I

103D CONGRESS

1ST SESSION H. R. 2317

To amend the Internal Revenue Code of 1986 with respect to the treatment

of long-term care insurance policies, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 27, 1993

Mrs. JOHNSON of Connecticut introduced the following bill; which was referred

jointly to the Committees on Ways and Means and Energy and Commerce

A BILL

To amend the Internal Revenue Code of 1986 with respect

to the treatment of long-term care insurance policies,

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) IN GENERAL.—This Act may be cited as the

5 ‘‘Long-Term Care Insurance Incentive Act of 1993’’.

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

7 this Act is as follows:

Section 1. Short title; table of contents.

TITLE I—TAX TREATMENT OF LONG-TERM CARE INSURANCE

Sec. 101. Treatment of long-term care insurance or plans.
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Sec. 102. Exclusion for benefits provided under long-term care insurance; inclusion of employer-provided coverage.

Sec. 103. Credit for qualified long-term care premiums.

Sec. 104. Qualified long-term services treated as medical care.

Sec. 105. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 106. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for long-term care insurance.

Sec. 107. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 108. Tax treatment of companies issuing qualified accelerated death benefit riders.

Sec. 109. Effective date.

TITLE II—REFUNDABLE TAX CREDIT FOR CERTAIN CUSTODIAL

CARE

Sec. 201. Refundable credit for custodial care of certain dependents in taxpayer’s home.

TITLE III—PROTECTION OF ASSETS UNDER MEDICAID THROUGH

USE OF QUALIFIED LONG-TERM CARE INSURANCE

Sec. 301. Protection of assets through use of qualified long-term care insurance.

1 TITLE I—TAX TREATMENT OF

2 LONG-TERM CARE INSURANCE

3 SEC. 101. TREATMENT OF LONG-TERM CARE INSURANCE

4 OR PLANS.

5 (a) GENERAL RULE.—Subpart E of part I of sub6 chapter L of chapter 1 of the Internal Revenue Code of

7 1986 is amended by inserting after section 818 the follow8 ing new section:

9 ‘‘SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE

10 OR PLANS.

11 ‘‘(a) GENERAL RULE.—For purposes of this part, a

12 long-term care insurance contract shall be treated as an

13 accident or health insurance contract.

14 ‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—
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1 ‘‘(1) IN GENERAL.—For purposes of this part,

2 the term ‘long-term care insurance contract’ means

3 any insurance contract issued if—

4 ‘‘(A) the only insurance protection pro5 vided under such contract is coverage of quali6 fied long-term care services and benefits inci7 dental to such coverage,

8 ‘‘(B) the maximum benefit under the pol9 icy for expenses incurred for any day does not

10 exceed $200,

11 ‘‘(C) such contract does not cover expenses

12 incurred for services or items to the extent that

13 such expenses are reimbursable under title

14 XVIII of the Social Security Act or would be so

15 reimbursable but for the application of a de16 ductible or coinsurance amount,

17 ‘‘(D) such contract is guaranteed renew18 able,

19 ‘‘(E) such contract does not have any cash

20 surrender value, and

21 ‘‘(F) all refunds of premiums, and all pol22 icyholder dividends or similar amounts, under

23 such contract are to be applied as a reduction

24 in future premiums or to increase future bene25 fits.
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1 ‘‘(2) SPECIAL RULES.—

2 ‘‘(A) CONTRACT MAY COVER MEDICARE

3 REIMBURSABLE EXPENSES WHERE MEDICARE

4 IS SECONDARY PAYOR.—Paragraph (1)(C) shall

5 not apply to expenses which are reimbursable

6 under title XVIII of the Social Security Act

7 only as a secondary payor.

8 ‘‘(B) REFUNDS OF PREMIUMS.—Para9 graph (1)(F) shall not apply to any refund of

10 premiums on surrender or cancellation of the

11 contract.

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

13 purposes of this section—

14 ‘‘(1) IN GENERAL.—The term ‘qualified long15 term care services’ means necessary diagnostic, pre16 ventive, therapeutic, and rehabilitative services, and

17 maintenance or personal care services, which—

18 ‘‘(A) are required by a chronically ill indi19 vidual in a qualified facility, and

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

21 care prescribed by a licensed health care practi22 tioner.

