair asset value of a nursing facility for each geo25 graphic region, as designated in section 105(c). The per
28

•S 2205 PCS

1 bed limit shall be equal to the average indexed costs in2 curred by all recently constructed nursing facilities in the

3 geographic region which have been designed and con4 structed in an efficient manner.

5 (2) The per bed limit on the fair asset value shall

6 be indexed annually using the R. S. Means Index.

7 (3) The per bed limit shall be recalculated every 5

8 years.

9 (c) The total annual rental shall constitute the prod10 uct of the lower of the indexed fair asset value or the in11 dexed per bed limit and a rental rate which shall be based

12 on the average yield for 20 year United States Treasury

13 Bonds during the prior year plus a risk premium of 3 per14 centage points.

15 (d)(1) The per resident day rental shall be obtained

16 by dividing the total annual rental by 90 percent of the

17 annual licensed bed days. The per resident day rental shall

18 constitute the per diem rate attributable to the property

19 cost center.

20 (2) The per resident day rental rate for a newly-con21 structed facility during such facility’s first year of oper22 ation shall be based on the total annual rental divided by

23 the greater of 50 percent of available resident days or ac24 tual annualized resident days up to 90 percent of annual
29

•S 2205 PCS

1 licensed bed days during such facility’s first year of oper2 ation.

3 (e) Facilities in operation prior to the effective date

4 of this title shall receive the per resident day rental or

5 actual costs, as determined in accordance with HCFA–

6 Pub. 15, whichever is greater, except that a nursing facil7 ity shall be reimbursed the per resident day rental on and

8 after the earlier of—

9 (1) the date upon which the nursing facility

10 changes ownership;

11 (2) the date the nursing facility accepts the per

12 resident day rental; or

13 (3) the date of the renegotiation of the lease for

14 the land and/or buildings, not including the exercise

15 of optional extensions specifically included in the

16 original lease agreement or valid extensions thereof.

17 SEC. 113. MID-YEAR RATE ADJUSTMENTS.

18 (a)(1) The Secretary shall establish by regulation, a

19 procedure for granting mid-year rate adjustments for the

20 nursing service, administrative and general, and fee-for21 service ancillary services cost centers.

22 (2) The mid-year rate adjustment procedure shall re23 quire the Secretary to grant adjustments on an industry24 wide basis, without the need for nursing facilities to apply
30

•S 2205 PCS

1 for such adjustments, based on the following cir2 cumstances:

3 (A) Statutory or regulatory changes affecting

4 nursing facilities (e.g., new staffing standards or ex5 panded services).

6 (B) Changes to the Federal minimum wage.

7 (C) General labor shortages with high regional

8 wage impacts.

9 (3) The midyear rate adjustment procedure shall per10 mit specific facilities or groups of facilities to apply for

11 an adjustment based on the following factors:

12 (A) Local labor shortages.

13 (B) Regulatory changes that apply to only a

14 subset of the nursing facility industry.

15 (C) Economic conditions created by natural dis16 asters or other events outside of the control of the

17 provider.

18 (D) Other cost producing factors, except case19 mix variation, to be specified by the Secretary by

20 regulation.

21 (4)(A) A nursing facility which applies for a mid-year

22 rate adjustment pursuant to subsection (a)(3) shall be re23 quired to show that the adjustment will result in a greater

24 than 2 percent deviation in the per diem rate for any indi25 vidual cost service center or a deviation of greater than
31

•S 2205 PCS

1 $5,000 in the total projected and indexed costs for the

2 rate year, whichever is less.

3 (B) A nursing facility application for a midyear rate

4 adjustment must be accompanied by recent cost experi5 ence data and/or budget projections.

6 SEC. 114. EXCEPTION TO PAYMENT METHODS FOR NEW

7 AND LOW-VOLUME NURSING FACILITIES.

8 (a) A low-volume nursing facility shall constitute a

9 nursing facility having fewer than 2,500 medicare part A

10 resident days per year.

11 (b) A new nursing facility shall constitute a newly

12 constructed, licensed, and certified nursing facility and/or

13 a nursing facility that is in its first 3 years of operation

14 as a medicare part A provider. A nursing facility that has

15 operated for more than 3 years but has a change of owner16 ship shall not constitute a new facility.

17 (c) Low-volume nursing facilities shall have the op18 tion of submitting a cost report to receive retrospective

19 payment for all of the cost centers, other than the property

20 cost center, or accepting a per diem rate which shall be

21 based on the sum of—

22 (1) the median indexed resident day facility

23 unit value for the appropriate geographic region for

24 the nursing service cost center during the base year

25 as identified in section 108(b)(2),
32

•S 2205 PCS

1 (2) the median indexed resident day administra2 tive and general per diem costs of all nursing facili3 ties in the appropriate geographic region as identi4 fied in section 109(a)(5)(E),

5 (3) the median indexed resident day costs per

6 unit of service for fee-for-service ancillary services

7 which shall be obtained using the cost information

8 from the nursing facilities in the appropriate geo9 graphic region during the base year, excluding low10 volume and new nursing facilities, and which shall

11 be based on an array of such costs from lowest to

12 highest, and

13 (4) the median indexed resident day per diem

14 costs for selected ancillary services and other costs

15 which shall be obtained using information from the

16 nursing facilities in the appropriate geographic re17 gion during the base year, excluding low-volume and

18 new nursing facilities, and which shall be based on

19 an array of such costs from lowest to highest.

20 (d) New nursing facilities shall have the option of

21 being paid on a retrospective cost pass-through basis for

22 all cost centers, or in accordance with paragraphs (1)

23 through (4) of subsection (c).
33

•S 2205 PCS

1 SEC. 115. APPEAL PROCEDURES.

2 (a)(1) Any person or legal entity aggrieved by a deci3 sion of the Secretary under this title, and which results

4 in an amount in controversy of $10,000 or more, shall

5 have the right to appeal such decision directly to the Pro6 vider Reimbursement Review Board (hereinafter referred

7 to as the ‘‘Board’’) authorized under section 1878 of title

8 XVIII of the Social Security Act.

9 (2) The $10,000 amount in controversy shall be com10 puted in accordance with 42 C.F.R. 405.1839.

11 (b) Hearings before the Board under this title, and

12 any appeals thereto, shall follow the procedures under sec13 tion 1878 of title XVIII of the Social Security Act and

14 the regulations contained in 42 C.F.R. 405.1841–1889,

15 except to the extent that such procedures conflict with,

16 or are inapplicable on account of, any other provision of

17 this title.

18 SEC. 116. EFFECTIVE DATE.

19 (a) The provisions of this title shall be effective Octo20 ber 1, 1995.

21 (b) The provisions contained in this title shall

22 supercede any other provisions of title XVIII or title XIX

23 of the Social Security Act which are inconsistent with such

24 provisions.
34

•S 2205 PCS

1 TITLE II—SUBACUTE CARE CON2 TINUUM AMENDMENTS OF

3 1994

4 SEC. 200. SHORT TITLE.

5 This title may be cited as the ‘‘Subacute Care Contin6 uum Act of 1994’’.

7 SEC. 201. FINDINGS AND PURPOSES.

8 (a) This title is based on the following findings:

9 (1) The Federal Government currently bears

10 excessive costs in providing subacute care to patients

11 for whom inpatient hospital services are not medi12 cally necessary, in part because of difficulties in

13 placing such patients in nursing facilities.

14 (2) Nursing facilities are currently disadvan15 taged in providing subacute care services because of

16 the significant cash flow burdens resulting from

17 delays by the Health Care Financing Administration

18 in approving exceptions from the medicare routine

19 cost limits.

20 (3) Physicians are discouraged from facilitating

21 the placement of subacute care patients into skilled

22 nursing facilities because of the absence of equal re23 imbursement for equivalent medically-necessary phy24 sician visits, regardless of setting.
35

•S 2205 PCS

1 (4) Current restrictions on payment for res2 piratory therapy provided in skilled nursing facilities

3 discourage the admission of subacute care patients

4 who will require such therapy services.

5 (5) The provision of subacute care by skilled

6 nursing facilities and nursing facilities can result in

7 increased efficiency and substantial cost savings to

8 the medicare and medicaid programs.

9 (b) The purposes of this title, among others, are to

10 remove existing and potential statutory and regulatory

11 barriers to the provision of quality, cost-effective subacute

12 care by skilled nursing facilities and nursing facilities

13 under titles XVIII and XIX of the Social Security Act,

14 and to alleviate the present cash flow burdens for skilled

15 nursing facilities that provide such care.

16 SEC. 202. CREATION OF A ‘‘LEVEL PLAYING FIELD’’ TO EN17 COURAGE THE DEVELOPMENT OF SUBACUTE

18 CARE PROVIDERS.

19 (a)(1) Section 1819(a) of the Social Security Act (42

20 U.S.C. 1395i–3(a)) is amended by adding at the end the

21 following new flush sentences:

22 ‘‘Nothing in this title shall be construed to prohibit, or

23 otherwise limit, a skilled nursing facility from offering or

24 providing subacute care services. Any requirements relat25 ing to the provision of such services as may be prescribed
36

•S 2205 PCS

1 by the Secretary or the States shall not include any term

2 or condition forbidding, or otherwise limiting, such facility

3 from so qualifying based on its status as a skilled nursing

4 facility. As used in this subsection, a patient needing

5 ‘subacute care services’ has had an acute event as a result

6 of an illness, injury, or exacerbation of a disease process;

7 has a determined course of treatment; does not require

8 intensive diagnostic or invasive procedures; and has a se9 vere condition requiring an outcome-focused, interdiscipli10 nary approach utilizing a professional team to deliver com11 plex clinical interventions (medical or rehabilitative or

12 both) and a higher frequency of physical visits than tradi13 tional extended or skilled nursing care.’’.

