II

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

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,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Quality Care For Life Act of 1994’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 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.

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
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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;

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

11 care in nursing facilities by providing equitable reim12 bursement under all appropriate Federal health care
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1 programs and by eliminating regulatory and legisla2 tive barriers to providing such care;

3 (3) amend the Internal Revenue Code of 1986

4 to clarify the Federal tax treatment of long term

5 care insurance policies to promote the purchase of

6 such policies;

7 (4) amend the Internal Revenue Code of 1986

8 to develop reasonable Federal standards for long

9 term care insurance that promote consumer protec10 tion;

11 (5) modify financial eligibility standards under

12 the medicaid program to ensure an inclusive ac13 counting of individual assets and promote personal

14 responsibility for long term care expenses;

15 (6) establish a program for home and commu16 nity-based services for individuals with disabilities

17 under the medicaid program to provide beneficiaries,

18 whose needs would be determined by functional eligi19 bility standards, with expanded choice of services

20 within a continuum of care, and contain costs by en21 couraging the use of appropriate levels of care; and

22 (7) revise the transfer of asset prohibitions

23 under the medicaid program to make the 60-month

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

25 all transfers of assets, to require ‘‘income cap
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1 trusts’’ and ‘‘nonprofit association trusts’’ to be ir2 revocable, to include the conversion of personal or

3 real property into annuities as an unlawful transfer,

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

5 such other loopholes not covered by the Omnibus

6 Budget Reconciliation Act of 1993 (Public Law

7 103–66).

8 TITLE I—PROSPECTIVE PAY9 MENT SYSTEM FOR NURSING

10 FACILITIES

11 SEC. 100. SHORT TITLE.

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

13 System for Nursing Facilities Amendments of 1994’’.

14 SEC. 101. DEFINITIONS.

15 For purposes of this title:

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

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

18 certain resident classes designated by the Secretary

19 as requiring heavy care.

20 (2) ‘‘Aggregated resident invoice’’ means a com21 pilation of the per resident invoices of a nursing fa22 cility which contain the number of resident days for

23 each resident and the resident class of each resident

24 at the nursing facility during a particular month.
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1 (3) ‘‘Allowable costs’’ means costs which HCFA

2 has determined to be necessary for a nursing facility

3 to incur according to the Provider Reimbursement

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

5 15’’).

6 (4) ‘‘Base year’’ means the most recent cost re7 porting period (consisting of a period which is 12

8 months in length, except for facilities with new own9 ers, in which case the period is not less than 4

10 months nor more than 13 months) for which cost

11 data of nursing facilities is available to be used for

12 the determination of a prospective rate.

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

14 score of a facility calculated by multiplying the resi15 dent days in each resident class by the relative

16 weight assigned to each resident class, and summing

17 the resulting products across all resident classes.

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

19 such as ventilators, intermittent positive pressure

20 breathing (IPPB) machines, nebulizers, suction

21 pumps, continuous positive airway pressure (CPAP)

22 devices, and bead beds such as air fluidized beds.

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

24 institution which has a distinct part that is certified

25 under title XVIII of the Social Security Act and
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1 meets the requirements of section 201.1 of the

2 Skilled Nursing Facility Manual published by HCFA

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

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

5 made to a nursing facility in recognition of incurring

6 costs below a prespecified level.

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

8 meets the definition of building equipment in section

9 104.3 of HCFA–Pub. 15. ‘‘Fixed equipment’’ in10 cludes, but is not limited to, attachments to build11 ings such as wiring, electrical fixtures, plumbing,

12 elevators, heating systems, and air conditioning sys13 tems.

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

15 on payments in any given cost center for nursing fa16 cilities in one of no fewer than 8 geographic regions,

17 further subdivided into rural and urban areas, as

18 designated by the Secretary.

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

20 level of care which the Secretary has determined is

21 required for residents in certain resident classes.

22 (12) ‘‘HCFA’’ means the Health Care Financ23 ing Administration of the Department of Health and

24 Human Services.
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1 (13) ‘‘Indexed forward’’ means an adjustment

2 made to a per diem rate to account for cost in3 creases due to inflation or other factors during an

4 intervening period following the base year and pro5 jecting such cost increases for a future period in

6 which the rate applies. Indexing forward under this

7 title shall be determined from the midpoint of the

8 base year to the midpoint of the rate year.

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

10 means an appraisal method published by the Mar11 shall Swift Valuation Service.

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

13 to as ‘MDS’)’’ means a resident assessment instru14 ment, currently recognized by HCFA, in addition to

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

16 any extensions to accommodate subacute care which

17 contain an appropriate core of assessment items

18 with definitions and coding categories needed to

19 comprehensively assess a nursing facility resident.

20 (16) ‘‘Major movable equipment’’ means equip21 ment which meets the definition of major movable

22 equipment in section 104.4 of HCFA–Pub. 15.

23 ‘‘Major movable equipment’’ includes, but is not lim24 ited to, accounting machines, beds, wheelchairs,

25 desks, vehicles, and X-ray machines.
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1 (17) ‘‘Nursing facility’’ means an institution

2 which meets the requirements of a ‘‘skilled nursing

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

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

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

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

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

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

9 the geographic regions designated by the Secretary.

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

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

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

13 value of the resources required for a given resident

14 class relative to the value of resources of either a

15 base resident class or the average of all the resident

16 classes.

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

18 the R. S. Means Company, Inc., specific to commer19 cial/industrial institutionalized nursing facilities,

20 which is based upon a survey of prices of common

21 building materials and wage rates for nursing facil22 ity construction.

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

24 nursing facility cost data for a subsequent rate year

25 using a more recent base year.
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1 (23) ‘‘Rental rate’’ means a percentage that

2 will be multiplied by the fair asset value of property

3 to determine the total annual rental payment in lieu

4 of property costs.

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

6 system which categorizes residents into different

7 resident classes according to similarity of the

8 assessed condition and required services of such

9 residents.

10 (25) ‘‘Resident day’’ means the period of serv11 ices for one resident, regardless of payment source,

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

13 admission of the resident constitutes a resident day

14 but the day of discharge does not constitute a resi15 dent day. Bed hold days are not to be considered

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

17 be offset.

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

19 (hereinafter referred to as ‘RUG–III’)’’ means a cat20 egory-based resident classification system used to

21 classify nursing facility residents into mutually ex22 clusive RUG–III groups. Residents in each RUG–III

23 group utilize similar quantities and patterns of

24 resources.
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1 (27) ‘‘Secretary’’ means the Secretary of

2 Health and Human Services.

3 SEC. 102. PAYMENT OBJECTIVES.

4 (a) Payment rates under the Prospective Payment

5 System for Nursing Facilities shall reflect the following

6 objectives:

7 (1) To maintain an equitable and fair balance

8 between cost containment and quality of care in

9 nursing facilities.

10 (2) To encourage nursing facilities to admit

11 residents without regard to such residents’ source of

12 payment.

13 (3) To provide an incentive to nursing facilities

14 to admit and provide care to persons in need of com15 paratively greater care.

16 (4) To maintain administrative simplicity, for

17 both nursing facilities and the Secretary.

18 (5) To encourage investment in buildings and

19 improvements to nursing facilities (capital forma20 tion) as necessary to maintain quality and access.

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

22 (a) The Secretary shall establish by regulation the

23 implementation of this title. The rates determined under

24 this title shall reflect the objectives in section 102.
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1 (b) The Secretary may require that each nursing fa2 cility file such data, statistics, schedules, or information

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

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

5 SECURITY ACT.

6 (a) No provision in this title shall replace, or other7 wise affect, the skilled nursing facility benefit under title

8 XVIII of the Social Security Act.

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

10 the determination of allowable costs under this title except

11 to the extent that such provisions conflict with any other

12 provision in this title.

13 SEC. 105. ESTABLISHMENT OF RESIDENT CLASSIFICATION

14 SYSTEM.

15 (a)(1) The Secretary shall establish a resident classi16 fication system which shall group residents into classes ac17 cording to similarity of the assessed condition and re18 quired services of such residents.

19 (2) The resident classification system shall be mod20 elled after the RUG–III system and all updated versions

21 of that system.

22 (3) The resident classification system shall be reflec23 tive of the necessary professional and paraprofessional

24 nursing staff time and costs required to address the care

25 needs of nursing facility residents.
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1 (b)(1) The Secretary shall assign a relative weight for

2 each resident class based on the relative value of the re3 sources required for each resident class. The assignment

4 of relative weights for resident classes shall be performed

5 for each geographic region as determined in accordance

6 with subsection (c).