23 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

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

25 ill individual’ means any individual who has
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1 been certified by a licensed health care practi2 tioner as—

3 ‘‘(i)(I) being unable to perform (with4 out substantial assistance from another in5 dividual) at least 2 activities of daily living

6 (as defined in subparagraph (B)) for a pe7 riod of at least 90 days due to a loss of

8 functional capacity, or

9 ‘‘(II) having a level of disability simi10 lar (as determined by the Secretary in con11 sultation with the Secretary of Health and

12 Human Services) to the level of disability

13 described in subclause (I), or

14 ‘‘(ii) having a similar level of disabil15 ity due to cognitive impairment.

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

17 purposes of subparagraph (A), each of the fol18 lowing is an activity of daily living:

19 ‘‘(i) MOBILITY.—The process of walk20 ing or wheeling on a level surface which

21 may include the use of an assistive device

22 such as a cane, walker, wheelchair, or

23 brace.
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1 ‘‘(ii) DRESSING.—The overall complex

2 behavior of getting clothes from closets

3 and drawers and then getting dressed.

4 ‘‘(iii) TOILETING.—The act of going

5 to the toilet room for bowel and bladder

6 function, transferring on and off the toilet,

7 cleaning after elimination, and arranging

8 clothes or the ability to voluntarily control

9 bowel and bladder function, or in the event

10 of incontinence, the ability to maintain a

11 reasonable level of personal hygiene.

12 ‘‘(iv) TRANSFER.—The process of get13 ting in and out of bed or in and out of a

14 chair or wheelchair.

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

16 food from a plate or its equivalent into the

17 mouth.

18 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali19 fied facility’ means—

20 ‘‘(A) a nursing, rehabilitative, hospice, or

21 adult day care facility (including a hospital, re22 tirement home, nursing home, skilled nursing

23 facility, intermediate care facility, or similar in24 stitution)—
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1 ‘‘(i) which is licensed under State law,

2 or

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

4 purposes of title XVIII or XIX of the So5 cial Security Act, or

6 ‘‘(B) an individual’s home if a licensed

7 health care practitioner certifies that without

8 home care the individual would have to be cared

9 for in a facility described in subparagraph (A).

10 ‘‘(4) MAINTENANCE OR PERSONAL CARE SERV11 ICES.—The term ‘maintenance or personal care serv12 ices’ means any care the primary purpose of which

13 is to provide needed assistance with any of the ac14 tivities of daily living described in paragraph (2)(B).

15 ‘‘(5) LICENSED HEALTH CARE PRACTI16 TIONER.—The term ‘licensed health care practi17 tioner’ means any physician (as defined in section

18 1861(r) of the Social Security Act) and any reg19 istered professional nurse, licensed social worker, or

20 other individual who meets such requirements as

21 may be prescribed by the Secretary.

22 ‘‘(d) CONTINUATION COVERAGE EXCISE TAX NOT

23 TO APPLY.—This section shall not apply in determining

24 whether section 4980B (relating to failure to satisfy con-
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1 tinuation coverage requirements of group health plans) ap2 plies.

3 ‘‘(e) INFLATION ADJUSTMENT OF $200 BENEFIT

4 LIMIT.—

5 ‘‘(1) IN GENERAL.—In the case of a calendar

6 year after 1994, the $200 amount contained in sub7 section (b)(1)(B) shall be increased for such cal8 endar year by the medical care cost adjustment for

9 such calendar year. If any increase determined

10 under the preceding sentence is not a multiple of

11 $10, such increase shall be rounded to the nearest

12 multiple of $10.

13 ‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For

14 purposes of paragraph (1), the medical care cost ad15 justment for any calendar year is the percentage (if

16 any) by which—

17 ‘‘(A) the medical care component of the

18 Consumer Price Index (as defined in section

19 1(f)(5)) for August of the preceding calendar

20 year, exceeds

21 ‘‘(B) such component for August of 1993.’’