14 (2) Section 1861(v)(1)(E) of the Social Security Act

15 (42 U.S.C. 1395x(v) (1)(E)) is amended by inserting ‘‘,

16 including subacute care services furnished by such facili17 ties’’ in the first sentence after ‘‘services’’ the second place

18 it appears.

19 (3) Section 1888(c) of the Social Security Act (42

20 U.S.C. 1395yy(c)) is amended by inserting ‘‘(including,

21 but not limited to, the provision of subacute care services

22 by such facility)’’ after ‘‘case mix’’.

23 (4) The amendments made by this subsection shall

24 be effective on the date of the enactment of this Act.
37

•S 2205 PCS

1 (b)(1) Section 1919(a) of the Social Security Act (42

2 U.S.C. 1396r(a)) is amended by inserting after the last

3 sentence the following new sentences: ‘‘Nothing in this

4 title shall be construed to prohibit, or otherwise limit, a

5 skilled nursing facility from offering or providing subacute

6 care services. Any requirements relating to the provision

7 of such services as may be prescribed by the Secretary

8 or the States shall not include any term or condition for9 bidding, or otherwise limiting, such facility from so quali10 fying based on its status as a skilled nursing facility. As

11 used in this subsection, a patient needing ‘subacute care

12 services’ has had an acute event as a result of an illness,

13 injury, or exacerbation of a disease process; has a deter14 mined course of treatment; does not require intensive di15 agnostic or invasive procedures; and has a severe condition

16 requiring an outcome-focused, interdisciplinary approach

17 utilizing a professional team to deliver complex clinical

18 interventions (medical or rehabilitative or both) and a

19 higher frequency of physical visits than traditional nursing

20 facility care.’’.

21 (2) Section 1902(a)(13)(A) of the Social Security Act

22 (42 U.S.C. 1396a(a)(13(A)) is amended—

23 (A) by inserting ‘‘, subacute care services fur24 nished by a nursing facility’’ after ‘‘nursing facility

25 services’’ ; and
38

•S 2205 PCS

1 (B) by inserting ‘‘nursing facility furnishing

2 subacute care services,’’ after ‘‘the filing of uniform

3 cost reports by each hospital, nursing facility,’’.

4 (3) The amendments made by this subsection shall

5 be effective on the date of the enactment of this Act.

6 SEC. 203. EXCEPTION PROCESS FROM MEDICARE ROUTINE

7 COST LIMITS.

8 (a) Section 1888 of the Social Security Act (42

9 U.S.C. 1395yy) is amended by adding at the end the fol10 lowing new subsection:

11 ‘‘(e) Effective January 1, 1996, regardless of the is12 suance of final regulations, with respect to any limits on

13 the reasonable costs of providing subacute care services,

14 the Secretary shall grant any skilled nursing facility pro15 viding subacute care services an interim exception within

16 90 days of submission of a request for such exception, sub17 ject to such procedures and accompanied by such data and

18 such documentation as the Secretary shall determine by

19 regulation. The Secretary shall finalize such interim ex20 ception based upon settled data at the end of the applica21 ble cost reporting period. Upon finalization of the excep22 tion request, the Secretary shall be responsible for reim23 bursement of any underpayment, and the skilled nursing

24 facility shall be responsible for reimbursement of any over25 payment within 30 days of such finalization, subject to
39

•S 2205 PCS

1 such guarantees as the Secretary shall determine by regu2 lation.’’.

3 (b) Notwithstanding any other provision of, or

4 amendment made by this title, a nursing facility that has

5 obtained an exception from the routine cost limits for pro6 viding subacute care under section 1888(e) of the Social

7 Security Act (as added by subsection (a)), before the effec8 tive date specified by section 208(b), shall have the option

9 of continuing to receive payments in accordance with such

10 exception for not more than 12 months after such date.

11 SEC. 204. PHYSICIAN VISITS AND CONSULTATIONS FOR

12 MEDICARE PATIENTS IN SKILLED NURSING

13 FACILITIES.

14 Section 1848(b) of the Social Security Act (42 U.S.C.

15 1395w–4(b)) is amended by—

16 (1) redesignating paragraphs (2) and (3) as

17 paragraphs (3) and (4), respectively; and

18 (2) inserting after paragraph (1) the following

19 new paragraph:

20 ‘‘(2) TREATMENT OF PHYSICIAN VISITS TO

21 SUBACUTE CARE PATIENT IN A SKILLED NURSING

22 FACILITY.—Before January 1 of each year (begin23 ning in 1996 and regardless of the issuance of final

24 regulations), the Secretary shall establish by regula25 tion, fee schedules that establish amounts for physi-
40

•S 2205 PCS

1 cian visits to a subacute care patient in a skilled

2 nursing facility that shall be the same as if the phy3 sician visited such subacute care patient in a hos4 pital.’’

5 SEC. 205. COVERAGE OF RESPIRATORY THERAPY SERVICES

6 IN SKILLED NURSING FACILITIES UNDER

7 THE MEDICARE PROGRAM.

8 (a) Section 1861(h)(3) of the Social Security Act (42

9 U.S.C. 1395x(h)) is amended by inserting ‘‘respiratory,’’

10 after ‘‘occupational,’’.

11 (b) Section 1861(v)(5)(A) of the Social Security Act

12 (42 U.S.C. 1395x(v)(5)(A)) is amended by inserting

13 ‘‘(other than respiratory therapy services)’’ after ‘‘other

14 therapy services’’.

15 SEC. 206. DRGS APPROPRIATE FOR SUBACUTE CARE IN

16 SKILLED NURSING FACILITIES.

17 (a) Not later than October 1, 1995, the Secretary

18 shall review the provision of subacute care by skilled nurs19 ing facilities and determine which hospital DRGs are ap20 propriate for skilled nursing facilities that provide such

21 care, and the appropriate hospitalizations and co-pay22 ments for such DRGs.

23 (b) Not later than October 1, 1996, the Secretary

24 shall publish a list of applicable DRGs with appropriate

25 hospitalizations and co-payments, and rebase medicare
41

•S 2205 PCS

1 payments for such groups to reflect the lower cost of such

2 care provided in skilled nursing facilities.

3 SEC. 207. SUBACUTE CARE SERVICES UNDER TITLE XIX.

4 (a) It is sense of the Congress that States are encour5 aged to develop payment methodologies under section

6 1901(a)(13) of the Social Security Act (42 U.S.C.

7 1396a(a)(13)), for nursing facilities which provide

8 subacute care to medicaid patients.

9 (b) It is the sense of the Congress that Federal fund10 ing should be available for nursing facilities which provide

11 subacute care to medicaid patients.

12 SEC. 208. EFFECTIVE DATE.

13 (a) Except as otherwise provided under this title and

14 subsection (b), the provisions of, and the amendments

15 made by, this title shall be effective January 1, 1996.

16 (b) Subacute classifications established under the

17 provisions of, and amendments made by, this title shall

18 be effective not later than October 1, 1996.

19 TITLE III—LONG-TERM CARE

20 TAX CLARIFICATION

21 SEC. 301. SHORT TITLE.

22 This title may be cited as the ‘‘Private Long-Term

23 Care Insurance Incentive Amendments of 1994’’.
42

•S 2205 PCS

1 SEC. 302. TREATMENT OF LONG-TERM CARE INSURANCE

2 OR PLANS.

3 (a) Chapter 79 of the Internal Revenue Code of 1986

4 (relating to definitions) is amended by inserting after sec5 tion 7702A the following new section:

6 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE

7 OR PLANS.

8 ‘‘(a) GENERAL RULE.—For purposes of this title—

9 ‘‘(1) a qualified long-term care insurance con10 tract shall be treated as an accident or health insur11 ance contract,

12 ‘‘(2) any plan of an employer providing cov13 erage of qualified long-term care services shall be

14 treated as an accident or health plan with respect to

15 such services,

16 ‘‘(3) amounts received under such a contract or

17 plan with respect to qualified long-term care serv18 ices, including payments described in subsection

19 (b)(2)(A), shall be treated—

20 ‘‘(A) as amounts received for personal in21 juries or sickness, and

22 ‘‘(B) for purposes of section 105(c), as

23 amounts received for the permanent loss of a

24 function of the body, and as amounts computed

25 with reference to the nature of the injury, and
43

•S 2205 PCS

1 ‘‘(4) payments described in subsection (b)(2)(A)

2 shall be treated as payments made with respect to

3 qualified long-term care services.

4 Paragraph (3)(B) shall not apply in the case of amounts

5 attributable to (and not in excess of) deductions allowed

6 under section 213 (relating to medical etc., expenses) for

7 any prior taxable year and also shall not apply for pur8 poses of section 105(f).

9 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE

10 CONTRACT.—

11 ‘‘(1) IN GENERAL.—For purposes of this title,

12 the term ‘qualified long-term care insurance con13 tract’ means any insurance contract if—

14 ‘‘(A) the only insurance protection pro15 vided under such contract is coverage of quali16 fied long-term care services and benefits inci17 dental to such coverage,

18 ‘‘(B) such contract or coverage is guaran19 teed renewable, or in the case of a group certifi20 cate, provides the insured individual with a

21 basis for continuation or conversion of coverage,

22 ‘‘(C) such contract does not have any cash

23 surrender value, and

24 ‘‘(D) all refunds of premiums, and all pol25 icyholder dividends or similar amounts, under
44

•S 2205 PCS

1 such contract are to be applied as a reduction

2 in future premiums or to increase future bene3 fits.