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

8 classes in a geographic region, the Secretary shall utilize

9 information derived from the most recent MDSs of all of

10 the nursing facilities in a geographic region.

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

12 each geographic region shall be recalibrated every 3 years

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

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

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

16 8 geographic regions for the total United States. Within

17 each geographic region, the Secretary shall take appro18 priate account of variations in cost between urban and

19 rural areas.

20 (2) There shall be no peer grouping of nursing facili21 ties (e.g., based on whether the nursing facilities are hos22 pital-based or not) other than peer-grouping by geographic

23 region.
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1 SEC. 106. COST CENTERS FOR NURSING FACILITY PAY2 MENT.

3 (a) Consistent with the objectives established in sec4 tion 102, the Secretary shall determine payment rates for

5 nursing facilities using the following cost-service

6 groupings:

7 (1) The nursing service cost center shall include

8 salaries and wages for the Director of Nursing,

9 Quality Assurance Nurses, registered nurses, li10 censed practical nurses, nurse aides (including wages

11 related to initial and on-going nurse aide training

12 and other on-going or periodic training costs in13 curred by nursing personnel), contract nursing,

14 fringe benefits and payroll taxes associated there15 with, medical records, and nursing supplies.

16 (2) The administrative and general cost center

17 shall include all expenses (including salaries, bene18 fits, and other costs) related to administration, plant

19 operation, maintenance and repair, housekeeping, di20 etary (excluding raw food), central services and sup21 ply (excluding medical supplies), laundry, and social

22 services.

23 (3) Ancillary services to be paid on a fee-for24 service basis shall include physical therapy, occupa25 tional therapy, speech therapy, respiratory therapy,

26 hyperalimentation, and complex medical equipment
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1 (CME). These fee-for-service ancillary service pay2 ments under Part A of title XVIII of the Social Se3 curity Act shall not affect the reimbursement of an4 cillary services under part B of title XVIII of the

5 Social Security Act.

6 (4) The cost center for selected ancillary serv7 ices and other costs shall include drugs, raw food,

8 medical supplies, IV therapy, X-ray services, labora9 tory services, property tax, property insurance,

10 minor equipment, and all other costs not included in

11 the other 4 cost/service groupings.

12 (5) The property cost center shall include de13 preciation on the buildings and fixed equipment,

14 major movable equipment, motor vehicles, land im15 provements, amortization of leasehold improvements,

16 lease acquisition costs, and capital leases; interest on

17 capital indebtedness; mortgage interest; lease costs;

18 and equipment rental expense.

19 (b) Nursing facilities shall be paid a prospective, fa20 cility-specific, per diem rate based on the sum of the per

21 diem rates established for the nursing service, administra22 tive and general, and property cost centers as determined

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

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

25 prospective rate for each unit of the fee-for-service ancil-
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1 lary services as determined in accordance with section

2 110.

3 (d) Nursing facilities shall be reimbursed for selected

4 ancillary services and other costs on a retrospective basis

5 in accordance with section 111.

6 SEC. 107. RESIDENT ASSESSMENT.

7 (a) The nursing facility shall perform a resident as8 sessment in accordance with section 1819(b)(3) of the So9 cial Security Act (42 U.S.C. 1395i–3(a)) within 14 days

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

11 required by that section.

12 (b) The resident assessment shall be used to deter13 mine the resident class of each resident in the nursing fa14 cility for purposes of determining the per diem rate for

15 the nursing service cost center in accordance with section

16 108.

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

18 COSTS.

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

20 calculated using a prospective, facility-specific per diem

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

22 nursing service costs during the base year.

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

24 be obtained by multiplying the number of resident days

25 in each resident class at a nursing facility during the base
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1 year by the relative weight assigned to each resident class

2 in the appropriate geographic region. Once this calculation

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

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

5 weight for the nursing facility.

6 (3) A facility nursing unit value for the nursing facil7 ity for the base year shall be obtained by dividing the nurs8 ing service costs for the base year, which shall be indexed

9 forward from the midpoint of the base period to the mid10 point of the rate period using the DRI McGraw-Hill

11 HCFA Nursing Home Without Capital Market Basket, by

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

13 year.

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

15 resident class shall be obtained by multiplying the lower

16 of the indexed facility unit value of the nursing facility

17 during the base year or the geographic ceiling, as deter18 mined in accordance with subsection (b), by the relative

19 weight of the resident class.

20 (5) The Secretary shall designate certain resident

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

22 percent of the facility-specific nursing services price shall

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

24 class which the Secretary has designated as requiring

25 heavy care. The acuity payment is intended to provide an
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1 incentive to nursing facilities to admit residents requiring

2 heavy care.

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

4 center for each resident in a resident class shall constitute

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

6 appropriate.

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

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

9 payment, shall be rebased annually.

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

11 facility for the nursing service cost center, the Secretary

12 shall multiply the per diem rate (including the acuity pay13 ment) for a resident class by the number of resident days

14 for each resident class based on aggregated resident in15 voices which each nursing facility shall submit on a month16 ly basis.

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

18 (a)(3) shall be subjected to geographic ceilings established

19 for the geographic regions designated by the Secretary in

20 section 105(c).

21 (2) The geographic ceiling shall be determined by

22 first creating an array of indexed facility unit values in

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

24 array, the Secretary shall identify a fixed proportion be25 tween the indexed facility unit value of the nursing facility
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1 which contained the medianth resident day in the array

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

3 facility unit value of the nursing facility which contained

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

5 first year of operation of the Prospective Payment System

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

7 times the median or 110 percent of the median) shall re8 main the same in subsequent years.

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

10 facility unit value for nursing facilities in a geographic re11 gion in each subsequent year, the fixed proportion identi12 fied pursuant to subsection (b)(2) shall be multiplied by

13 the indexed facility unit value of the nursing facility which

14 contained the medianth resident day in the array of facil15 ity unit values for the geographic region during the base

16 year.

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

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

19 section 113, respectively, for purposes of determining the

20 geographic ceiling for the nursing service cost center.

21 (c) The Secretary shall establish by regulation, proce22 dures for allowing exceptions to the geographic ceiling im23 posed on the nursing service cost center. The procedure

24 shall permit exceptions based on the following factors:
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1 (1) Local supply and/or labor shortages which

2 substantially increase costs to specific nursing facili3 ties.

4 (2) Higher per resident day usage of contract

5 nursing personnel, if utilization of contract nursing

6 personnel is warranted by local circumstances, and

7 the provider has taken all reasonable measures to

8 minimize contract personnel expense.

9 (3) Extraordinarily low proportion of distinct

10 part nursing facilities in a geographic region result11 ing in a geographic ceiling which unfairly restricts

12 the reimbursement of distinct part facilities.

13 (4) Regulatory changes that increase costs to

14 only a subset of the nursing facility industry.

15 (5) The offering of a new institutional health

16 service or treatment program by a nursing facility

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

18 (6) Disproportionate usage of part-time employ19 ees, where adequate numbers of full-time employees

20 cannot reasonably be obtained.

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

22 by the Secretary in regulations that are specific to

23 a subset of facilities in a geographic region (except

24 case-mix variation).
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1 SEC. 109. THE PER DIEM RATE FOR ADMINISTRATIVE AND

2 GENERAL COSTS.

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

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

5 per diem rate.

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

7 nursing facility by applying 2 standards which shall be cal8 culated as follows:

9 (A) Standard A shall be derived for each geo10 graphic region by first creating an array of indexed

11 nursing facility administrative and general per diem

12 costs from lowest to highest. The Secretary shall

13 then identify a fixed proportion by dividing the in14 dexed administrative and general per diem costs of

15 the nursing facility which contained the medianth

16 resident day of the array (except as provided in sub17 section (a)(4)) into the indexed administrative and

18 general per diem costs of the nursing facility which

19 contained the 75th percentile resident day in that

20 array. Standard A for each base year shall con21 stitute the product of this fixed proportion (e.g., 1.1

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

23 the administrative and general indexed per diem

24 costs of the nursing facility which contained the

25 medianth resident day in the array of such costs

26 during the base year.
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1 (B) Standard B shall be derived using the same

2 calculation as in subparagraph (A) except that the

3 fixed proportion shall use the indexed administrative

4 and general costs of the nursing facility containing

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

6 resident day in the array of such costs.