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

23 for such subpart E is amended by inserting after the item

24 relating to section 818 the following new item:

‘‘Sec. 818A. Treatment of long-term care insurance or plans.’’
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1 SEC. 102. EXCLUSION FOR BENEFITS PROVIDED UNDER

2 LONG-TERM CARE INSURANCE; INCLUSION

3 OF EMPLOYER-PROVIDED COVERAGE.

4 (a) IN GENERAL.—Subsection (a) of section 104 of

5 the Internal Revenue Code of 1986 (relating to compensa6 tion for injuries or sickness) is amended by striking ‘‘and’’

7 at the end of paragraph (4), by striking the period at the

8 end of paragraph (5) and inserting ‘‘, and’’, and by insert9 ing after paragraph (4) the following new paragraph:

10 ‘‘(6) benefits under a long-term care insurance

11 contract (as defined in section 818A(b)).’’

12 (b) INCLUSION OF EMPLOYER-PROVIDED COV13 ERAGE.—Section 106 of such Code (relating to contribu14 tions by employer to accident and health plans) is amend15 ed by adding at the end thereof the following sentence:

16 ‘‘The preceding sentence shall not apply to any plan pro17 viding coverage for long-term care services.’’

18 SEC. 103. CREDIT FOR QUALIFIED LONG-TERM CARE PRE19 MIUMS.

20 (a) GENERAL RULE.—Subpart C of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of

22 1986 (relating to refundable credits) is amended by redes23 ignating section 35 as section 36 and by inserting after

24 section 34 the following new section:
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1 ‘‘SEC. 35. LONG-TERM CARE INSURANCE CREDIT.

2 ‘‘(a) GENERAL RULE.—In the case of an individual,

3 there shall be allowed as a credit against the tax imposed

4 by this subtitle for the taxable year an amount equal to

5 the applicable percentage of the eligible long-term care

6 premiums paid during such taxable year for such individ7 ual or the spouse of such individual.

8 ‘‘(b) APPLICABLE PERCENTAGE.—

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the term ‘applicable percentage’ means 31 per11 cent reduced (but not below zero) by 1 percentage

12 point for each $1,000 (or fraction thereof) by which

13 the taxpayer’s adjusted gross income for the taxable

14 year exceeds the base amount.

15 ‘‘(2) BASE AMOUNT.—For purposes of para16 graph (1), the term ‘base amount’ means—

17 ‘‘(A) except as otherwise provided in this

18 paragraph, $25,000,

19 ‘‘(B) $40,000 in the case of joint return,

20 and

21 ‘‘(C) zero in the case of a taxpayer who—

22 ‘‘(i) is married at the close of the tax23 able year (within the meaning of section

24 7703) but does not file a joint return for

25 such taxable year, and
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1 ‘‘(ii) does not live apart from his or

2 her spouse at all times during the taxable

3 year.

4 ‘‘(c) ELIGIBLE LONG-TERM CARE PREMIUMS.—

5 ‘‘(1) IN GENERAL.—For purposes of this sec6 tion, the term ‘eligible long-term care premiums’

7 means the amount paid during a taxable year for

8 any long-term care insurance contract (as defined in

9 section 818A) covering an individual, to the extent

10 such amount does not exceed the limitation deter11 mined under the following table:

‘‘In the case of an individual

with an attained age before the The limitation

close of the taxable year of: is:

40 or less ........................................................................... $200

More than 40 but not more than 50 ................................ 375

More than 50 but not more than 60 ................................ 750

More than 60 but not more than 70 ................................ 1,600

More than 70 .................................................................... 2,000.

12 ‘‘(2) INDEXING.—

13 ‘‘(A) IN GENERAL.—In the case of any

14 taxable year beginning in a calendar year after

15 1993, each dollar amount contained in para16 graph (1) shall be increased by the medical care

17 cost adjustment of such amount for such cal18 endar year. If any increase determined under

19 the preceding sentence is not a multiple of $10,

20 such increase shall be rounded to the nearest

21 multiple of $10.
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1 ‘‘(B) MEDICAL CARE COST ADJUST2 MENT.—For purposes of subparagraph (A), the

3 medical care cost adjustment for any calendar

4 year is the percentage (if any) by which—

5 ‘‘(i) the medical care component of

6 the Consumer Price Index (as defined in

7 section 1(f)(5)) for August of the preced8 ing calendar year, exceeds

9 ‘‘(ii) such component for August of

10 1991.