4 ‘‘(2) SPECIAL RULES.—

5 ‘‘(A) PER DIEM, ETC. PAYMENTS PER6 MITTED.—A contract shall not fail to be treated

7 as described in paragraph (1)(A) by reason of

8 payments being made on a per diem or other

9 periodic basis without regard to the expenses

10 incurred during the period to which the pay11 ments relate.

12 ‘‘(B) REFUNDS OF PREMIUMS.—Para13 graph (1)(D) shall not apply to any refund of

14 premiums on surrender, cancellation of the con15 tract, or death of the policyholder.

16 ‘‘(3) TREATMENT OF COVERAGE PROVIDED AS

17 PART OF A LIFE INSURANCE CONTRACT.—Except as

18 provided in regulations, in the case of coverage of

19 qualified long-term care services provided as part of

20 a life insurance contract—

21 ‘‘(A) APPLICATION OF GENERAL REQUIRE22 MENTS.—The requirements of this section shall

23 apply as if the portion of the contract providing

24 such coverage was a separate contract.
45

•S 2205 PCS

1 ‘‘(B) PREMIUMS AND CHARGES FOR

2 QUALIFIED LONG-TERM CARE COVERAGE.—Pre3 miums for coverage of qualified long-term care

4 services and charges against the life insurance

5 contract’s cash surrender value (within the

6 meaning of section 7702(f)(2)(A)) for such cov7 erage shall be treated as premiums for the

8 qualified long-term care insurance contract.

9 ‘‘(C) APPLICATION OF SECTION 7702.—

10 Subsection (c)(2) of section 7702 (relating to

11 the guideline premium limitation) shall be ap12 plied by increasing the guideline premium limi13 tation with respect to the life insurance con14 tract, as of any date—

15 ‘‘(i) by the sum of any charges (but

16 not premiums) described in subparagraph

17 (B) made to that date under the contract,

18 less

19 ‘‘(ii) any such charges the imposition

20 of which reduces the premiums paid for

21 the contract (within the meaning of section

22 7702(f)(1)).

23 ‘‘(D) APPLICATION OF SECTION

24 72(e)(4)(B).—Subsection (e)(4)(B) of section 72

25 (relating to certain amounts retained by the in-
46

•S 2205 PCS

1 surer) shall be applied as including charges de2 scribed in subparagraph (B).

3 ‘‘(E) APPLICANT.—No deduction shall be

4 allowed under subsection (a) of section 213 for

5 premiums and charges described in subpara6 graph (B).

7 For purposes of this paragraph, the term ‘portion’ means

8 only the terms and benefits under a life insurance contract

9 (whether provided by a rider or addendum on, or other

10 provision of, such contract) that are in addition to the

11 terms and benefits under the contract without regard to

12 the coverage of qualified long-term care services and bene13 fits incidental to such coverage.

14 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

15 purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘qualified long17 term care services’ means necessary diagnostic, pre18 ventive, therapeutic, and rehabilitative services, and

19 maintenance or personal care services, which—

20 ‘‘(A) are required by an ill individual in a

21 qualified facility, and

22 ‘‘(B) are provided pursuant to a plan of

23 care prescribed by a licensed health care practi24 tioner, or

25 ‘‘(C) are required by law or regulation.
47

•S 2205 PCS

1 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

2 ‘‘(A) IN GENERAL.—The term ‘chronically

3 ill individual’ means any individual who has

4 been certified by a licensed health care practi5 tioner as—

6 ‘‘(i)(I) being unable to perform (with7 out substantial assistance from another in8 dividual) at least two activities of daily liv9 ing (as defined in subparagraph (B)), due

10 to a loss of functional capacity, or

11 ‘‘(II) having a level of disability simi12 lar (as determined by the Secretary in con13 sultation with the Secretary of Health and

14 Human Services) to the level of disability

15 described in subclause (I), or

16 ‘‘(ii) having a similar level of disabil17 ity due to cognitive impairment.

18 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

19 purposes of subparagraph (A), each of the fol20 lowing is an activity of daily living:

21 ‘‘(i) BATHING.—The overall complex

22 behavior of getting water and cleansing the

23 whole body, including on the water for a

24 bath, shower, or sponge bath, getting to,
48

•S 2205 PCS

1 in, and out of a tub or shower, and wash2 ing and drying oneself.

3 ‘‘(ii) DRESSING.—The overall complex

4 behavior of getting clothes form closets

5 and drawers and then getting dressed.

6 ‘‘(iii) TOILETING.—The act of going

7 to the toilet room for bowel and bladder

8 function, transferring on and off the toilet,

9 cleaning after elimination, and arranging

10 clothes.

11 ‘‘(iv) TRANSFER.—The process of get12 ting in and out of bed or in and out of a

13 chair or wheelchair.

14 ‘‘(v) EATING.—The process of getting

15 food from a plate or its equivalent into the

16 mouth.

17 ‘‘(vi) CONTINENCE.—The ability to

18 voluntarily control bowel and bladder func19 tion and to maintain a reasonable level of

20 personal hygiene.

21 ‘‘(vii) STATE REQUIRED.—Any other

22 activity of daily living as required by state

23 law or regulation which is not preempted

24 by Federal law or regulation.
49

•S 2205 PCS

1 ‘‘(C) NUMBER OF ACTIVITIES OF DAILY

2 LIVING.—A qualified long-term care insurance

3 contract may utilize fewer than the number of

4 activities of daily living in paragraph (B).

5 ‘‘(D) DETERMINATION OF ADDITIONAL AC6 TIVITIES OF DAILY LIVING.—For purposes of

7 subparagraph (A), the Secretary, in consulta8 tion with the Secretary of Health and Human

9 Services, may determine by regulation that ad10 ditional activities constitute activities of daily

11 living. If the Secretary identifies additional ac12 tivities of daily living, the Secretary may also

13 increase the required number of activities of

14 daily living that an individual must be unable to

15 perform to satisfy the definition of ‘chronically

16 ill individual’ when a contract utilizes activities

17 of daily living other than those specified in sub18 paragraph (B). Regardless of regulations issued

19 by the Secretary, long-term care contracts shall

20 not fail to meet the requirements of this para21 graph if such contracts utilize the activities of

22 daily living specified in subparagraph (B).

23 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali24 fied facility’ means—
50

•S 2205 PCS

1 ‘‘(A) a nursing, rehabilitative, hospice serv2 ice, or adult day care facility (including a hos3 pital, retirement home, nursing home, skilled

4 nursing facility, intermediate care facility, or

5 similar institution)—

6 ‘‘(i) which is licensed under State law,

7 or

8 ‘‘(ii) which is a certified facility for

9 purposes of title XVIII or XIX of the So10 cial Security Act, or

11 ‘‘(B) an individual’s home or other facility

12 under a plan of treatment developed by a li13 censed health care practitioner.

14 ‘‘(4) MAINTENANCE OF PERSONAL CARE SERV15 ICES.—The term ‘maintenance or personal care serv16 ices’ means any care the primary purpose of which

17 is to provide needed assistance with any of the ac18 tivities of daily living described in paragraph (2)(B).

19 Such term may include such services as adult day

20 care, homemaker and chore services, hospice serv21 ices, respite care, and services required by law or

22 regulation.

23 ‘‘(5) LICENSED HEALTH CARE PRACTI24 TIONER.—The term ‘licensed health care practi25 tioner’ means any physician (as defined in section
51

•S 2205 PCS

1 1861(r) of the Social Security Act) and any reg2 istered professional nurse, licensed social worker, or

3 other individual who meets such requirements as

4 may be prescribed by the Secretary.

5 ‘‘(d) SPECIAL RULES.—

6 ‘‘(1) CONTINUATION RULES NOT TO APPLY.—

7 The health care continuation rules contained in sec8 tion 4980B (and contained in part 6 of subtitle B

9 of title I of the Employee Retirement Income Secu10 rity Act of 1974 and in title II of the Public Health

11 Service Act) shall not apply to—

12 ‘‘(A) qualified long-term care insurance

13 contracts, or

14 ‘‘(B) plans described in subsection (a)(2).

15 ‘‘(2) EMPLOYER PLANS NOT TREATED AS DE16 FERRED COMPENSATION PLANS.—For purposes of

17 this title, a plan of an employer providing coverage

18 of qualified long-term care services shall not be

19 treated as a plan which provides for deferred com20 pensation by reason of providing such coverage.

21 ‘‘(3) CONTRACTS COVERING PARENTS AND

22 GRANDPARENTS.—For purposes of this title, if a

23 qualified long-term care insurance contract pur24 chased by or provided to a taxpayer provides cov25 erage with respect to one or more of the taxpayer’s
52

•S 2205 PCS

1 parents or grandparents (or, in the case of a joint

2 return, of either spouse), such coverage and all pay3 ments made pursuant to such coverage shall be

4 treated in the same manner as if the parents or

5 grandparents were dependents (as defined in section

6 152) of the taxpayer. For purposes of this para7 graph, the term ‘parent’ includes any stepmother or

8 stepfather, the term ‘grandparent’ includes any

9 stepgrandfather or stepgrandmother, and any rela10 tionship that exists by virtue of a legal adoption

11 shall be recognized to the same extent as relation12 ships by blood.

13 ‘‘(4) WELFARE BENEFIT RULES NOT TO

14 APPLY.—For purposes of subpart D of part I of

15 subchapter D of chapter 1 (relating to treatment of

16 welfare benefit funds), qualified long-term care serv17 ices shall not be treated as a welfare benefit or a

18 medical benefit.

19 ‘‘(5) DEDUCTIBILITY.—For purposes of this

20 title, no payment of a premium for a long-term care

21 insurance contract shall fail to be deductible in

22 whole or in part merely because the contract pro23 vides for level annual payments.