7 (3) The Secretary shall use the geographic regions

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

9 Standard A and Standard B.

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

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

12 section 113, respectively, for purposes of determining

13 Standard A and Standard B.

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

15 for the administrative and general cost center, Standard

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

17 administrative and general per diem costs, indexed for18 ward using the DRI McGraw-Hill HCFA Nursing Home

19 Without Capital Market Basket, as follows:

20 (A) Each nursing facility having indexed costs

21 which fall below the median shall be assigned a rate

22 equal to such facility’s individual indexed costs plus

23 an ‘‘efficiency incentive’’ equal to one half of the dif24 ference between the median and Standard A.
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1 (B) Each nursing facility having indexed costs

2 which fall below Standard A but at or above the me3 dian shall be assigned a per diem rate equal to such

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

5 incentive’’ equal to one-half of the difference be6 tween such facility’s indexed costs and Standard A.

7 (C) Each nursing facility having indexed costs

8 which fall between Standard A and Standard B shall

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

10 of the difference between such facility’s indexed

11 costs and Standard A.

12 (D) Each nursing facility having indexed costs

13 which exceed Standard B shall be assigned a rate as

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

15 nursing facilities shall be assigned a per diem rate

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

17 between Standard A and Standard B.

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

19 (D), the median represents the indexed administra20 tive and general per diem costs of the nursing facil21 ity which contained the medianth resident day in the

22 array of such costs during the base year in the geo23 graphic region.
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1 (b) Rebasing of the payment rates for administrative

2 and general costs shall occur no less frequently than once

3 a year.

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

5 SERVICES.

6 (a) Payment for each ancillary service enumerated in

7 section 106(a)(3), such as physical therapy, shall be cal8 culated and paid on a prospective fee-for-service basis.

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

10 the fee-for-service ancillary services for a particular nurs11 ing facility by dividing the nursing facility’s actual costs,

12 including overhead allocated through the cost finding proc13 ess, of providing each particular service, indexed forward

14 using the DRI McGraw-Hill HCFA Nursing Home With15 out Capital Market Basket, by the units of the particular

16 service provided by the nursing facility during the cost

17 year.

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

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

20 facility and ancillary service.

21 SEC. 111. REIMBURSEMENT OF SELECTED ANCILLARY

22 SERVICES AND OTHER COSTS.

23 (a) Reimbursement of selected ancillary services and

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

25 and medical supplies, shall be reimbursed on a retrospec-
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1 tive basis as pass-through costs, including overhead allo2 cated through the cost-finding process.

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

4 for selected ancillary services and other costs for each

5 nursing facility providing such services. Any overpayments

6 or underpayments resulting from the difference between

7 the interim and final settlement rates shall be either re8 funded by the nursing facility or paid to the nursing facil9 ity following submission of a timely filed medicare cost

10 report.

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

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

13 center for nursing facilities shall be calculated and paid

14 on a prospective (except as provided for newly constructed

15 facilities in subsection (d)(2)), facility-specific, per resi16 dent day rate based on the fair asset value of the property.

17 (2)(A) The fair asset value of the property shall con18 stitute the sum of the market value of the land (including

19 site preparation costs), a reconstruction cost appraised

20 value for the buildings and fixed equipment, and the prod21 uct of the number of beds in the nursing facility and a

22 per bed allowance for major movable equipment.

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

24 are included in determining the fair asset value must be

25 used in connection with the care of residents.
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1 (C) Appraisals for the buildings and fixed equipment

2 shall be performed using the Marshall-Swift segmented

3 cost method. A nursing facility shall be appraised every

4 4 years.

5 (D) The Secretary shall utilize an annual allowance

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

7 nursing facility. The Secretary shall review the annual al8 lowance for major movable equipment every 5 years to de9 termine its accuracy.

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

11 to a building and fixed equipment between appraisals the

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

13 value of the existing building and the fixed equipment,

14 such facility may submit documentation as to the cost of

15 the renovation during the previous year. The Secretary

16 shall add the reasonable costs of the major renovation for

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

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

19 the next full appraisal.

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

21 appraisals, indexing, and the application of allowances,

22 and is, therefore, unaffected by sales transactions, refi23 nancing, or other changes in financing. Accordingly, the

24 concept of recapture of depreciation is inapplicable to fa25 cilities whose payment is established under this title.
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•S 2205 IS

1 (3) The value of the land, buildings, and fixed equip2 ment shall be indexed annually between reappraisals as

3 follows:

4 (A) The land shall be indexed using Consumer

5 Price Index Urban.

6 (B) The buildings and fixed equipment shall be

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

8 (4) The annual allowance for major movable equip9 ment shall be indexed annually using the hospital equip10 ment index of the Marshall Swift Valuation Service.

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

12 the land, buildings and fixed equipment, and major mov13 able equipment for the different geographic regions.

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

15 on the fair asset value of a nursing facility for each geo16 graphic region, as designated in section 105(c). The per

17 bed limit shall be equal to the average indexed costs in18 curred by all recently constructed nursing facilities in the

19 geographic region which have been designed and con20 structed in an efficient manner.

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

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

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

24 years.
28

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1 (c) The total annual rental shall constitute the prod2 uct of the lower of the indexed fair asset value or the in3 dexed per bed limit and a rental rate which shall be based

4 on the average yield for 20 year United States Treasury

5 Bonds during the prior year plus a risk premium of 3 per6 centage points.

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

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

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

10 constitute the per diem rate attributable to the property

11 cost center.

12 (2) The per resident day rental rate for a newly-con13 structed facility during such facility’s first year of oper14 ation shall be based on the total annual rental divided by

15 the greater of 50 percent of available resident days or ac16 tual annualized resident days up to 90 percent of annual

17 licensed bed days during such facility’s first year of oper18 ation.

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

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

21 actual costs, as determined in accordance with HCFA–

22 Pub. 15, whichever is greater, except that a nursing facil23 ity shall be reimbursed the per resident day rental on and

24 after the earlier of—
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•S 2205 IS

1 (1) the date upon which the nursing facility

2 changes ownership;

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

4 resident day rental; or

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

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

7 of optional extensions specifically included in the

8 original lease agreement or valid extensions thereof.

9 SEC. 113. MID-YEAR RATE ADJUSTMENTS.

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

11 procedure for granting mid-year rate adjustments for the

12 nursing service, administrative and general, and fee-for13 service ancillary services cost centers.

14 (2) The mid-year rate adjustment procedure shall re15 quire the Secretary to grant adjustments on an industry16 wide basis, without the need for nursing facilities to apply

17 for such adjustments, based on the following cir18 cumstances:

19 (A) Statutory or regulatory changes affecting

20 nursing facilities (e.g., new staffing standards or ex21 panded services).

22 (B) Changes to the Federal minimum wage.

23 (C) General labor shortages with high regional

24 wage impacts.
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1 (3) The midyear rate adjustment procedure shall per2 mit specific facilities or groups of facilities to apply for

3 an adjustment based on the following factors:

4 (A) Local labor shortages.

5 (B) Regulatory changes that apply to only a

6 subset of the nursing facility industry.

7 (C) Economic conditions created by natural dis8 asters or other events outside of the control of the

9 provider.

10 (D) Other cost producing factors, except case11 mix variation, to be specified by the Secretary by

12 regulation.

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

14 rate adjustment pursuant to subsection (a)(3) shall be re15 quired to show that the adjustment will result in a greater

16 than 2 percent deviation in the per diem rate for any indi17 vidual cost service center or a deviation of greater than

18 $5,000 in the total projected and indexed costs for the

19 rate year, whichever is less.

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

21 adjustment must be accompanied by recent cost experi22 ence data and/or budget projections.
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1 SEC. 114. EXCEPTION TO PAYMENT METHODS FOR NEW

2 AND LOW-VOLUME NURSING FACILITIES.

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

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

5 resident days per year.

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

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

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

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

10 operated for more than 3 years but has a change of owner11 ship shall not constitute a new facility.

12 (c) Low-volume nursing facilities shall have the op13 tion of submitting a cost report to receive retrospective

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

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

16 based on the sum of—

17 (1) the median indexed resident day facility

18 unit value for the appropriate geographic region for

19 the nursing service cost center during the base year

20 as identified in section 108(b)(2),

21 (2) the median indexed resident day administra22 tive and general per diem costs of all nursing facili23 ties in the appropriate geographic region as identi24 fied in section 109(a)(5)(E),

25 (3) the median indexed resident day costs per

26 unit of service for fee-for-service ancillary services
32

•S 2205 IS

1 which shall be obtained using the cost information

2 from the nursing facilities in the appropriate geo3 graphic region during the base year, excluding low4 volume and new nursing facilities, and which shall

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

6 highest, and

7 (4) the median indexed resident day per diem

8 costs for selected ancillary services and other costs

9 which shall be obtained using information from the

10 nursing facilities in the appropriate geographic re11 gion during the base year, excluding low-volume and

12 new nursing facilities, and which shall be based on

13 an array of such costs from lowest to highest.

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

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

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

17 through (4) of subsection (c).