11 ‘‘(d) COORDINATION WITH MEDICAL EXPENSE DE12 DUCTION.—Any amount allowed as a credit under this

13 section shall not be taken into account under section 213.’’

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

15 for subpart C of part IV of subchapter A of chapter 1

16 of such Code is amended by striking the item relating to

17 section 35 and inserting the following:

‘‘Sec. 35. Long-term care insurance credit.

‘‘Sec. 36. Overpayments of tax.’’

18 SEC. 104. QUALIFIED LONG-TERM SERVICES TREATED AS

19 MEDICAL CARE.

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

21 213(d) of the Internal Revenue Code of 1986 (defining

22 medical care) is amended by striking ‘‘or’’ at the end of

23 subparagraph (B), by redesignating subparagraph (C) as
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1 subparagraph (D), and by inserting after subparagraph

2 (B) the following new subparagraph:

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

4 (as defined in section 818A(c)), or’’.

5 (b) DEDUCTION FOR LONG-TERM CARE EXPENSES

6 FOR PARENT OR GRANDPARENT.—Section 213 of such

7 Code (relating to deduction for medical expenses) is

8 amended by adding at the end the following new sub9 section:

10 ‘‘(g) SPECIAL RULE FOR CERTAIN LONG-TERM CARE

11 EXPENSES.—For purposes of subsection (a), the term ‘de12 pendent’ shall include any parent or grandparent of the

13 taxpayer for whom the taxpayer has expenses for long14 term care services described in section 818A(c), but only

15 to the extent of such expenses.’’

16 (c) TECHNICAL AMENDMENTS.—

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

18 such Code (as redesignated by subsection (a)) is

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

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

21 (2) Paragraph (1) of section 213(d) of such

22 Code is amended by adding at the end thereof the

23 following new flush sentence:

24 ‘‘In the case of a long-term care insurance contract

25 (as defined in section 818A), only eligible long-term
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1 care premiums (as defined in section 35(c)) shall be

2 taken into account under subparagraph (D).’’

3 (3) Paragraph (6) of section 213(d) of such

4 Code is amended—

5 (A) by striking ‘‘subparagraphs (A) and

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

7 and (C)’’, and

8 (B) by striking ‘‘paragraph (1)(C)’’ in sub9 paragraph (A) and inserting ‘‘paragraph

10 (1)(D)’’.

11 (4) Paragraph (7) of section 213(d) of such

12 Code is amended by striking ‘‘subparagraphs (A)

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

14 and (C)’’.

15 SEC. 105. CERTAIN EXCHANGES OF LIFE INSURANCE CON16 TRACTS FOR LONG-TERM CARE INSURANCE

17 CONTRACTS NOT TAXABLE.

18 Subsection (a) of section 1035 of the Internal Reve19 nue Code of 1986 (relating to certain exchanges of insur20 ance contracts) is amended by striking the period at the

21 end of paragraph (3) and inserting ‘‘; or’’, and by adding

22 at the end thereof the following new paragraph:

23 ‘‘(4) a contract of life insurance or an endow24 ment or annuity contract for a long-term care insur25 ance contract (as defined in section 818A).’’
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1 SEC. 106. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

2 WITHDRAWN FROM INDIVIDUAL RETIRE3 MENT PLANS OR 401(k) PLANS FOR LONG4 TERM CARE INSURANCE.

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 items specifically excluded from gross income) is amended

8 by redesignating section 137 as section 138 and by insert9 ing after section 136 the following new section:

10 ‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

11 ACCOUNTS AND SECTION 401(k) PLANS FOR

12 LONG-TERM CARE INSURANCE.

13 ‘‘(a) GENERAL RULE.—The amount includible in the

14 gross income of an individual for the taxable year by rea15 son of qualified distributions during such taxable year

16 shall not exceed the excess of—

17 ‘‘(1) the amount which would (but for this sec18 tion) be so includible by reason of such distributions,

19 over

20 ‘‘(2) the aggregate premiums paid by such indi21 vidual during such taxable year for any long-term

22 care insurance contract (as defined in section 818A)

23 for the benefit of such individual or the spouse of

24 such individual.