24 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

25 such regulations as may be necessary to carry out the re-
53

•S 2205 PCS

1 quirements of this section, including regulations to prevent

2 the avoidance of this section by providing qualified long3 term care services under a life insurance contract.’’.

4 (b) The table of sections for chapter 79 of the Inter5 nal Revenue Code of 1986 is amended by inserting after

6 the item relating to section 7702A the following new item:

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

7 SEC. 303. QUALIFIED LONG-TERM SERVICES TREATED AS

8 MEDICAL CARE.

9 (a) Paragraph (1) of section 213(d) of the Internal

10 Revenue Code of 1986 (defining medical care) is amended

11 by striking ‘‘or’’ at the end of subparagraph (B), by redes12 ignating subparagraph (C) as subparagraph (D), and by

13 inserting after subparagraph (B) the following new sub14 paragraph:

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

16 (as defined in section 7702B(c)), or’’.

17 (b)(1) Subparagraph (D) of section 213(d)(1) of the

18 Internal Revenue Code of 1986 (as redesigned by sub19 section (a)) is amended by striking ‘‘subparagraphs (A)

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

21 (C)’’.

22 (2) Paragraph (6) of section 213(d) of such Code is

23 amended—
54

•S 2205 PCS

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

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

3 and

4 (B) by striking ‘‘paragraph (1)(C)’’ in subpara5 graph (A) and inserting ‘‘paragraph (1)(D)’’.

6 (3) Paragraph (7) of section 213(d) of such Code is

7 amended by striking ‘‘subparagraphs (A) and (B)’’ and

8 inserting ‘‘subparagraphs (A), (B), and (C)’’.

9 SEC. 304. QUALIFIED LONG-TERM CARE INSURANCE CON10 TRACTS PERMITTED TO BE OFFERED IN CAF11 ETERIA PLANS.

12 Paragraph (2) of section 125(d) of the Internal Reve13 nue Code of 1986 (relating to the exclusion of deferred

14 compensation) is amended by adding at the end thereof

15 the following new subparagraph:

16 ‘‘(D) EXCEPTION FOR LONG-TERM CARE

17 INSURANCE CONTRACTS.—For purposes of sub18 paragraph (A), a plan shall not be treated as

19 providing deferred compensation by reason of

20 providing any long-term care insurance contract

21 (as defined in section 7702B(b)) if—

22 ‘‘(i) the employee may elect to con23 tinue the insurance upon cessation of par24 ticipation in the plan, and
55

•S 2205 PCS

1 ‘‘(ii) the amount paid or incurred dur2 ing any taxable year for such insurance

3 does not exceed the premium which would

4 have been payable for such year under a

5 level premium structure.’’.

6 SEC. 305. INCLUSION IN INCOME OF EXCESSIVE LONG7 TERM CARE BENEFITS.

8 (a) Part II of subchapter B of chapter 1 of the Inter9 nal Revenue Code of 1986 (relating to items specifically

10 included in gross income) is amended by adding at the

11 end the following new section:

12 ‘‘SEC. 91. EXCESSIVE LONG-TERM CARE BENEFITS.

13 ‘‘(a) GENERAL RULE.—Gross income for the taxable

14 year of any individual includes excessive long-term care

15 benefits received by or for the benefit of such individual

16 during the taxable year.

17 ‘‘(b) EXCESSIVE LONG-TERM CARE BENEFITS.—

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion, the term ‘excessive long-term care benefits’

20 means the excess (if any) of—

21 ‘‘(A) the aggregate amount from all poli22 cies which is not includible in the gross income

23 of the individual for the taxable year by reason

24 of the amendments made by the Private Long25 Term Care Insurance Incentive Amendments of
56

•S 2205 PCS

1 1994 (determined without regard to this sec2 tion), over

3 ‘‘(B) the aggregate of $250 for each day

4 during the taxable year that such individual—

5 ‘‘(i) was a chronically ill individual (as

6 defined in section 7702B(c)(2)), and

7 ‘‘(ii) was confined to a qualified facil8 ity (as defined in section 7702B(c)(3)).

9 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

10 any taxable year beginning after 1995, the $250 in

11 paragraph (1)(B) shall be equal to the sum of—

12 ‘‘(A) the amount in effect under paragraph

13 (1)(B) for the preceding calendar year (after

14 application of this subparagraph), plus

15 ‘‘(B) the product of the amount referred to

16 in subclause (A) multiplied by the cost-of-living

17 adjustment for the calendar year of the amount

18 under subclause (A).

19 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur20 poses of paragraph (2), the cost-of-living adjustment

21 for any calendar year is the percentage (if any) by

22 which the cost index under paragraph (4) for the

23 preceding calendar year exceeds such index for the

24 second preceding calendar year.
57

•S 2205 PCS

1 ‘‘(4) COST INDEX.—The Secretary, in consulta2 tion with the Secretary of Health and Human Serv3 ices, shall before January 1, 1996, establish a cost

4 index to measure increases in the cost of nursing

5 home and similar facilities. The Secretary may from

6 time to time revise such index to the extent nec7 essary to accurately measure increase or decreases

8 in such costs.

9 ‘‘(5) ROUNDING.—If any dollar amount deter10 mined under this paragraph is not a multiple of $10,

11 such dollar amount shall be rounded to the nearest

12 multiple of $10 (or, if such dollar amount is a mul13 tiple of $5, such dollar amount shall be increased to

14 the next higher multiple of $10).

15 ‘‘(6) COMPUTATION OF DAILY AMOUNT.—For

16 purposes of this section, the aggregate for each day

17 may be determined by using an average daily

18 amount for the month, computed by dividing the

19 amount of benefits for the month by the number of

20 days in the month.’’.

21 (b) The table of sections for part II of subchapter

22 B of chapter 1 of the Internal Revenue Code of 1986 is

23 amended by adding at the end the following new item:

‘‘Sec. 91. Excessive long-term care benefits.’’.
58

•S 2205 PCS

1 SEC. 306. TAX RESERVES FOR QUALIFIED LONG-TERM

2 CARE INSURANCE CONTRACTS.

3 (a) Subparagraph (A) of section 807(d)(3) of the In4 ternal Revenue Code of 1986 (relating to tax reserve

5 methods) is amended by redesigning clause (iv) as clause

6 (v) and by inserting after clause (iii) the following new

7 clause:

8 ‘‘(iv) QUALIFIED LONG-TERM CARE

9 INSURANCE CONTRACTS.—In the case of

10 any qualified long-term care insurance con11 tract (as defined in section 7702B(c))—

12 ‘‘(I) the reserve method pre13 scribed by the National Association of

14 Insurance Commissioners which cov15 ers such contract (as of the date of is16 suance), or

17 ‘‘(II) if no reserve method has

18 been prescribed by the National Asso19 ciation of Insurance Commissioners

20 which covers such contract, a 1-year

21 full preliminary term method.’’.

22 (b)(1) Clause (iii) of section 807(d)(3)(A) of the In23 ternal Revenue Code of 1986 is amended by striking

24 ‘‘noncancellable accident and health insurance contract,’’

25 and inserting ‘‘noncancellable accident and health insur-
59

•S 2205 PCS

1 ance contract (other than qualified long-term care insur2 ance contracts (as defined in section 7702B(c)),’’.

3 (2) Clause (v) of section 807(d)(3)(A) of such Code

4 (as redesignated by subsection (a)) is amended by striking

5 ‘‘or (iii)’’ and inserting ‘‘(iii), or (iv)’’.

6 SEC. 307. EFFECTIVE DATE.

7 (a) Except as provided in subsection (b), the amend8 ments made by this title shall apply to policies issued in

9 taxable years beginning after the date of the enactment

10 of this Act.

11 (b) Policies issued prior to or during the taxable year

12 in which this Act is enacted that met the requirements

13 of the National Association of Insurance Commissioners’

14 Model Long-Term Care Act and Regulation when the pol15 icy was issued shall be considered qualified long-term care

16 insurance and the services provided under such policies

17 shall be considered qualified long-term care services.

18 TITLE IV—LONG-TERM CARE

19 INSURANCE STANDARDS

20 SEC. 400. SHORT TITLE.

21 This title may be cited as the ‘‘Long-Term Care

22 Insurance Standards Amendments of 1994’’.
60

•S 2205 PCS

1 SEC. 401. NATIONAL LONG-TERM CARE INSURANCE ADVI2 SORY COUNCIL.

3 (a) Congress shall appoint an advisory board to be

4 known as the National Long-Term Care Insurance Advi5 sory Council (hereinafter referred to as the ‘‘Advisory

6 Council’’).

7 (b) The Advisory Council shall consist of 5 members,

8 each of whom has substantial expertise in matters relating

9 to the provision and regulation of long-term care insurance

10 or long-term care financing and delivery systems.

11 (c) The Advisory Council shall—

12 (1) provide advice, recommendations, and as13 sistance to Congress on matters relating to long14 term care insurance as specified in this section and

15 as otherwise required by the Secretary;

16 (2) collect, analyze, and disseminate informa17 tion relating to long-term care insurance in order to

18 increase the understanding of insurers, providers,

19 consumers, and regulatory bodies of the issues relat20 ing to, and to facilitate improvements in, such insur21 ance;

22 (3) develop for congressional consideration pro23 posed models, standards, requirements, and proce24 dures relating to long-term care insurance, as appro25 priate; and
61

•S 2205 PCS

1 (4) monitor the development of the long-term

2 care insurance market and advise Congress concern3 ing the need for statutory changes.