18 SEC. 115. APPEAL PROCEDURES.

19 (a)(1) Any person or legal entity aggrieved by a deci20 sion of the Secretary under this title, and which results

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

22 have the right to appeal such decision directly to the Pro23 vider Reimbursement Review Board (hereinafter referred

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

25 XVIII of the Social Security Act.
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•S 2205 IS

1 (2) The $10,000 amount in controversy shall be com2 puted in accordance with 42 C.F.R. 405.1839.

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

4 any appeals thereto, shall follow the procedures under sec5 tion 1878 of title XVIII of the Social Security Act and

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

7 except to the extent that such procedures conflict with,

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

9 this title.

10 SEC. 116. EFFECTIVE DATE.

11 (a) The provisions of this title shall be effective Octo12 ber 1, 1995.

13 (b) The provisions contained in this title shall

14 supercede any other provisions of title XVIII or title XIX

15 of the Social Security Act which are inconsistent with such

16 provisions.

17 TITLE II—SUBACUTE CARE CON18 TINUUM AMENDMENTS OF

19 1994

20 SEC. 200. SHORT TITLE.

21 This title may be cited as the ‘‘Subacute Care Contin22 uum Act of 1994’’.

23 SEC. 201. FINDINGS AND PURPOSES.

24 (a) This title is based on the following findings:
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•S 2205 IS

1 (1) The Federal Government currently bears

2 excessive costs in providing subacute care to patients

3 for whom inpatient hospital services are not medi4 cally necessary, in part because of difficulties in

5 placing such patients in nursing facilities.

6 (2) Nursing facilities are currently disadvan7 taged in providing subacute care services because of

8 the significant cash flow burdens resulting from

9 delays by the Health Care Financing Administration

10 in approving exceptions from the medicare routine

11 cost limits.

12 (3) Physicians are discouraged from facilitating

13 the placement of subacute care patients into skilled

14 nursing facilities because of the absence of equal re15 imbursement for equivalent medically-necessary phy16 sician visits, regardless of setting.

17 (4) Current restrictions on payment for res18 piratory therapy provided in skilled nursing facilities

19 discourage the admission of subacute care patients

20 who will require such therapy services.

21 (5) The provision of subacute care by skilled

22 nursing facilities and nursing facilities can result in

23 increased efficiency and substantial cost savings to

24 the medicare and medicaid programs.
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•S 2205 IS

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

2 remove existing and potential statutory and regulatory

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

4 care by skilled nursing facilities and nursing facilities

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

6 and to alleviate the present cash flow burdens for skilled

7 nursing facilities that provide such care.

8 SEC. 202. CREATION OF A ‘‘LEVEL PLAYING FIELD’’ TO EN9 COURAGE THE DEVELOPMENT OF SUBACUTE

10 CARE PROVIDERS.

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

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

13 following new flush sentences:

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

15 otherwise limit, a skilled nursing facility from offering or

16 providing subacute care services. Any requirements relat17 ing to the provision of such services as may be prescribed

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

19 or condition forbidding, or otherwise limiting, such facility

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

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

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

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

24 has a determined course of treatment; does not require

25 intensive diagnostic or invasive procedures; and has a se-
36

•S 2205 IS

1 vere condition requiring an outcome-focused, interdiscipli2 nary approach utilizing a professional team to deliver com3 plex clinical interventions (medical or rehabilitative or

4 both) and a higher frequency of physical visits than tradi5 tional extended or skilled nursing care.’’.

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

7 (42 U.S.C. 1395x(v) (1)(E)) is amended by inserting ‘‘,

8 including subacute care services furnished by such facili9 ties’’ in the first sentence after ‘‘services’’ the second place

10 it appears.

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

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

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

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

15 (4) The amendments made by this subsection shall

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

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

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

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

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

21 skilled nursing facility from offering or providing subacute

22 care services. Any requirements relating to the provision

23 of such services as may be prescribed by the Secretary

24 or the States shall not include any term or condition for25 bidding, or otherwise limiting, such facility from so quali-
37

•S 2205 IS

1 fying based on its status as a skilled nursing facility. As

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

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

4 injury, or exacerbation of a disease process; has a deter5 mined course of treatment; does not require intensive di6 agnostic or invasive procedures; and has a severe condition

7 requiring an outcome-focused, interdisciplinary approach

8 utilizing a professional team to deliver complex clinical

9 interventions (medical or rehabilitative or both) and a

10 higher frequency of physical visits than traditional nursing

11 facility care.’’.

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

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

14 (A) by inserting ‘‘, subacute care services fur15 nished by a nursing facility’’ after ‘‘nursing facility

16 services’’ ; and

17 (B) by inserting ‘‘nursing facility furnishing

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

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

20 (3) The amendments made by this subsection shall

21 be effective on the date of the enactment of this Act.
38

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1 SEC. 203. EXCEPTION PROCESS FROM MEDICARE ROUTINE

2 COST LIMITS.

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

4 U.S.C. 1395yy) is amended by adding at the end the fol5 lowing new subsection:

6 ‘‘(e) Effective January 1, 1996, regardless of the is7 suance of final regulations, with respect to any limits on

8 the reasonable costs of providing subacute care services,

9 the Secretary shall grant any skilled nursing facility pro10 viding subacute care services an interim exception within

11 90 days of submission of a request for such exception, sub12 ject to such procedures and accompanied by such data and

13 such documentation as the Secretary shall determine by

14 regulation. The Secretary shall finalize such interim ex15 ception based upon settled data at the end of the applica16 ble cost reporting period. Upon finalization of the excep17 tion request, the Secretary shall be responsible for reim18 bursement of any underpayment, and the skilled nursing

19 facility shall be responsible for reimbursement of any over20 payment within 30 days of such finalization, subject to

21 such guarantees as the Secretary shall determine by regu22 lation.’’.

23 (b) Notwithstanding any other provision of, or

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

25 obtained an exception from the routine cost limits for pro26 viding subacute care under section 1888(e) of the Social
39

•S 2205 IS

1 Security Act (as added by subsection (a)), before the effec2 tive date specified by section 208(b), shall have the option

3 of continuing to receive payments in accordance with such

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

5 SEC. 204. PHYSICIAN VISITS AND CONSULTATIONS FOR

6 MEDICARE PATIENTS IN SKILLED NURSING

7 FACILITIES.

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

9 1395w–4(b)) is amended by—

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

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

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

13 new paragraph:

14 ‘‘(2) TREATMENT OF PHYSICIAN VISITS TO

15 SUBACUTE CARE PATIENT IN A SKILLED NURSING

16 FACILITY.—Before January 1 of each year (begin17 ning in 1996 and regardless of the issuance of final

18 regulations), the Secretary shall establish by regula19 tion, fee schedules that establish amounts for physi20 cian visits to a subacute care patient in a skilled

21 nursing facility that shall be the same as if the phy22 sician visited such subacute care patient in a hos23 pital.’’
40

•S 2205 IS

1 SEC. 205. COVERAGE OF RESPIRATORY THERAPY SERVICES

2 IN SKILLED NURSING FACILITIES UNDER

3 THE MEDICARE PROGRAM.

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

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

6 after ‘‘occupational,’’.

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

8 (42 U.S.C. 1395x(v)(5)(A)) is amended by inserting

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

10 therapy services’’.

11 SEC. 206. DRGS APPROPRIATE FOR SUBACUTE CARE IN

12 SKILLED NURSING FACILITIES.

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

14 shall review the provision of subacute care by skilled nurs15 ing facilities and determine which hospital DRGs are ap16 propriate for skilled nursing facilities that provide such

17 care, and the appropriate hospitalizations and co-pay18 ments for such DRGs.

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

20 shall publish a list of applicable DRGs with appropriate

21 hospitalizations and co-payments, and rebase medicare

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

23 care provided in skilled nursing facilities.

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

25 (a) It is sense of the Congress that States are encour26 aged to develop payment methodologies under section
41

•S 2205 IS

1 1901(a)(13) of the Social Security Act (42 U.S.C.

2 1396a(a)(13)), for nursing facilities which provide

3 subacute care to medicaid patients.

4 (b) It is the sense of the Congress that Federal fund5 ing should be available for nursing facilities which provide

6 subacute care to medicaid patients.

7 SEC. 208. EFFECTIVE DATE.

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

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

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

11 (b) Subacute classifications established under the

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

13 be effective not later than October 1, 1996.