25 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

26 this section, the term ‘qualified distribution’ means any
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1 distribution to an individual from an individual retirement

2 account or a section 401(k) plan if such individual has

attained age 591 3 ⁄2 on or before the date of the distribution

4 (and, in the case of a distribution used to pay premiums

5 for the benefit of the spouse of such individual, such

spouse has attained age 591 6 ⁄2 on or before the date of the

7 distribution).

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

10 term ‘individual retirement account’ has the mean11 ing given such term by section 408(a).

12 ‘‘(2) SECTION 401(k) PLAN.—The term ‘section

13 401(k) plan’ means any employer plan which meets

14 the requirements of section 401(a) and which in15 cludes a qualified cash or deferred arrangement (as

16 defined in section 401(k)).

17 ‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—

18 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC19 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

20 DEFERRED ARRANGEMENT.—This section shall not

21 apply to any distribution from a section 401(k) plan

22 to the extent the aggregate amount of such distribu23 tions for the use described in subsection (a) exceeds

24 the aggregate employer contributions made pursuant

25 to the employee’s election under section 401(k)(2).
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1 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI2 FICATION.—A plan shall not be treated as failing to

3 satisfy the requirements of section 401, and an ar4 rangement shall not be treated as failing to be a

5 qualified cash or deferred arrangement (as defined

6 in section 401(k)(2)), merely because under the plan

7 or arrangement distributions are permitted which

8 are excludable from gross income by reason of this

9 section.’’

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 401(k) of such Code is amended by

12 adding at the end the following new paragraph:

13 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

137.’’

14 (2) Section 408(d) of such Code is amended by

15 adding at the end the following new paragraph:

16 ‘‘(8) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 137.’’

17 (3) The table of sections for such part III is

18 amended by striking the last item and inserting the

19 following new items:

‘‘Sec. 137. Distributions from individual retirement accounts and

section 401(k) plans for long-term care insurance.

‘‘Sec. 138. Cross references to other Acts.’’
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1 SEC. 107. TAX TREATMENT OF ACCELERATED DEATH BENE2 FITS UNDER LIFE INSURANCE CONTRACTS.

3 Section 101 of the Internal Revenue Code of 1986

4 (relating to certain death benefits) is amended by adding

5 at the end thereof the following new subsection:

6 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

7 DEATH BENEFITS.—

8 ‘‘(1) IN GENERAL.—For purposes of this sec9 tion, any amount paid or advanced to an individual

10 under a life insurance contract on the life of an in11 sured—

12 ‘‘(A) who is a terminally ill individual, or

13 ‘‘(B) who is a chronically ill individual (as

14 defined in section 818A(c)(2)) who is confined

15 to a qualified facility (as defined in section

16 818A(c)(3)(A)),

17 shall be treated as an amount paid by reason of the

18 death of such insured.

19 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur20 poses of this subsection, the term ‘terminally ill indi21 vidual’ means an individual who has been certified

22 by a physician as having an illness or physical condi23 tion which can reasonably be expected to result in

24 death in 12 months or less.
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1 ‘‘(3) PHYSICIAN.—For purposes of this sub2 section, the term ‘physician’ has the meaning given

3 to such term by section 213(d)(4).’’

4 SEC. 108. TAX TREATMENT OF COMPANIES ISSUING QUALI5 FIED ACCELERATED DEATH BENEFIT RID6 ERS.

7 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID8 ERS TREATED AS LIFE INSURANCE.—Section 818 of the

9 Internal Revenue Code of 1986 (relating to other defini10 tions and special rules) is amended by adding at the end

11 thereof the following new subsection:

12 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

13 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

14 this part—

15 ‘‘(1) IN GENERAL.—Any reference to a life in16 surance contract shall be treated as including a ref17 erence to a qualified accelerated death benefit rider

18 on such contract.