4 (d) In order to carry out its responsibilities under this

5 section, the Advisory Council is authorized to—

6 (1) consult individuals and public and private

7 entities with experience and expertise in matters re8 lating to long-term care insurance;

9 (2) conduct meetings and hold hearings;

10 (3) conduct research (either directly or under

11 grant or contract);

12 (4) collect, analyze, publish, and disseminate

13 data and information (either directly or under grant

14 or contract); and

15 (5) develop model formats and procedures for

16 insurance products; and develop proposed standards,

17 rules and procedures for regulatory programs, as

18 appropriate.

19 (e) There are authorized to be appropriated, for ac20 tivities of the Advisory Council, $1,500,000 for fiscal year

21 1995, and each subsequent year.

22 SEC. 402. POLICY REQUIREMENTS.

23 (a) Section 7702B of the Internal Revenue Code of

24 1986 (as added by section 302) is amended by inserting

25 after subsection (e) the following new subsection:
62

•S 2205 PCS

1 ‘‘(f) CONSUMER PROTECTION PROVISIONS.—

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

3 subsection are met with respect to any contract if

4 any long-term care insurance policy issued under the

5 contract meets—

6 ‘‘(A) the requirements of the model regula7 tion and model Act described in paragraph (2),

8 ‘‘(B) the disclosure requirement of para9 graph (3),

10 ‘‘(C) the requirements relating to

11 nonforfeitability under paragraph (4), and

12 ‘‘(D) the requirements relating to rate sta13 bilization under the paragraph (5),

14 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

15 AND ACT.—

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

17 this paragraph are met with respect to any pol18 icy if such policy meets—

19 ‘‘(i) MODEL REGULATION.—The fol20 lowing requirements of the model regula21 tion:

22 ‘‘(I) Section 7A (relating to guar23 anteed renewal or noncancellability),

24 and the requirements of section 6B of
63

•S 2205 PCS

1 the model Act relating to such section

2 7A.

3 ‘‘(II) Section 7B (relating to pro4 hibitions on limitations and exclu5 sions).

6 ‘‘(III) Section 7C (relating to ex7 tension of benefits).

8 ‘‘(IV) Section 7D (relating to

9 continuation or conversion of cov10 erage).

11 ‘‘(V) Section 7E (relating to dis12 continuance and replacement of poli13 cies).

14 ‘‘(VI) Section 8 (relating to unin15 tentional lapse).

16 ‘‘(VII) Section 9 (relating to dis17 closure), other than Section 9F there18 of.

19 ‘‘(VIII) Section 10 (relating to

20 prohibitions against post-claims un21 derwriting).

22 ‘‘(IX) Section 11 (relating to

23 minimum standards).

24 ‘‘(X) Section 12 (relating to re25 quirement to offer inflation protec-
64

•S 2205 PCS

1 tion), except that any requirement for

2 a signature on a rejection of inflation

3 protection shall permit the signature

4 to be on an application or on a sepa5 rate form.

6 ‘‘(XI) Section 23 (relating to pro7 hibition against preexisting conditions

8 and probationary periods in replace9 ment policies or certificates).

10 ‘‘(ii) MODEL ACT.—The following re11 quirements of the model Act:

12 ‘‘(I) Section 6C (relating to pre13 existing conditions).

14 ‘‘(II) Section 6D (relating to

15 prior hospitalization).

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

17 paragraph—

18 ‘‘(i) MODEL PROVISIONS.—The terms

19 ‘model regulation’ and ‘model Act’ mean

20 the long-term care insurance model regula21 tion, and the long-term care insurance

22 model Act, respectively, promulgated by

23 the National Association of Insurance

24 Commissioners (as adopted in January of

25 1993).
65

•S 2205 PCS

1 ‘‘(ii) COORDINATION.—Any provision

2 of the model regulation or model Act listed

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

4 (A) shall be treated as including any other

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

7 ‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re8 quirement of this paragraph is met with respect to

9 any policy if such policy meets the requirements of

10 section 4980D(d)(1).

11 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

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

13 this paragraph are met with respect to any level

14 premium long-term care insurance policy if the

15 issuer of such policy offers to the policyholder,

16 including any group policyholder, a

17 nonforfeiture provision.

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

19 nonforfeiture provision required under subpara20 graph (A) shall meet the following require21 ments:

22 ‘‘(i) The nonforfeiture provision shall

23 be appropriate captioned.

24 ‘‘(ii) The nonforfeiture provision shall

25 provide for a benefit available in the event
66

•S 2205 PCS

1 of a default in the payment of any pre2 miums and the amount of the benefit may

3 be adjusted subsequent to being initially

4 granted only as necessary to reflect

5 changes in claims, persistency, and interest

6 as reflected in changes in rates for pre7 mium paying policies approved by the Sec8 retary for the same policy form.

9 ‘‘(iii) The nonforfeiture provision shall

10 provide for a benefit based on an equitable

11 schedule where benefits returned are equal

12 to the asset share remaining in the policy

13 and which assures that persisting policy14 holders are not required to subsidize the

15 cost of insurance premiums for policy16 holders who terminate coverage. The cri17 teria for determining the actuarial value of

18 this benefit shall be developed by the Na19 tional Long-Term Care Insurance Advisory

20 Committee in consultation with the Amer21 ican Society of Actuaries and the National

22 Association of Insurance Commissioners

23 and shall be approved by Congress.

24 ‘‘(5) RATE STABILIZATION.—
67

•S 2205 PCS

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

2 this paragraph are met with respect to any

3 long-term care insurance policy, including any

4 group master policy, if—

5 ‘‘(i) such policy contains the minimum

6 rate guarantees specified in subparagraph

7 (B), and

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

9 the requirements specified in subparagraph

10 (C).

11 ‘‘(B) MINIMUM RATE GUARANTEES.—The

12 minimum rate guarantees specified in this sub13 paragraph are as follows:

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

15 guaranteed for a period of at least 3 years

16 from the date of issue of the policy.

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

18 period required under clause (i), any rate

19 increase shall be guaranteed for a period of

20 at least 2 years from the effective date of

21 such rate increase.

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

23 75 or older who has maintained coverage

24 under a long-term care insurance policy for

25 10 years, rate increase under such policy
68

•S 2205 PCS

1 shall not exceed 10 percent in any 12-

2 month period.

3 ‘‘(C) INCREASES IN PREMIUMS.—The re4 quirements specified in this subparagraph are

5 as follows:

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

7 long-term care insurance policy, including

8 any group master policy, plans to increase

9 the premium rates for a policy, such issuer

10 shall, at least 90 days before the effective

11 date of the rate increase, offer to each in12 dividual policyholder under such policy the

13 option to remain insured under the policy

14 at a reduced level of benefits which main15 tains the premium rate at the rate in effect

16 on the day before the effective date of the

17 rate increase.

18 ‘‘(ii) INCREASE OF MORE THAN 50

19 PERCENT.—

20 ‘‘(I) IN GENERAL.—If an issuer

21 of any long-term care insurance pol22 icy, including any group master pol23 icy, increases premium rates for a pol24 icy by more than 50 percent in any 3-

25 year period—
69

•S 2205 PCS

1 ‘‘(aa) in the case of a group

2 master long-term care insurance

3 policy, the issuer shall dis4 continue issuing all group master

5 long-term care insurance policies

6 in any State in which the issuer

7 issues such policy for a period of

8 2 years from the effective date of

9 such premium increase; and

10 ‘‘(bb) in the case of an indi11 vidual long-term care insurance

12 policy, the issuer shall dis13 continue issuing all individual

14 long-term care policies in any

15 State in which the issuer issues

16 such policy for a period of 2

17 years from the effective date of

18 such premium increase.

19 ‘‘(II) APPLICABILITY.—Subclause

20 (I) shall apply to any issuer of long21 term care insurance policies or any

22 other person that purchases or other23 wise acquires any long-term care in24 surance policies from another issuer

25 or person.
70

•S 2205 PCS

1 ‘‘(D) MODIFICATIONS OR WAIVERS OF RE2 QUIREMENTS.—The Secretary may modify or

3 waive any of the requirements under this para4 graph if—

5 ‘‘(i) such requirements will adversely

6 affect an issuer’s solvency;

7 ‘‘(ii) such modification or waiver is re8 quired for the issuer to meet other State or

9 Federal requirements;

10 ‘‘(iii) medical developments, new dis11 abling diseases, changes in long-term care

12 delivery, or a new method of financing

13 long-term care will result in changes to

14 mortality and morbidity patterns or as15 sumptions;

16 ‘‘(iv) judicial interpretations of a pol17 icy’s benefit features results in unintended

18 claim liabilities; or

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

20 acquisition of long-term care insurance

21 policies of an issuer or other person, the

22 continued sale of other long-term care in23 surance policies by the purchasing issuer

24 or person is in the best interest of individ25 ual consumers.
71

•S 2205 PCS

1 ‘‘(6) LONG-TERM CARE INSURANCE POLICY DE2 FINED.—For purposes of this subsection, the term

3 ‘long-term care insurance policy’ has the meaning

4 given such term by section 4980C(e).’’.

5 SEC. 403. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

6 LONG-TERM CARE INSURANCE POLICIES.

7 (a) Chapter 43 of the Internal Revenue Code of

8 1986 is amended by adding at the end the following

9 new section:

10 ‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG11 TERM CARE INSURANCE POLICIES.

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

13 any person failing to meet the requirements of subsection

14 (c) or (d) a tax in the amount determined under sub15 section (b).

16 ‘‘(b) AMOUNT OF TAX.—

17 ‘‘(1) IN GENERAL.—For purposes of subsection

18 (a), the amount of the tax shall not exceed the

19 greater of—

20 ‘‘(A) 3 times the amount of any commis21 sions paid for each policy involved in the viola22 tion, or

23 ‘‘(B) $10,000.