14 TITLE III—LONG-TERM CARE

15 TAX CLARIFICATION

16 SEC. 301. SHORT TITLE.

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

18 Care Insurance Incentive Amendments of 1994’’.

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

20 OR PLANS.

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

22 (relating to definitions) is amended by inserting after sec23 tion 7702A the following new section:
42

•S 2205 IS

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

2 OR PLANS.

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

4 ‘‘(1) a qualified long-term care insurance con5 tract shall be treated as an accident or health insur6 ance contract,

7 ‘‘(2) any plan of an employer providing cov8 erage of qualified long-term care services shall be

9 treated as an accident or health plan with respect to

10 such services,

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

12 plan with respect to qualified long-term care serv13 ices, including payments described in subsection

14 (b)(2)(A), shall be treated—

15 ‘‘(A) as amounts received for personal in16 juries or sickness, and

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

18 amounts received for the permanent loss of a

19 function of the body, and as amounts computed

20 with reference to the nature of the injury, and

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

22 shall be treated as payments made with respect to

23 qualified long-term care services.

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

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

26 under section 213 (relating to medical etc., expenses) for
43

•S 2205 IS

1 any prior taxable year and also shall not apply for pur2 poses of section 105(f).

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

4 CONTRACT.—

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

6 the term ‘qualified long-term care insurance con7 tract’ means any insurance contract if—

8 ‘‘(A) the only insurance protection pro9 vided under such contract is coverage of quali10 fied long-term care services and benefits inci11 dental to such coverage,

12 ‘‘(B) such contract or coverage is guaran13 teed renewable, or in the case of a group certifi14 cate, provides the insured individual with a

15 basis for continuation or conversion of coverage,

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

17 surrender value, and

18 ‘‘(D) all refunds of premiums, and all pol19 icyholder dividends or similar amounts, under

20 such contract are to be applied as a reduction

21 in future premiums or to increase future bene22 fits.

23 ‘‘(2) SPECIAL RULES.—

24 ‘‘(A) PER DIEM, ETC. PAYMENTS PER25 MITTED.—A contract shall not fail to be treated
44

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

2 payments being made on a per diem or other

3 periodic basis without regard to the expenses

4 incurred during the period to which the pay5 ments relate.

6 ‘‘(B) REFUNDS OF PREMIUMS.—Para7 graph (1)(D) shall not apply to any refund of

8 premiums on surrender, cancellation of the con9 tract, or death of the policyholder.

10 ‘‘(3) TREATMENT OF COVERAGE PROVIDED AS

11 PART OF A LIFE INSURANCE CONTRACT.—Except as

12 provided in regulations, in the case of coverage of

13 qualified long-term care services provided as part of

14 a life insurance contract—

15 ‘‘(A) APPLICATION OF GENERAL REQUIRE16 MENTS.—The requirements of this section shall

17 apply as if the portion of the contract providing

18 such coverage was a separate contract.

19 ‘‘(B) PREMIUMS AND CHARGES FOR

20 QUALIFIED LONG-TERM CARE COVERAGE.—Pre21 miums for coverage of qualified long-term care

22 services and charges against the life insurance

23 contract’s cash surrender value (within the

24 meaning of section 7702(f)(2)(A)) for such cov-
45

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1 erage shall be treated as premiums for the

2 qualified long-term care insurance contract.

3 ‘‘(C) APPLICATION OF SECTION 7702.—

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

5 the guideline premium limitation) shall be ap6 plied by increasing the guideline premium limi7 tation with respect to the life insurance con8 tract, as of any date—

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

10 not premiums) described in subparagraph

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

12 less

13 ‘‘(ii) any such charges the imposition

14 of which reduces the premiums paid for

15 the contract (within the meaning of section

16 7702(f)(1)).

17 ‘‘(D) APPLICATION OF SECTION

18 72(e)(4)(B).—Subsection (e)(4)(B) of section 72

19 (relating to certain amounts retained by the in20 surer) shall be applied as including charges de21 scribed in subparagraph (B).

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

23 allowed under subsection (a) of section 213 for

24 premiums and charges described in subpara25 graph (B).
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1 For purposes of this paragraph, the term ‘portion’ means

2 only the terms and benefits under a life insurance contract

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

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

5 terms and benefits under the contract without regard to

6 the coverage of qualified long-term care services and bene7 fits incidental to such coverage.

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

9 purposes of this section—

10 ‘‘(1) IN GENERAL.—The term ‘qualified long11 term care services’ means necessary diagnostic, pre12 ventive, therapeutic, and rehabilitative services, and

13 maintenance or personal care services, which—

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

15 qualified facility, and

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

17 care prescribed by a licensed health care practi18 tioner, or

19 ‘‘(C) are required by law or regulation.

20 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

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

22 ill individual’ means any individual who has

23 been certified by a licensed health care practi24 tioner as—
47

•S 2205 IS

1 ‘‘(i)(I) being unable to perform (with2 out substantial assistance from another in3 dividual) at least two activities of daily liv4 ing (as defined in subparagraph (B)), due

5 to a loss of functional capacity, or

6 ‘‘(II) having a level of disability simi7 lar (as determined by the Secretary in con8 sultation with the Secretary of Health and

9 Human Services) to the level of disability

10 described in subclause (I), or

11 ‘‘(ii) having a similar level of disabil12 ity due to cognitive impairment.

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

14 purposes of subparagraph (A), each of the fol15 lowing is an activity of daily living:

16 ‘‘(i) BATHING.—The overall complex

17 behavior of getting water and cleansing the

18 whole body, including on the water for a

19 bath, shower, or sponge bath, getting to,

20 in, and out of a tub or shower, and wash21 ing and drying oneself.

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

23 behavior of getting clothes form closets

24 and drawers and then getting dressed.
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1 ‘‘(iii) TOILETING.—The act of going

2 to the toilet room for bowel and bladder

3 function, transferring on and off the toilet,

4 cleaning after elimination, and arranging

5 clothes.

6 ‘‘(iv) TRANSFER.—The process of get7 ting in and out of bed or in and out of a

8 chair or wheelchair.

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

10 food from a plate or its equivalent into the

11 mouth.

12 ‘‘(vi) CONTINENCE.—The ability to

13 voluntarily control bowel and bladder func14 tion and to maintain a reasonable level of

15 personal hygiene.

16 ‘‘(vii) STATE REQUIRED.—Any other

17 activity of daily living as required by state

18 law or regulation which is not preempted

19 by federal law or regulation.

20 ‘‘(C) NUMBER OF ACTIVITIES OF DAILY

21 LIVING.—A qualified long-term care insurance

22 contract may utilize fewer than the number of

23 activities of daily living in paragraph (B).

24 ‘‘(D) DETERMINATION OF ADDITIONAL AC25 TIVITIES OF DAILY LIVING.—For purposes of
49

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1 subparagraph (A), the Secretary, in consulta2 tion with the Secretary of Health and Human

3 Services, may determine by regulation that ad4 ditional activities constitute activities of daily

5 living. If the Secretary identifies additional ac6 tivities of daily living, the Secretary may also

7 increase the required number of activities of

8 daily living that an individual must be unable to

9 perform to satisfy the definition of ‘chronically

10 ill individual’ when a contract utilizes activities

11 of daily living other than those specified in sub12 paragraph (B). Regardless of regulations issued

13 by the Secretary, long-term care contracts shall

14 not fail to meet the requirements of this para15 graph if such contracts utilize the activities of

16 daily living specified in subparagraph (B).

17 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali18 fied facility’ means—

19 ‘‘(A) a nursing, rehabilitative, hospice serv20 ice, or adult day care facility (including a hos21 pital, retirement home, nursing home, skilled

22 nursing facility, intermediate care facility, or

23 similar institution)—

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

25 or
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1 ‘‘(ii) which is a certified facility for

2 purposes of title XVIII or XIX of the So3 cial Security Act, or

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

5 under a plan of treatment developed by a li6 censed health care practitioner.

7 ‘‘(4) MAINTENANCE OF PERSONAL CARE SERV8 ICES.—The term ‘maintenance or personal care serv9 ices’ means any care the primary purpose of which

10 is to provide needed assistance with any of the ac11 tivities of daily living described in paragraph (2)(B).

12 Such term may include such services as adult day

13 care, homemaker and chore services, hospice serv14 ices, respite care, and services required by law or

15 regulation.

16 ‘‘(5) LICENSED HEALTH CARE PRACTI17 TIONER.—The term ‘licensed health care practi18 tioner’ means any physician (as defined in section

19 1861(r) of the Social Security Act) and any reg20 istered professional nurse, licensed social worker, or

21 other individual who meets such requirements as

22 may be prescribed by the Secretary.