19 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE20 FIT RIDERS.—For purposes of this subsection, the

21 term ‘qualified accelerated death benefit rider’

22 means any rider or addendum on, or other provision

23 of a life insurance contract which provides for pay24 ments to an individual on the life of an insured upon

25 such insured—
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1 ‘‘(A) becoming a terminally ill individual

2 (as defined in section 101(g)(2)), or

3 ‘‘(B) becoming a chronically ill individual

4 (as defined in section 818A(c)(2)) who is con5 fined to a qualified facility (as defined in sec6 tion 818A(c)(3)(A)).’’

7 (b) DEFINITIONS OF LIFE INSURANCE AND MODI8 FIED ENDOWMENT CONTRACTS.—

9 (1) RIDER TREATED AS QUALIFIED ADDI10 TIONAL BENEFIT.—Paragraph (5)(A) of section

11 7702(f) of such Code is amended by striking ‘‘or’’

12 at the end of clause (iv), by redesignating clause (v)

13 as clause (vi), and by inserting after clause (iv) the

14 following new clause:

15 ‘‘(v) any qualified accelerated death

16 benefit rider (as defined in section

17 818(g)(2)) or any long-term care insurance

18 contract rider which reduces the death

19 benefit, or’’.

20 (2) TRANSITIONAL RULE.—For purposes of ap21 plying section 7702 or 7702A of the Internal Reve22 nue Code of 1986 to any contract (or determining

23 whether either such section applies to such con24 tract), the issuance of a rider or addendum on, or

25 other provision of, a life insurance contract permit-
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1 ting the acceleration of death benefits (as described

2 in section 101(g) of such Code) or payments for

3 qualified long-term care services (as defined in sec4 tion 818A of such Code) shall not be treated as a

5 modification or material change of such contract.

6 SEC. 109. EFFECTIVE DATE.

7 The amendments made by this title shall apply to tax8 able years beginning after December 31, 1993.

9 TITLE II—REFUNDABLE TAX

10 CREDIT FOR CERTAIN CUSTO11 DIAL CARE

12 SEC. 201. REFUNDABLE CREDIT FOR CUSTODIAL CARE OF

13 CERTAIN DEPENDENTS IN TAXPAYER’S

14 HOME.

15 (a) IN GENERAL.—Subpart C of part IV of sub16 chapter A of chapter 1 of the Internal Revenue Code of

17 1986 (relating to refundable credits), as amended by sec18 tion 103 of this Act, is amended by redesignating section

19 36 as section 37 and by inserting after section 35 the fol20 lowing new section:

21 ‘‘SEC. 36. CREDIT FOR TAXPAYERS WITH CERTAIN PERSONS

22 REQUIRING CUSTODIAL CARE IN THEIR

23 HOUSEHOLDS.

24 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in25 dividual who maintains a household which includes as a
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1 member one or more qualified persons, there shall be al2 lowed as a credit against the tax imposed by this chapter

3 for the taxable year an amount equal to $2,000 for each

4 such person.

5 ‘‘(b) QUALIFIED PERSON DEFINED.—For purposes

6 of this section, the term ‘qualified person’ means any indi7 vidual—

8 ‘‘(1) who is a dependent (as defined in section

9 152) or spouse of the taxpayer,

10 ‘‘(2) who is a chronically ill individual (within

11 the meaning of section 818A(c)(2)), and

12 ‘‘(3) who has as his principal place of abode for

13 more than half of the taxable year the home of the

14 taxpayer.

15 ‘‘(c) SPECIAL RULES.—For purposes of this sec16 tion—

17 ‘‘(1) MAINTAINING A HOUSEHOLD.—An individ18 ual shall be treated as maintaining a household for

19 any period if over half the cost of maintaining the

20 household for such period is furnished by such indi21 vidual (or, if such individual is married during such

22 period, by such individual and his spouse).

23 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE24 TURN.—If the taxpayer is married at the close of

25 the taxable year, the credit under subsection (a)
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1 shall be allowed only if the taxpayer and his spouse

2 file a joint return for the taxable year.

3 ‘‘(3) MARITAL STATUS.—An individual legally

4 separated from his spouse under a decree of divorce

5 or separate maintenance shall not be considered as

6 married.