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

25 due to reasonable cause and not to willful neglect,
72

•S 2205 PCS

1 the Secretary may waive part or all of the tax im2 posed by subsection (a) to the extent that payment

3 of the tax would be excessive relative to the failure

4 involved.

5 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require6 ments of this subjection are as follows:

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

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

9 requirements of the model regulation must be

10 met:

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

12 forms and replacement coverage).

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

14 requirements), except that the issuer shall

15 also report at least annually the number of

16 claims denied during the reporting period

17 for each class of business (expended as a

18 percentage of claims denied), other than

19 claims denied for failure to meet the

20 waiving period or because of any applicable

21 pre-existing condition.

22 ‘‘(iii) Section 20 (relating to filing re23 quirements for marketing).

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

25 for marketing), including inaccurate com-
73

•S 2205 PCS

1 pletion of medical histories, other than sec2 tion 21C(1), 21(C)(3) and 21C(6) thereof,

3 except that—

4 ‘‘(I) in addition to such require5 ments, no person shall in selling or of6 fering to sell a long-term care insur7 ance policy, misrepresent a material

8 fact;

9 ‘‘(II) no such requirements shall

10 include a requirement to inquire or

11 identify whether a prospective appli12 cant or enrollee for long-term care in13 surance has accident and sickness in14 surance; and

15 ‘‘(III) the association shall dis16 close in any long-term care insurance

17 solicitation the amount of compensa18 tion that the association receives from

19 endorsement or sale of the policy or

20 certificate to its members, expressed

21 as a percentage of annual premium

22 generated by such policies.

23 ‘‘(v) Section 22 (relating to appro24 priateness of recommended purchase).
74

•S 2205 PCS

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

2 format outline of coverage).

3 ‘‘(vii) Section 25 (relating to require4 ment to deliver shopper’s guide).

5 ‘‘(B) MODEL ACT.—The following require6 ments of the model Act must be met:

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

8 return), except that such section shall also

9 apply to denials of applications and any re10 fund shall be made within 30 days of the

11 return or denial.

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

13 coverage).

14 ‘‘(iii) Section 6H (relating to require15 ments for certificates under group plans).

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

17 summary).

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

19 reports on accelerated death benefits).

20 ‘‘(vi) Section 7 (relating to incontest21 ability period).

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

23 paragraph, the terms ‘model regulation’ and

24 ‘model Act’ have the meanings given such terms

25 by section 7702B(f)(2)(B).
75

•S 2205 PCS

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

2 for a long-term care insurance policy (or for a cer3 tificate under a group long-term care insurance pol4 icy) is approved, the issuer shall deliver to the appli5 cant (or policyholder or certificate-holder) the policy

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

7 after the date of the approval.

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

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

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

11 of a written request by the policyholder or certifi12 cate-holder (or representative)—

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

14 reasons for the denial, and

15 ‘‘(B) make available all information di16 rectly relating to such denial except in cases

17 where such issuer would be prohibited from pro18 viding information regarding claims denial

19 under confidentiality statues or other state or

20 Federal laws.

21 ‘‘(d) DISCLOSURE.—The requirements of this sub22 section are met if either of the following statements,

23 whichever is applicable, is prominently displayed on the

24 front page of any long-term care insurance policy and in
76

•S 2205 PCS

1 the outline of coverage required under subsection

2 (c)(1)(B)(ii):

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

4 to be a qualified long-term care insurance contract

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

6 Code of 1986.’.

7 ‘‘(2) A statement that: ‘This policy is not in8 tended to be a qualified long-term care insurance

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

10 Revenue Code of 1986.’.

11 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE12 FINED.—For purposes of this section, the term ‘long-term

13 care insurance policy’ means any insurance policy or rider

14 advertised, marketed, offered or designed to provide cov15 erage for not less than 12 consecutive months for each

16 covered person on an expense incurred, indemnity, prepaid

17 or other basis; for one or more necessary diagnostic, pre18 ventive, therapeutic, rehabilitative, maintenance or per19 sonal care services, provided in a setting other than an

20 acute care unit of a hospital. Such term includes group

21 and individual annuities and life insurance policies or rid22 ers which provide directly or which supplement long-term

23 care insurance. Such term also includes a policy or rider

24 which provides for payment of benefits based upon cog25 nitive impairment or the loss of functional capacity. Long-
77

•S 2205 PCS

1 term care insurance may be issued by insurers; fraternal

2 benefit societies; nonprofit health, hospital and medical

3 service corporations; prepaid health plans; health mainte4 nance organizations or any similar organization to the ex5 tent such organizations are otherwise authorized to issue

6 life or health insurance. Long-term care insurance shall

7 not include any insurance policy which is offered primarily

8 to provide basic medicare supplement coverage, basic hos9 pital expense coverage, basic medical-surgical expense cov10 erage, hospital confinement indemnity coverage, major

11 medical expense coverage, disability income or related

12 asset-protection coverage, accident only coverage, specified

13 disease or specified accident coverage, or limited benefit

14 health coverage. With regard to life insurance, this term

15 does not include life insurance policies which accelerate

16 the death benefit specifically for one or more of the quali17 fying events of terminal illness, medical conditions requir18 ing extraordinary medical intervention, or permanent in19 stitutional confinement, and which provide the option of

20 a lump-sum payment for those benefits and in which nei21 ther the benefits nor the eligibility for the benefits is con22 ditioned upon the receipt of long-term care.’’.

23 (b) The table of sections for chapter 43 of the Inter24 nal Revenue Code of 1986 is amended by adding at the

25 end the following new item:
78

•S 2205 PCS

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

1 SEC. 404. RELATION TO STATE LAW.

2 Insurance policies which have been deemed in compli3 ance with the requirements of this title and the Internal

4 Revenue Code of 1986 (as amended by this title) by the

5 State Insurance Commissioner in the State of domicile

6 shall be deemed approved for sale in any other State. No

7 State may prohibit an insurance carrier from selling out8 side the State of domicile long-term care insurance policies

9 which have been approved in the State of domicile.

10 SEC. 405. UNIFORM LANGUAGE AND DEFINITIONS.

11 (a) The Advisory Council shall develop recommenda12 tions for the use of uniform language and definitions in

13 long-term care insurance policies (as defined in section

14 4980C(e) of the Internal Revenue Code of 1986) for ap15 proval by Congress.

16 (b) Standards under subsection (a) may permit the

17 use of nonuniform language to the extent required to take

18 into account differences among States in the licensing of

19 nursing facilities and other providers of long-term care.

20 SEC. 406. EFFECTIVE DATES.

21 (a) The amendments made by section 402 shall apply

22 to contracts issued in taxable years beginning after the

23 date of the enactment of this Act.
79

•S 2205 PCS

1 (b) The amendments made by section 402 shall apply

2 to actions taken in taxable years beginning after the date

3 of the enactment of this Act.

4 TITLE V—FINANCIAL

5 ELIGIBILITY STANDARDS

6 SEC. 501. REVISIONS TO FINANCIAL ELIGIBILITY PROVI7 SIONS.

8 (a) Section 1902(a) of the Social Security Act (42

9 U.S.C. 1396a(a)) is amended—

10 (1) in paragraph (17)(C), by inserting ‘‘subject

11 to subsection (z),’’ before ‘‘provide’’, and

12 (2) by adding at the end the following new sub13 section:

14 ‘‘(z)(1) For purposes of subsection (a)(17)(C), not15 withstanding any other provision of this title, the re16 sources of an individual, and the spouse of such individual,

17 which shall be used to determine financial eligibility for

18 nursing facility services under this title shall include—

19 ‘‘(A) all of the real property owned by the indi20 vidual, including but not limited to, the individual’s

21 primary residence;

22 ‘‘(B) all personal property of the individual, in23 cluding but not limited to, any automobiles owned by

24 the individual; and
80

•S 2205 PCS

1 ‘‘(C) all liquid assets held by the individual, in2 cluding but not limited to, the asset value of any

3 trust established by such individual.

4 ‘‘(2)(A) An individual shall not be eligible for nursing

5 facility services under this title if the total value of the

6 resources owned by the individual (individually or jointly

7 with his or her spouse, if any) exceeds the value of the

8 median price of a home in the geographic region in which

9 such individual resides.

10 ‘‘(B) For purposes of subparagraph (A), the Sec11 retary shall establish a valuation system for single family

12 homes in appropriate geographic regions, taking appro13 priate account of the variation in values between urban

14 and rural areas. The valuation system established by the

15 Secretary shall be updated annually.

16 ‘‘(C) Subparagraph (A) shall apply for a couple in

17 the same manner as such subparagraph applies for an in18 dividual where one member of the couple applies for nurs19 ing facility services under this title.

20 ‘‘(D) For purposes of determining the total value of

21 resources in paragraph (A), the value of resources held

22 jointly with the individual’s spouse shall be considered

23 available to the individual applying for medical assistance

24 as determined under section 1924(d)(2).
81

•S 2205 PCS

1 ‘‘(3) No provision under this subsection shall affect

2 the community spouse protections contained in section

3 1924.

4 ‘‘(4) The Secretary shall provide grants to States for

5 demonstration projects to investigate the coordination of

6 private long-term care insurance benefits and financial eli7 gibility requirements under this title. Such demonstration

8 projects shall include, but not be limited to, investigations

9 of—

10 ‘‘(A) a State policy which subtracts the

11 amounts paid by an individual for private long-term

12 care insurance from the individual’s resources which

13 are counted to determine financial eligibility; and

14 ‘‘(B) a State policy which provides purchasers

15 of private long-term care insurance with impoverish16 ment protections by using medicaid as reinsurance.