23 ‘‘(d) SPECIAL RULES.—

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

25 The health care continuation rules contained in sec-
51

•S 2205 IS

1 tion 4980B (and contained in part 6 of subtitle B

2 of title I of the Employee Retirement Income Secu3 rity Act of 1974 and in title II of the Public Health

4 Service Act) shall not apply to—

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

6 contracts, or

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

8 ‘‘(2) EMPLOYER PLANS NOT TREATED AS DE9 FERRED COMPENSATION PLANS.—For purposes of

10 this title, a plan of an employer providing coverage

11 of qualified long-term care services shall not be

12 treated as a plan which provides for deferred com13 pensation by reason of providing such coverage.

14 ‘‘(3) CONTRACTS COVERING PARENTS AND

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

16 qualified long-term care insurance contract pur17 chased by or provided to a taxpayer provides cov18 erage with respect to one or more of the taxpayer’s

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

20 return, of either spouse), such coverage and all pay21 ments made pursuant to such coverage shall be

22 treated in the same manner as if the parents or

23 grandparents were dependents (as defined in section

24 152) of the taxpayer. For purposes of this para25 graph, the term ‘parent’ includes any stepmother or
52

•S 2205 IS

1 stepfather, the term ‘grandparent’ includes any

2 stepgrandfather or stepgrandmother, and any rela3 tionship that exists by virtue of a legal adoption

4 shall be recognized to the same extent as relation5 ships by blood.

6 ‘‘(4) WELFARE BENEFIT RULES NOT TO

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

8 subchapter D of chapter 1 (relating to treatment of

9 welfare benefit funds), qualified long-term care serv10 ices shall not be treated as a welfare benefit or a

11 medical benefit.

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

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

14 insurance contract shall fail to be deductible in

15 whole or in part merely because the contract pro16 vides for level annual payments.

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

18 such regulations as may be necessary to carry out the re19 quirements of this section, including regulations to prevent

20 the avoidance of this section by providing qualified long21 term care services under a life insurance contract.’’.

22 (b) The table of sections for chapter 79 of the Inter23 nal Revenue Code of 1986 is amended by inserting after

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

‘‘Sec. 7702B. Treatment of long-term care insurance or plans.’’.
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1 SEC. 303. QUALIFIED LONG-TERM SERVICES TREATED AS

2 MEDICAL CARE.

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

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

5 by striking ‘‘or’’ at the end of subparagraph (B), by redes6 ignating subparagraph (C) as subparagraph (D), and by

7 inserting after subparagraph (B) the following new sub8 paragraph:

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

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

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

12 Internal Revenue Code of 1986 (as redesigned by sub13 section (a)) is amended by striking ‘‘subparagraphs (A)

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

15 (C)’’.

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

17 amended—

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

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

20 and

21 (B) by striking ‘‘paragraph (1)(C)’’ in subpara22 graph (A) and inserting ‘‘paragraph (1)(D)’’.

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

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

25 inserting ‘‘subparagraphs (A), (B), and (C)’’.
54

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1 SEC. 304. QUALIFIED LONG-TERM CARE INSURANCE CON2 TRACTS PERMITTED TO BE OFFERED IN CAF3 ETERIA PLANS.

4 Paragraph (2) of section 125(d) of the Internal Reve5 nue Code of 1986 (relating to the exclusion of deferred

6 compensation) is amended by adding at the end thereof

7 the following new subparagraph:

8 ‘‘(D) EXCEPTION FOR LONG-TERM CARE

9 INSURANCE CONTRACTS.—For purposes of sub10 paragraph (A), a plan shall not be treated as

11 providing deferred compensation by reason of

12 providing any long-term care insurance contract

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

14 ‘‘(i) the employee may elect to con15 tinue the insurance upon cessation of par16 ticipation in the plan, and

17 ‘‘(ii) the amount paid or incurred dur18 ing any taxable year for such insurance

19 does not exceed the premium which would

20 have been payable for such year under a

21 level premium structure.’’.

22 SEC. 305. INCLUSION IN INCOME OF EXCESSIVE LONG23 TERM CARE BENEFITS.

24 (a) Part II of subchapter B of chapter 1 of the Inter25 nal Revenue Code of 1986 (relating to items specifically
55

•S 2205 IS

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

2 end the following new section:

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

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

5 year of any individual includes excessive long-term care

6 benefits received by or for the benefit of such individual

7 during the taxable year.

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

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the term ‘excessive long-term care benefits’

11 means the excess (if any) of—

12 ‘‘(A) the aggregate amount from all poli13 cies which is not includible in the gross income

14 of the individual for the taxable year by reason

15 of the amendments made by the Private Long16 Term Care Insurance Incentive Amendments of

17 1994 (determined without regard to this sec18 tion), over

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

20 during the taxable year that such individual—

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

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

23 ‘‘(ii) was confined to a qualified facil24 ity (as defined in section 7702B(c)(3)).
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1 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

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

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

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

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

6 application of this subparagraph), plus

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

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

9 adjustment for the calendar year of the amount

10 under subclause (A).

11 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur12 poses of paragraph (2), the cost-of-living adjustment

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

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

15 preceding calendar year exceeds such index for the

16 second preceding calendar year.

17 ‘‘(4) COST INDEX.—The Secretary, in consulta18 tion with the Secretary of Health and Human Serv19 ices, shall before January 1, 1996, establish a cost

20 index to measure increases in the cost of nursing

21 home and similar facilities. The Secretary may from

22 time to time revise such index to the extent nec23 essary to accurately measure increase or decreases

24 in such costs.
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1 ‘‘(5) ROUNDING.—If any dollar amount deter2 mined under this paragraph is not a multiple of $10,

3 such dollar amount shall be rounded to the nearest

4 multiple of $10 (or, if such dollar amount is a mul5 tiple of $5, such dollar amount shall be increased to

6 the next higher multiple of $10).

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

8 purposes of this section, the aggregate for each day

9 may be determined by using an average daily

10 amount for the month, computed by dividing the

11 amount of benefits for the month by the number of

12 days in the month.’’.

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

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

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

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

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

17 CARE INSURANCE CONTRACTS.

18 (a) Subparagraph (A) of section 807(d)(3) of the In19 ternal Revenue Code of 1986 (relating to tax reserve

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

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

22 clause:

23 ‘‘(iv) QUALIFIED LONG-TERM CARE

24 INSURANCE CONTRACTS.—In the case of
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•S 2205 IS

1 any qualified long-term care insurance con2 tract (as defined in section 7702B(c))—

3 ‘‘(I) the reserve method pre4 scribed by the National Association of

5 Insurance Commissioners which cov6 ers such contract (as of the date of is7 suance), or

8 ‘‘(II) if no reserve method has

9 been prescribed by the National Asso10 ciation of Insurance Commissioners

11 which covers such contract, a 1-year

12 full preliminary term method.’’.

13 (b)(1) Clause (iii) of section 807(d)(3)(A) of the In14 ternal Revenue Code of 1986 is amended by striking

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

16 and inserting ‘‘noncancellable accident and health insur17 ance contract (other than qualified long-term care insur18 ance contracts (as defined in section 7702B(c)),’’.

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

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

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

22 SEC. 307. EFFECTIVE DATE.

23 (a) Except as provided in subsection (b), the amend24 ments made by this title shall apply to policies issued in
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1 taxable years beginning after the date of the enactment

2 of this Act.

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

4 in which this Act is enacted that met the requirements

5 of the National Association of Insurance Commissioners’

6 Model Long-Term Care Act and Regulation when the pol7 icy was issued shall be considered qualified long-term care

8 insurance and the services provided under such policies

9 shall be considered qualified long-term care services.

10 TITLE IV—LONG-TERM CARE

11 INSURANCE STANDARDS

12 SEC. 400. SHORT TITLE.

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

14 Insurance Standards Amendments of 1994’’.

15 SEC. 401. NATIONAL LONG-TERM CARE INSURANCE ADVI16 SORY COUNCIL.

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

18 known as the National Long-Term Care Insurance Advi19 sory Council (hereinafter referred to as the ‘‘Advisory

20 Council’’).

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

22 each of whom has substantial expertise in matters relating

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

24 or long-term care financing and delivery systems.

25 (c) The Advisory Council shall—
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1 (1) provide advice, recommendations, and as2 sistance to Congress on matters relating to long3 term care insurance as specified in this section and

4 as otherwise required by the Secretary;

5 (2) collect, analyze, and disseminate informa6 tion relating to long-term care insurance in order to

7 increase the understanding of insurers, providers,

8 consumers, and regulatory bodies of the issues relat9 ing to, and to facilitate improvements in, such insur10 ance;

11 (3) develop for congressional consideration pro12 posed models, standards, requirements, and proce13 dures relating to long-term care insurance, as appro14 priate; and

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

16 care insurance market and advise Congress concern17 ing the need for statutory changes.

