I

106TH CONGRESS

1ST SESSION H. R. 161

To amend title XIX of the Social Security Act to restrict imposition of

Medicaid liens and Medicaid estate recovery for long-term care services

in the case of certain individuals who have received benefits under longterm care insurance policies for at least 3 years, and to amend the

Internal Revenue Code of 1986 to allow the carryover of reimbursement

maximums for flexible spending arrangements, to allow the reimbursement of long-term care insurance premiums by FSA’s, and to repeal

the inclusion in income of long-term care coverage provided through

FSA’s.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 6, 1999

Mr. HILL of Montana (for himself, Mr. PAUL, Mr. GIBBONS, Mr. HUTCHINSON, Mrs. CHENOWETH, and Mr. BLUNT) introduced the following bill;

which was referred to the Committee on Ways and Means, and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

To amend title XIX of the Social Security Act to restrict

imposition of Medicaid liens and Medicaid estate recovery

for long-term care services in the case of certain individuals who have received benefits under long-term care

insurance policies for at least 3 years, and to amend

the Internal Revenue Code of 1986 to allow the carryover

of reimbursement maximums for flexible spending arrangements, to allow the reimbursement of long-term

care insurance premiums by FSA’s, and to repeal the
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inclusion in income of long-term care coverage provided

through FSA’s.

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

3 SECTION 1. RESTRICTING MEDICAID LIENS AND MEDICAID

4 ESTATE RECOVERY FOR LONG-TERM CARE

5 SERVICES IN THE CASE OF CERTAIN INDIVID6 UALS WHO HAVE RECEIVED BENEFITS

7 UNDER LONG-TERM CARE INSURANCE POLI8 CIES FOR AT LEAST 3 YEARS.

9 (a) LIMITATION ON LIENS.—Subsection (a) of sec10 tion 1917 of the Social Security Act (42 U.S.C. 1396p)

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

13 ‘‘(4) No lien may be imposed under paragraph (1)(B)

14 on an individual’s home on account of medical assistance

15 paid with respect to the provision of long-term care serv16 ices (including nursing facility services and home health

17 care services) if the individual (as of the date of provision

18 of such services) had received benefits under a qualified

19 long-term care insurance contract (as defined in section

20 7702B(b)(1) of the Internal Revenue Code of 1986) for

21 at least 3 years during the 5-year period ending on such

22 date.’’.

23 (b) LIMITATION ON ESTATE RECOVERY.—Subsection

24 (b) of such section is amended—
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1 (1) in paragraph (1)(C)(i), by inserting ‘‘and

2 except as provided in paragraph (5)’’ after ‘‘except

3 as proivded in such clause’’, and

4 (2) by adding at the end the following new

5 paragraph:

6 ‘‘(5) A State shall not seek adjustment or recovery

7 of any medical assistance correctly paid on behalf of an

8 individual under the State plan under this subsection in

9 the case of medical assistance for which a lien may not

10 be imposed under subsection (a)(4).’’.

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

12 this section shall apply to adjustments or recoveries initi13 ated on or after the date of the enactment of this Act.

14 SEC. 2. TREATMENT OF CARRYOVERS AND LONG-TERM

15 CARE INSURANCE UNDER FLEXIBLE SPEND16 ING ARRANGEMENTS.

17 (a) ALLOWANCE OF CARRYOVERS, PERMITTED REIM18 BURSEMENT OF LONG-TERM CARE INSURANCE PRE19 MIUMS (AND HEALTH INSURANCE PREMIUMS DURING

20 UNEMPLOYMENT), AND REPEAL OF INCOME INCLUSION

21 FOR LONG-TERM CARE INSURANCE.—Subsection (c) of

22 section 106 of the Internal Revenue Code of 1986 (relat23 ing to inclusion of long-term care benefits provided

24 through flexible spending arrangements) is amended to

25 read as follows:
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1 ‘‘(c) SPECIAL RULES RELATING TO FLEXIBLE

2 SPENDING ARRANGEMENTS FOR HEALTH.—

3 ‘‘(1) CARRYOVER PERMITTED.—

4 ‘‘(A) IN GENERAL.—For purposes of this

5 title, a flexible spending arrangement for health

6 shall not cease to be treated as such an ar7 rangement, and no amount shall be includible

8 in the gross income of the participant in such

9 arrangement, solely because the maximum

10 amount of reimbursement otherwise available to

11 a participant under such arrangement for any

12 year is increased by the carryover amount.