17 ‘‘(5) Eligibility requirements under paragraphs (1)

18 through (4) of this subsection shall not apply to services

19 provided under this title other than nursing facility serv20 ices.’’.

21 SEC. 502. EFFECTIVE DATE.

22 The amendments made by this title shall be effective

23 January 1, 1995.
82

•S 2205 PCS

1 TITLE VI—ESTABLISHMENT OF

2 PROGRAM FOR HOME AND

3 COMMUNITY-BASED SERV4 ICES FOR CERTAIN INDIVID5 UALS WITH DISABILITIES

6 SEC. 600. SHORT TITLE.

7 This title may be cited as the ‘‘Home and Commu8 nity-Based Services for Individuals with Disabilities Pro9 gram Amendments of 1994’’.

10 SEC. 601. ESTABLISHMENT OF PROGRAM.

11 (a) ESTABLISHMENT OF PROGRAM.—Title XIX of

12 the Social Security Act (42 U.S.C. 1396 et seq.) is amend13 ed by redesignating section 1931 as section 1932 and by

14 inserting after section 1931 the following new section:

15 ‘‘HOME AND COMMUNITY-BASED SERVICES FOR

16 INDIVIDUALS WITH DISABILITIES.

17 ‘‘SEC. 1932. (a) IN GENERAL.—There is hereby es18 tablished a program under which States will be required

19 to provide for home and community-based services as de20 scribed in this section on behalf of individuals with disabil21 ities who meet the requirements described in this section.

22 This program is established notwithstanding any other

23 provisions of this title, and such services must be provided

24 to all such individuals by a State that has an approved

25 State plan under this title. The State shall not have re-
83

•S 2205 PCS

1 sponsibility to cover such services under this title to the

2 extent that such services are provided to an individual

3 under any other public programs. All provisions of this

4 title shall be applicable to the program established under

5 this section except as are inconsistent with this section.

6 ‘‘(b) ELIGIBILITY.—

7 ‘‘(1) INDIVIDUALS WITH DISABILITIES DE8 FINED.—In this section, the term ‘individual with

9 disabilities’ means any individual who falls within

10 one or both of the following 2 categories of individ11 uals:

12 ‘‘(A) INDIVIDUALS REQUIRING HELP WITH

13 ACTIVITIES OF DAILY LIVING.—An individual of

14 any age who—

15 ‘‘(i) requires hands-on or standby as16 sistance, supervision, or cueing (as defined

17 in regulations) to perform 3 or more activi18 ties of daily living (as defined in paragraph

19 (2)), and

20 ‘‘(ii) is expected to require such as21 sistance, supervision, or cueing over a pe22 riod of at least 100 days.

23 ‘‘(B) INDIVIDUALS WITH MODERATE COG24 NITIVE OR MENTAL IMPAIRMENT.—An individ25 ual of any age—
84

•S 2205 PCS

1 ‘‘(i) whose score, on a standard men2 tal status protocol (or protocols) appro3 priate for measuring the individual’s par4 ticular condition specified by the Secretary,

5 indicates either moderate cognitive impair6 ment or moderate mental impairment, or

7 both;

8 ‘‘(ii) who displays symptoms of one or

9 more serious behavioral problems (that is

10 on a list of such problems specified by the

11 Secretary) which create a need for super12 vision to prevent harm to self or others;

13 and

14 ‘‘(iii) who is expected to meet the con15 ditions of clauses (i) or (ii) over a period

16 of at least 100 days.

17 ‘‘(2) ACTIVITY OF DAILY LIVING DE18 FINED.—In this section, the term ‘activity of

19 daily living’ means any of the following: eating,

20 toileting (dressing and bathing), transferring,

21 and mobility.

22 ‘‘(c) SCREENING.—

23 ‘‘(1) INITIAL SCREENING.—The State shall pro24 vide for an initial screening of all individuals who

25 appear to have some reasonable likelihood of being
85

•S 2205 PCS

1 an individual with disabilities. Such a screening may

2 be conducted by a qualified case manager, or by any

3 other person or entity designated by the State under

4 criteria specified by the Secretary. Such assessment

5 shall be conducted using a uniform protocol specified

6 by the Secretary. A State may specify the collection

7 of addition information, or an alternative protocol, if

8 approved in advance by the Secretary. Such assess9 ment shall include, at a minimum an assessment of

10 the individual’s—

11 ‘‘(A) ability or inability to perform any ac12 tivities of daily living;

13 ‘‘(B) health status;

14 ‘‘(C) mental status;

15 ‘‘(D) current living arrangement; and

16 ‘‘(E) use of formal and informal long-term

17 care support systems.

18 ‘‘(2) PERIODIC REASSESSMENT.—For any indi19 vidual who receives services under this program, the

20 State shall arrange for a reassessment of the indi21 vidual’s need for services under this section after a

22 significant change in an individual’s condition that

23 may affect the individual’s need for such services,

24 within 6 months of the most recent assessment, or

25 for such longer period in such cases as a significant
86

•S 2205 PCS

1 change in an individual’s condition that may affect

2 such determination is unlikely.

3 ‘‘(d) CARE PLAN DEVELOPMENT.—

4 ‘‘(1) IN GENERAL.—The State shall assign a

5 qualified case manager to any individual who quali6 fies for coverage under this section. The qualified

7 case manager shall arrange for the development of,

8 or develop, an individualized written plan of care

9 based upon the comprehensive assessment. The care

10 plan shall be developed under any criteria that may

11 be specified by the State based upon any criteria

12 that the Secretary may specify. At a minimum, such

13 plan shall identify—

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

15 the individual;

16 ‘‘(B) the mix of formal and informal serv17 ices and support systems that are available to

18 meet the long-term care and service needs of

19 the individual;

20 ‘‘(C) goals for the individual which shall be

21 measurable to the extent practicable;

22 ‘‘(D) the appropriate services necessary to

23 meet such needs; and

24 ‘‘(E) the manner in which covered services

25 will be provided.
87

•S 2205 PCS

1 ‘‘(2) PROVISION OF SERVICES.—

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

3 case manager, in consultation with the individ4 ual, the individual’s family and the individual’s

5 primary medical care provider, shall arrange

6 for, or provide, the appropriate covered services

7 in a cost-effective manner, consistent with ob8 taining quality care. The qualified case man9 ager also shall assist in making the necessary

10 arrangements for the delivery of such services

11 and the implementation of the care plan.

12 ‘‘(B) NON-COVERED SERVICES.—The State

13 may require the qualified case manager to as14 sist the individual in obtaining non-covered

15 services, at the individual’s own expense, or

16 through other programs that may be available.

17 Nothing in this section shall be construed to

18 make the State responsible for payment under

19 this section for any services that are not cov20 ered services, as defined in subsection (f)(1), or

21 from prohibiting the individual, or other indi22 viduals, from paying for non-covered services or

23 services in excess of the amount or type ap24 proved by the case manager.
88

•S 2205 PCS

1 ‘‘(C) INDIVIDUAL CHOICE.—The accept2 ance of benefits under this provision is a vol3 untary choice of the individual or his or her

4 representative. Nothing in this section shall be

5 construed to require an individual to accept the

6 services available under this section, or to ac7 cept benefits under this section instead of en8 tering a nursing facility, skilled nursing facility,

9 or intermediate care facility for the mentally re10 tarded. An individual shall not be denied other

11 covered services under this section solely be12 cause he or she refuses to accept one such cov13 ered service, unless the failure to accept that

14 one covered service would vitiate the effective15 ness of the other covered services, and no cost16 effective alternative acceptable to the individual

17 is reasonably available. To the extent possible,

18 the case manager shall follow the choice of an

19 individual with disabilities regarding which cov20 ered services to receive and the providers who

21 will provide such services.

22 ‘‘(3) COORDINATION.—The plan shall specify

23 how the plan will integrate services provided under

24 this section with services provided under titles V and

25 XX of this Act and the Housing and Urban Devel-
89

•S 2205 PCS

1 opment Act, programs under the Older Americans

2 Act of 1965, and any other Federal or State pro3 grams that provide services or assistance targeted to

4 the aged and individuals with disabilities.

5 ‘‘(4) INVOLVEMENT OF INDIVIDUALS.—The

6 qualified case manager shall be responsible for ar7 ranging for the involvement of appropriate persons

8 in the comprehensive assessment and development of

9 the plan of care. In addition, the plan of care shall

10 be developed and implemented in close consultation

11 with the individual and individual’s family.

12 ‘‘(5) CARE PLAN MONITORING.—The qualified

13 case manager shall monitor the delivery of services

14 to the individual, the qualify of care provided, and

15 the status of individual. Periodic reassessments of

16 the status and needs of the individual, and revisions

17 of the care plan, shall be made by the qualified case

18 manager as appropriate. Such reassessments shall

19 be conducted not less than every 6 months. If the

20 individual is no longer eligible for benefits as a re21 sult of improved health conditions or death, the

22 qualified case manager, in consultation with the in23 dividual’s primary medical care provider, shall dis24 charge the case.
90

•S 2205 PCS

1 ‘‘(6) QUALIFIED CASE MANAGER.—In this sec2 tion, the term ‘qualified case manager’ means a per3 son or entity which—

4 ‘‘(A) provides case management services to

5 an individual who is eligible for home and com6 munity-based services;

7 ‘‘(B) is not a relative of the individual re8 ceiving such case management services;

9 ‘‘(C) has experience in assessing individ10 uals’ functional and cognitive impairment;

11 ‘‘(D) has experience or has been trained in

12 establishing, and in periodically reviewing and

13 revising, individual community care plans, and

14 in the provision of case management services to

15 individuals who are eligible for home and com16 munity-based services under this section;

17 ‘‘(E) completes the individual care plan in

18 a timely manner and reviews and discusses new

19 and revised individual care plans with the indi20 vidual or such individual’s representative or

21 both; and

22 ‘‘(F) meets such other standards estab23 lished by the Secretary or the State which may

24 include standards which assure—
91

•S 2205 PCS

1 ‘‘(i) the quality of the case manage2 ment services; and

3 ‘‘(ii) that individuals whose home and

4 community-based services such person or

5 entity manages are not at risk of financial

6 exploitation due to such a manager.