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

19 section, the Advisory Council is authorized to—

20 (1) consult individuals and public and private

21 entities with experience and expertise in matters re22 lating to long-term care insurance;

23 (2) conduct meetings and hold hearings;

24 (3) conduct research (either directly or under

25 grant or contract);
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•S 2205 IS

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

2 data and information (either directly or under grant

3 or contract); and

4 (5) develop model formats and procedures for

5 insurance products; and develop proposed standards,

6 rules and procedures for regulatory programs, as

7 appropriate.

8 (e) There are authorized to be appropriated, for ac9 tivities of the Advisory Council, $1,500,000 for fiscal year

10 1995, and each subsequent year.

11 SEC. 402. POLICY REQUIREMENTS.

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

13 1986 (as added by section 302) is amended by inserting

14 after subsection (e) the following new subsection:

15 ‘‘(f) CONSUMER PROTECTION PROVISIONS.—

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

17 subsection are met with respect to any contract if

18 any long-term care insurance policy issued under the

19 contract meets—

20 ‘‘(A) the requirements of the model regula21 tion and model Act described in paragraph (2),

22 ‘‘(B) the disclosure requirement of para23 graph (3),

24 ‘‘(C) the requirements relating to

25 nonforfeitability under paragraph (4), and
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1 ‘‘(D) the requirements relating to rate sta2 bilization under the paragraph (5),

3 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

4 AND ACT.—

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

6 this paragraph are met with respect to any pol7 icy if such policy meets—

8 ‘‘(i) MODEL REGULATION.—The fol9 lowing requirements of the model regula10 tion:

11 ‘‘(I) Section 7A (relating to guar12 anteed renewal or noncancellability),

13 and the requirements of section 6B of

14 the model Act relating to such section

15 7A.

16 ‘‘(II) Section 7B (relating to pro17 hibitions on limitations and exclu18 sions).

19 ‘‘(III) Section 7C (relating to ex20 tension of benefits).

21 ‘‘(IV) Section 7D (relating to

22 continuation or conversion of cov23 erage).
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1 ‘‘(V) Section 7E (relating to dis2 continuance and replacement of poli3 cies).

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

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

9 ‘‘(VIII) Section 10 (relating to

10 prohibitions against post-claims un11 derwriting).

12 ‘‘(IX) Section 11 (relating to

13 minimum standards).

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

17 a signature on a rejection of inflation

18 protection shall permit the signature

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

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

23 and probationary periods in replace24 ment policies or certificates).
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1 ‘‘(ii) MODEL ACT.—The following re2 quirements of the model Act:

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

5 ‘‘(II) Section 6D (relating to

6 prior hospitalization).

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

8 paragraph—

9 ‘‘(i) MODEL PROVISIONS.—The terms

10 ‘model regulation’ and ‘model Act’ mean

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

13 model Act, respectively, promulgated by

14 the National Association of Insurance

15 Commissioners (as adopted in January of

16 1993).

17 ‘‘(ii) COORDINATION.—Any provision

18 of the model regulation or model Act listed

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

20 (A) shall be treated as including any other

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

23 ‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re24 quirement of this paragraph is met with respect to
65

•S 2205 IS

1 any policy if such policy meets the requirements of

2 section 4980D(d)(1).

3 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

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

5 this paragraph are met with respect to any level

6 premium long-term care insurance policy if the

7 issuer of such policy offers to the policyholder,

8 including any group policyholder, a

9 nonforfeiture provision.

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

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

14 ‘‘(i) The nonforfeiture provision shall

15 be appropriate captioned.

16 ‘‘(ii) The nonforfeiture provision shall

17 provide for a benefit available in the event

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

20 be adjusted subsequent to being initially

21 granted only as necessary to reflect

22 changes in claims, persistency, and interest

23 as reflected in changes in rates for pre24 mium paying policies approved by the Sec25 retary for the same policy form.
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1 ‘‘(iii) The nonforfeiture provision shall

2 provide for a benefit based on an equitable

3 schedule where benefits returned are equal

4 to the asset share remaining in the policy

5 and which assures that persisting policy6 holders are not required to subsidize the

7 cost of insurance premiums for policy8 holders who terminate coverage. The cri9 teria for determining the actuarial value of

10 this benefit shall be developed by the Na11 tional Long-Term Care Insurance Advisory

12 Committee in consultation with the Amer13 ican Society of Actuaries and the National

14 Association of Insurance Commissioners

15 and shall be approved by Congress.

16 ‘‘(5) RATE STABILIZATION.—

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

18 this paragraph are met with respect to any

19 long-term care insurance policy, including any

20 group master policy, if—

21 ‘‘(i) such policy contains the minimum

22 rate guarantees specified in subparagraph

23 (B), and
67

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

2 the requirements specified in subparagraph

3 (C).

4 ‘‘(B) MINIMUM RATE GUARANTEES.—The

5 minimum rate guarantees specified in this sub6 paragraph are as follows:

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

8 guaranteed for a period of at least 3 years

9 from the date of issue of the policy.

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

11 period required under clause (i), any rate

12 increase shall be guaranteed for a period of

13 at least 2 years from the effective date of

14 such rate increase.

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

16 75 or older who has maintained coverage

17 under a long-term care insurance policy for

18 10 years, rate increase under such policy

19 shall not exceed 10 percent in any 12-

20 month period.

21 ‘‘(C) INCREASES IN PREMIUMS.—The re22 quirements specified in this subparagraph are

23 as follows:

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

25 long-term care insurance policy, including
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1 any group master policy, plans to increase

2 the premium rates for a policy, such issuer

3 shall, at least 90 days before the effective

4 date of the rate increase, offer to each in5 dividual policyholder under such policy the

6 option to remain insured under the policy

7 at a reduced level of benefits which main8 tains the premium rate at the rate in effect

9 on the day before the effective date of the

10 rate increase.

11 ‘‘(ii) INCREASE OF MORE THAN 50

12 PERCENT.—

13 ‘‘(I) IN GENERAL.—If an issuer

14 of any long-term care insurance pol15 icy, including any group master pol16 icy, increases premium rates for a pol17 icy by more than 50 percent in any 3-

18 year period—

19 ‘‘(aa) in the case of a group

20 master long-term care insurance

21 policy, the issuer shall dis22 continue issuing all group master

23 long-term care insurance policies

24 in any State in which the issuer

25 issues such policy for a period of
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1 2 years from the effective date of

2 such premium increase; and

3 ‘‘(bb) in the case of an indi4 vidual long-term care insurance

5 policy, the issuer shall dis6 continue issuing all individual

7 long-term care policies in any

8 State in which the issuer issues

9 such policy for a period of 2

10 years from the effective date of

11 such premium increase.

12 ‘‘(II) APPLICABILITY.—Subclause

13 (I) shall apply to any issuer of long14 term care insurance policies or any

15 other person that purchases or other16 wise acquires any long-term care in17 surance policies from another issuer

18 or person.

19 ‘‘(D) MODIFICATIONS OR WAIVERS OF RE20 QUIREMENTS.—The Secretary may modify or

21 waive any of the requirements under this para22 graph if—

23 ‘‘(i) such requirements will adversely

24 affect an issuer’s solvency;
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1 ‘‘(ii) such modification or waiver is re2 quired for the issuer to meet other State or

3 Federal requirements;

4 ‘‘(iii) medical developments, new dis5 abling diseases, changes in long-term care

6 delivery, or a new method of financing

7 long-term care will result in changes to

8 mortality and morbidity patterns or as9 sumptions;

10 ‘‘(iv) judicial interpretations of a pol11 icy’s benefit features results in unintended

12 claim liabilities; or

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

14 acquisition of long-term care insurance

15 policies of an issuer or other person, the

16 continued sale of other long-term care in17 surance policies by the purchasing issuer

18 or person is in the best interest of individ19 ual consumers.

20 ‘‘(6) LONG-TERM CARE INSURANCE POLICY DE21 FINED.—For purposes of this subsection, the term

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

23 given such term by section 4980C(e).’’.
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1 SEC. 403. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

2 LONG-TERM CARE INSURANCE POLICIES.

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

4 1986 is amended by adding at the end the following

5 new section:

6 ‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG7 TERM CARE INSURANCE POLICIES.

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

9 any person failing to meet the requirements of subsection

10 (c) or (d) a tax in the amount determined under sub11 section (b).

12 ‘‘(b) AMOUNT OF TAX.—

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

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

15 greater of—

16 ‘‘(A) 3 times the amount of any commis17 sions paid for each policy involved in the viola18 tion, or

19 ‘‘(B) $10,000.