13 ‘‘(B) CARRYOVER AMOUNT.—For purposes

14 of this paragraph, the term ‘carryover amount’

15 means, for any participant, for any year, and

16 with respect to any flexible spending arrange17 ment, the excess (if any) of—

18 ‘‘(i) the maximum amount of reim19 bursement available to such participant

20 under such arrangement for the preceding

21 year (determined after the application of

22 this paragraph), over

23 ‘‘(ii) the actual amount of reimburse24 ment to which such participant is entitled

25 under such arrangement for such preced-
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1 ing year by reason of covered claims in2 curred.

3 In no event shall the carryover amount exceed

4 the sum of the premiums paid for coverage

5 under such arrangement with respect to such

6 participant for such year and such preceding

7 year.

8 ‘‘(2) REIMBURSEMENT FOR LONG-TERM CARE

9 INSURANCE PREMIUMS AND (DURING UNEMPLOY10 MENT) FOR HEALTH INSURANCE PREMIUMS.—For

11 purposes of this title, a flexible spending arrange12 ment for health shall not cease to be treated as such

13 an arrangement, and no amount shall be includible

14 in the gross income of the participant in such ar15 rangement, solely because such arrangement—

16 ‘‘(A) treats premium payments for any

17 qualified long-term care insurance contract (as

18 defined in section 7702B(b)) for the taxpayer

19 and the taxpayer’s family members as reim20 bursable expenses, or

21 ‘‘(B) treats premium payments for medical

22 insurance for the taxpayer and the taxpayer’s

23 family members as reimbursable expenses if

24 such payments are made—
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1 ‘‘(i) after separation of the taxpayer

2 from employment, and

3 ‘‘(ii) to obtain insurance for the pe4 riod beginning on or after the date of such

5 separation and ending on or before the

6 earlier of—

7 ‘‘(I) the date which is 18 months

8 after the date of such separation, or

9 ‘‘(II) the date on which the tax10 payer becomes employed full-time.

11 ‘‘(3) DEFINITIONS AND SPECIAL RULE REGARD12 ING INSURANCE PREMIUMS.—For purposes of para13 graph (2)—

14 ‘‘(A) FAMILY MEMBER.—The term ‘family

15 member’ means, with respect to any taxpayer—

16 ‘‘(i) the spouse of the taxpayer,

17 ‘‘(ii) any child (within the meaning of

18 section 151) of the taxpayer, if such child

19 has not attained the age of 19 at the close

20 of the calendar year in which the taxable

21 year of the taxpayer begins, and

22 ‘‘(iii) any parent or stepparent of the

23 taxpayer or of the taxpayer’s spouse.

24 ‘‘(B) MEDICAL INSURANCE.—The term

25 ‘medical insurance’ means insurance covering
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1 medical care referred to in subparagraph (A) or

2 (B) of section 213(d)(1).

3 ‘‘(C) LIMITATION ON LONG-TERM CARE IN4 SURANCE PREMIUMS.—The rule of the last sen5 tence of section 213(d)(1) and the rules of sec6 tion 213(d)(10) (relating to eligible long-term

7 care premiums) shall apply.

8 ‘‘(4) FLEXIBLE SPENDING ARRANGEMENT.—

9 For purposes of this subsection, a flexible spending

10 arrangement is a benefit program which provides

11 employees with coverage under which—

12 ‘‘(A) specified incurred expenses may be

13 reimbursed (subject to reimbursement maxi14 mums and other reasonable conditions), and

15 ‘‘(B) the maximum amount of reimburse16 ment which is reasonably available to a partici17 pant for such coverage is less than 500 percent

18 of the value of such coverage.

19 In the case of an insured plan, the maximum

20 amount reasonably available shall be determined on

21 the basis of the underlying coverage.

22 ‘‘(5) COORDINATION WITH CAFETERIA PLAN

23 PROVISIONS.—Section 125(a) shall not fail to apply

24 to a participant in a plan, and a plan shall not fail

25 to be treated as a cafeteria plan, solely because a
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1 flexible spending arrangement available under the

2 plan—

3 ‘‘(A) increases the maximum amount of re4 imbursement otherwise available by the carry5 over amount, as described in paragraph (1), or

6 ‘‘(B) treats premium payments as reim7 bursable expenses as described paragraph (2).’’

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

9 this section shall apply to years beginning after the date

10 of the enactment of this Act.

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