7 ‘‘(7) RELATIVE DEFINED.—In this section, the

8 term ‘relative’ means an individual bearing a rela9 tionship to another individual which is described in

10 paragraphs (1) through (8) of section 152(a) of the

11 Internal Revenue Code of 1986.

12 ‘‘(e) TYPES OF PROVIDERS AND REQUIREMENTS FOR

13 PARTICIPATION.—

14 ‘‘(1) IN GENERAL.—The State plan shall speci15 fy—

16 ‘‘(A) the types of services eligible to par17 ticipate in the program under the plan; and

18 ‘‘(B) any requirements for participation

19 applicable to each type of service provider.

20 ‘‘(2) SERVICE PROVIDER DEFINED.—In this

21 section, the term ‘service provider’ means a provider

22 who is licensed under State law or who meets other

23 criteria as the Secretary or State may specify.

24 ‘‘(f) COVERED SERVICES.—
92

•S 2205 PCS

1 ‘‘(1) IN GENERAL.—In this section, the term

2 ‘covered services’ includes—

3 ‘‘(A) case management;

4 ‘‘(B) adult day services;

5 ‘‘(C) habilitation and rehabilitation serv6 ices;

7 ‘‘(D) home health care;

8 ‘‘(E) respite services; and

9 ‘‘(F) hospice services.

10 ‘‘(2) DELIVERY OF SERVICES.—Subject to the

11 limits in subsection (g), covered services may be de12 livered in an individual’s home, a range of commu13 nity residential arrangements, or outside the home.

14 ‘‘(3) AMOUNT, SCOPE, AND DURATION.—In es15 tablishing the amount, scope, and duration of serv16 ices required to be provided, covered services shall be

17 treated as required services under this title.

18 ‘‘(g) EXCLUSIONS AND LIMITATIONS.—

19 ‘‘(1) IN GENERAL.—The following are specifi20 cally excluded from coverage under this section:

21 ‘‘(A) Room and board.

22 ‘‘(B) Items or services otherwise covered to

23 the extent that such items or services are cov24 ered under an insurance plan or program other

25 than a State health program.
93

•S 2205 PCS

1 ‘‘(C) Services provided to an individual

2 who otherwise would be institutionalized in a

3 nursing facility or intermediate care facility for

4 the mentally retarded, unless the State, or if

5 delegated, the qualified case manager reason6 ably estimates (under methods specified by the

7 Secretary) that the cost of covered services

8 under this section would be lower than if the in9 dividual were so institutionalized.

10 ‘‘(D) Services specified in the plan of care

11 which are not specified as covered services

12 under subsection (f)(1).

13 ‘‘(2) TAKING INTO ACCOUNT INFORMAL

14 CARE.—A State plan may take into account, in de15 termining the amount and array of services made

16 available to covered individuals with disabilities, the

17 availability of informal care.

18 ‘‘(h) MAINTENANCE OF EFFORT.—The State plan

19 must provide assurances that, in the case of an individual

20 receiving medical assistance for home and community21 based services under this title as of the date of the enact22 ment of this section, the State will continue to make avail23 able (either under this title or otherwise) to such individ24 ual an appropriate level of assistance for home and com25 munity-based services, taking into account the level of as-
94

•S 2205 PCS

1 sistance provided as of such date and the individual’s need

2 for home and community-based services.

3 ‘‘(i) QUALITY ASSURANCE AND SAFEGUARDS.—

4 ‘‘(1) QUALITY ASSURANCE.—The State shall

5 ensure and monitor the quality of services, includ6 ing—

7 ‘‘(A) safeguarding the health and safety of

8 individuals with disabilities;

9 ‘‘(B) establishing minimum standards for

10 care managers and providers and enforcing

11 those standards,

12 ‘‘(C) establishing the minimum competency

13 requirements for provider employees who pro14 vide direct services under this section and how

15 the competency of such employees will be en16 forced;

17 ‘‘(D) obtaining meaningful consumer

18 input, including consumer surveys that measure

19 the extent to which participants receive the

20 services described in the plan of care and par21 ticipant satisfaction with such services;

22 ‘‘(E) participation in quality assurance ac23 tivities; and

24 ‘‘(F) specifying the role of the long-term

25 care ombudsman (under the Older Americans
95

•S 2205 PCS

1 Act of 1965) and the Protection and Advocacy

2 Agency (under the Developmental Disabilities

3 Assistance and Bill of Rights Act) in assuring

4 quality of services and protecting the rights of

5 individuals with disabilities.

6 ‘‘(2) SAFEGUARDS.—

7 ‘‘(A) CONFIDENTIALITY.—The State shall

8 provide safeguards which restrict the use or dis9 closure of information concerning applicants

10 and beneficiaries to purposes directly connected

11 with the administration of the program.

12 ‘‘(B) SAFEGUARDS AGAINST ABUSE.—The

13 State shall provide safeguards against physical,

14 emotional, or financial abuse or exploitation in

15 the provision of care management and covered

16 services.

17 ‘‘(j) PROVIDER REIMBURSEMENT.—

18 ‘‘(1) PAYMENT METHODS.—The State shall

19 specify the payment methods to be used to reim20 burse providers and case managers for services fur21 nished under the plan. Such methods may include

22 reimbursement on a fee-for-service basis, prepay23 ment on a capitation basis, or a combination of

24 these methods. The State, if it chooses, may provide
96

•S 2205 PCS

1 the case manager with authority to negotiate rates

2 with individual providers.

3 ‘‘(2) PAYMENT RATES.—The State shall specify

4 the methods and criteria to be used to set payment

5 rates for services furnished under the plan. In addi6 tion to any other requirements, such payments must

7 be sufficient to ensure that the requirements of

8 1902(a)(30)(A) are satisfied.

9 ‘‘(3) PAYMENT IN FULL.—Except as specified

10 in subsection (d)(2)(B), the State shall restrict pay11 ment for covered services to those providers that

12 agree to accept the payment under the plan (at rates

13 established pursuant to subparagraph (2)) as pay14 ment in full for services furnished under this section.

15 ‘‘(k) APPROVAL OF STATE PLAN AMENDMENTS.—

16 Each state shall take whatever action is necessary to have

17 an amendment to its State plan under this title approved

18 by October 1, 1996, that implements this section for that

19 State not later than October 1, 1997, except that where

20 an Act of the State legislature is necessary to effectuate

21 such State plan amendment and said legislature is not in

22 session as of the date of the enactment of this section,

23 the State shall have said amendment approved not later

24 than 6 months after the commencement of the session of

25 its legislature that begins immediately subsequent to such
97

•S 2205 PCS

1 date of enactment, if such date is later than October 1,

2 1996.’’.

3 SEC. 602. INCREASED RESOURCE DISREGARDS FOR NURS4 ING FACILITY RESIDENTS.

5 Section 1902(a)(10) of the Social Security Act (42

6 U.S.C. 1396a(a)(10)) is amended—

7 (1) by striking ‘‘and’’ at the end of subpara8 graph (F); and

9 (2) by inserting after subparagraph (F) the fol10 lowing new subparagraph:

11 ‘‘(G) that, in determining the eligibility of

12 any individual who is an inpatient in a nursing

13 facility or intermediate care facility for the

14 mentally retarded, in the case of an unmarried

15 individual, the first $12,000 of resources shall

16 be disregarded.’’.

17 TITLE VII—ASSET TRANSFERS

18 SEC. 701. TRANSFERS OF ASSETS.

19 Section 1917(c)(1)(B)(i) of the Social Security Act

20 (42 U.S.C. 1396p(c)(1)(B)(i)) is amended to read as

21 follows:

22 ‘‘(B)(i) The look-back date specified in this sub23 paragraph is a date that is 60 months before the

24 date specified in clause (ii).’’.
98

•S 2205 PCS

1 SEC. 702. TREATMENT OF CERTAIN TRUSTS.

2 Section 1917(c)(2) of the Social Security Act (42

3 U.S.C. 1396p(c)(2)) is amended by adding at the end the

4 following new flush sentences:

5 ‘‘In order for the income or assets of an income cap trust,

6 nonprofit asset trust or other such trust arrangement to

7 be exempt under this paragraph, the trust must be irrev8 ocable and all amounts remaining in the beneficiary’s ac9 count must be paid to the State upon the death of the

10 beneficiary. For purposes of this section, the term ‘trust’

11 shall not include a personal service contract annuity for

12 a family member within the 60-month period even if such

13 transfer is for fair market value. The Secretary shall pro14 hibit, by regulation, the use of family limited partnerships

15 to convert available assets into an exempt status; pur16 chases of interests in third-party assets for the purpose

17 of rendering otherwise includable assets unavailable, and

18 not subject to liens; and purchase of care services agree19 ments for past services by family members to reduce

20 countable assets.’’.

21 SEC. 703. EFFECTIVE DATE.

22 The amendments made by this title shall be effective

23 January 1, 1995.

Æ

S 2205 PCS——2

S 2205 PCS——3
99

•S 2205 PCS

S 2205 PCS——4

S 2205 PCS——5

S 2205 PCS——6

S 2205 PCS——7

S 2205 PCS——8