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

21 due to reasonable cause and not to willful neglect,

22 the Secretary may waive part or all of the tax im23 posed by subsection (a) to the extent that payment

24 of the tax would be excessive relative to the failure

25 involved.
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1 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require2 ments of this subjection are as follows:

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

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

5 requirements of the model regulation must be

6 met:

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

8 forms and replacement coverage).

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

10 requirements), except that the issuer shall

11 also report at least annually the number of

12 claims denied during the reporting period

13 for each class of business (expended as a

14 percentage of claims denied), other than

15 claims denied for failure to meet the

16 waiving period or because of any applicable

17 pre-existing condition.

18 ‘‘(iii) Section 20 (relating to filing re19 quirements for marketing).

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

21 for marketing), including inaccurate com22 pletion of medical histories, other than sec23 tion 21C(1), 21(C)(3) and 21C(6) thereof,

24 except that—
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1 ‘‘(I) in addition to such require2 ments, no person shall in selling or of3 fering to sell a long-term care insur4 ance policy, misrepresent a material

5 fact;

6 ‘‘(II) no such requirements shall

7 include a requirement to inquire or

8 identify whether a prospective appli9 cant or enrollee for long-term care in10 surance has accident and sickness in11 surance; and

12 ‘‘(III) the association shall dis13 close in any long-term care insurance

14 solicitation the amount of compensa15 tion that the association receives from

16 endorsement or sale of the policy or

17 certificate to its members, expressed

18 as a percentage of annual premium

19 generated by such policies.

20 ‘‘(v) Section 22 (relating to appro21 priateness of recommended purchase).

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

23 format outline of coverage).

24 ‘‘(vii) Section 25 (relating to require25 ment to deliver shopper’s guide).
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1 ‘‘(B) MODEL ACT.—The following require2 ments of the model Act must be met:

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

4 return), except that such section shall also

5 apply to denials of applications and any re6 fund shall be made within 30 days of the

7 return or denial.

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

9 coverage).

10 ‘‘(iii) Section 6H (relating to require11 ments for certificates under group plans).

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

13 summary).

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

15 reports on accelerated death benefits).

16 ‘‘(vi) Section 7 (relating to incontest17 ability period).

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

19 paragraph, the terms ‘model regulation’ and

20 ‘model Act’ have the meanings given such terms

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

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

23 for a long-term care insurance policy (or for a cer24 tificate under a group long-term care insurance pol25 icy) is approved, the issuer shall deliver to the appli-
75

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1 cant (or policyholder or certificate-holder) the policy

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

3 after the date of the approval.

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

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

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

7 of a written request by the policyholder or certifi8 cate-holder (or representative)—

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

10 reasons for the denial, and

11 ‘‘(B) make available all information di12 rectly relating to such denial except in cases

13 where such issuer would be prohibited from pro14 viding information regarding claims denial

15 under confidentiality statues or other state or

16 Federal laws.

17 ‘‘(d) DISCLOSURE.—The requirements of this sub18 section are met if either of the following statements,

19 whichever is applicable, is prominently displayed on the

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

21 the outline of coverage required under subsection

22 (c)(1)(B)(ii):

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

24 to be a qualified long-term care insurance contract
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1 under section 7702B(b) of the Internal Revenue

2 Code of 1986.’.

3 ‘‘(2) A statement that: ‘This policy is not in4 tended to be a qualified long-term care insurance

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

6 Revenue Code of 1986.’.

7 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE8 FINED.—For purposes of this section, the term ‘long-term

9 care insurance policy’ means any insurance policy or rider

10 advertised, marketed, offered or designed to provide cov11 erage for not less than 12 consecutive months for each

12 covered person on an expense incurred, indemnity, prepaid

13 or other basis; for one or more necessary diagnostic, pre14 ventive, therapeutic, rehabilitative, maintenance or per15 sonal care services, provided in a setting other than an

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

17 and individual annuities and life insurance policies or rid18 ers which provide directly or which supplement long-term

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

20 which provides for payment of benefits based upon cog21 nitive impairment or the loss of functional capacity. Long22 term care insurance may be issued by insurers; fraternal

23 benefit societies; nonprofit health, hospital and medical

24 service corporations; prepaid health plans; health mainte25 nance organizations or any similar organization to the ex-
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1 tent such organizations are otherwise authorized to issue

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

3 not include any insurance policy which is offered primarily

4 to provide basic medicare supplement coverage, basic hos5 pital expense coverage, basic medical-surgical expense cov6 erage, hospital confinement indemnity coverage, major

7 medical expense coverage, disability income or related

8 asset-protection coverage, accident only coverage, specified

9 disease or specified accident coverage, or limited benefit

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

11 does not include life insurance policies which accelerate

12 the death benefit specifically for one or more of the quali13 fying events of terminal illness, medical conditions requir14 ing extraordinary medical intervention, or permanent in15 stitutional confinement, and which provide the option of

16 a lump-sum payment for those benefits and in which nei17 ther the benefits nor the eligibility for the benefits is con18 ditioned upon the receipt of long-term care.’’.

19 (b) The table of sections for chapter 43 of the Inter20 nal Revenue Code of 1986 is amended by adding at the

21 end the following new item:

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

22 SEC. 404. RELATION TO STATE LAW.

23 Insurance policies which have been deemed in compli24 ance with the requirements of this title and the Internal
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1 Revenue Code of 1986 (as amended by this title) by the

2 State Insurance Commissioner in the State of domicile

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

4 State may prohibit an insurance carrier from selling out5 side the State of domicile long-term care insurance policies

6 which have been approved in the State of domicile.

7 SEC. 405. UNIFORM LANGUAGE AND DEFINITIONS.

8 (a) The Advisory Council shall develop recommenda9 tions for the use of uniform language and definitions in

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

11 4980C(e) of the Internal Revenue Code of 1986) for ap12 proval by Congress.

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

14 use of nonuniform language to the extent required to take

15 into account differences among States in the licensing of

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

17 SEC. 406. EFFECTIVE DATES.

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

19 to contracts issued in taxable years beginning after the

20 date of the enactment of this Act.

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

22 to actions taken in taxable years beginning after the date

23 of the enactment of this Act.
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1 TITLE V—FINANCIAL

2 ELIGIBILITY STANDARDS

3 SEC. 501. REVISIONS TO FINANCIAL ELIGIBILITY PROVI4 SIONS.

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

6 U.S.C. 1396a(a)) is amended—

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

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

9 (2) by adding at the end the following new sub10 section:

11 ‘‘(z)(1) For purposes of subsection (a)(17)(C), not12 withstanding any other provision of this title, the re13 sources of an individual, and the spouse of such individual,

14 which shall be used to determine financial eligibility for

15 nursing facility services under this title shall include—

16 ‘‘(A) all of the real property owned by the indi17 vidual, including but not limited to, the individual’s

18 primary residence;

19 ‘‘(B) all personal property of the individual, in20 cluding but not limited to, any automobiles owned by

21 the individual; and

22 ‘‘(C) all liquid assets held by the individual, in23 cluding but not limited to, the asset value of any

24 trust established by such individual.
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1 ‘‘(2)(A) An individual shall not be eligible for nursing

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

3 resources owned by the individual (individually or jointly

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

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

6 such individual resides.

7 ‘‘(B) For purposes of subparagraph (A), the Sec8 retary shall establish a valuation system for single family

9 homes in appropriate geographic regions, taking appro10 priate account of the variation in values between urban

11 and rural areas. The valuation system established by the

12 Secretary shall be updated annually.

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

14 the same manner as such subparagraph applies for an in15 dividual where one member of the couple applies for nurs16 ing facility services under this title.

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

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

19 jointly with the individual’s spouse shall be considered

20 available to the individual applying for medical assistance

21 as determined under section 1924(d)(2).

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

23 the community spouse protections contained in section

24 1924.
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1 ‘‘(4) The Secretary shall provide grants to States for

2 demonstration projects to investigate the coordination of

3 private long-term care insurance benefits and financial eli4 gibility requirements under this title. Such demonstration

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

6 of—

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

8 amounts paid by an individual for private long-term

9 care insurance from the individual’s resources which

10 are counted to determine financial eligibility; and

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

12 of private long-term care insurance with impoverish13 ment protections by using medicaid as reinsurance.

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

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

16 provided under this title other than nursing facility serv17 ices.’’.

18 SEC. 502. EFFECTIVE DATE.

19 The amendments made by this title shall be effective

20 January 1, 1995.
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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-
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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—
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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
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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
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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.
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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.
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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-
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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.
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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—
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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.—
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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.
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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-
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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
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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
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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
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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).’’.
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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.

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