7 ‘‘(4) CERTAIN MARRIED INDIVIDUALS LIVING

8 APART.—If—

9 ‘‘(A) an individual who is married and who

10 files a separate return—

11 ‘‘(i) maintains a household which in12 cludes as a member one or more qualified

13 persons, and

14 ‘‘(ii) furnishes over half of the cost of

15 maintaining such household during such

16 taxable year, and

17 ‘‘(B) during the last 6 months of such tax18 able year such individual’s spouse is not a mem19 ber of such household,

20 such individual shall not be considered as married.

21 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

22 such regulations as may be necessary to carry out the pur23 poses of this section.’’

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

25 for subpart C of part IV of subchapter A of chapter 1
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1 of such Code is amended by striking the item relating to

2 section 36 and inserting the following:

‘‘Sec. 36. Credit for taxpayers with certain persons requiring custodial care in their households.

‘‘Sec. 37. Overpayments of tax.’’

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

4 this section shall apply to taxable years beginning after

5 December 31, 1993.

6 TITLE III—PROTECTION OF AS7 SETS UNDER MEDICAID

8 THROUGH USE OF QUALIFIED

9 LONG-TERM CARE INSUR10 ANCE

11 SEC. 301. PROTECTION OF ASSETS THROUGH USE OF

12 QUALIFIED LONG-TERM CARE INSURANCE.

13 (a) IN GENERAL.—Title XIX of the Social Security

14 Act is amended by adding at the end the following new

15 section:

16 ‘‘SPECIAL RULES FOR ASSET DISREGARD IN THE CASE OF

17 QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS

18 ‘‘SEC. 1931. (a) IN GENERAL.—Each State plan

19 under this title, as a condition for the receipt of payment

20 under section 1903(a) with respect to long-term care serv21 ices (as defined in subsection (c)(1)), shall provide that

22 in determining the eligibility of an individual for medical

23 assistance under the plan with respect to such services

24 there shall be disregarded some or all of the individual’s
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1 assets which are attributable (as determined under sub2 section (c)(2)) to coverage under a qualified long-term

3 care insurance contract (as defined in subsection (b)).

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

5 CONTRACT DEFINED.—In this section, the term ‘qualified

6 long-term care insurance contract’ means, with respect to

7 a State, a long-term care insurance contract (as defined

8 in section 818A(b) of the Internal Revenue Code of 1986)

9 which—

10 ‘‘(1) provides such protection against the costs

11 of receiving long-term care services as the State may

12 require by law;

13 ‘‘(2) provides that benefits under the contract

14 shall be paid without regard to eligibility for medical

15 assistance under this title; and

16 ‘‘(3) meets such other requirements (such as re17 quirements relating to premiums, disclosure, mini18 mum benefits, rights of conversion, and standards

19 for claims processing) as the State may determine to

20 be appropriate.

21 ‘‘(c) OTHER DEFINITIONS.—In this section:

22 ‘‘(1) LONG-TERM CARE SERVICES.—The term

23 ‘long-term care services’ means nursing facility serv24 ices, home health care services, and home and com25 munity-based services, and includes such other simi-
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1 lar items and services described in section 1905(a)

2 as a State may specify.

3 ‘‘(2) ATTRIBUTION RULES.—An individual’s as4 sets are considered to be ‘attributable’ to a qualified

5 long-term care insurance contract to the extent spec6 ified under the State plan. Such a plan shall provide

7 for at least one of the following:

8 ‘‘(A) All assets are considered attributable

9 if the insurance contract provides coverage for

10 at least a specified period of coverage (of not

11 less than 3 years and of not more than 6 years)

12 for long-term care services.

13 ‘‘(B) An amount of assets, up to the dollar

14 limitation on benefits for long-term care serv15 ices under the contract, is considered attrib16 utable to the contract.’’.

17 (b) CONFORMING AMENDMENT.—Section

18 1902(a)(17)(A) of such Act (42 U.S.C. 1396a(a)(17)(A))

19 is amended by inserting ‘‘and section 1931’’ after ‘‘objec20 tives of this title’’.

21 (c) EFFECTIVE DATE.—

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

23 this section shall apply (except as provided under

24 paragraph (2)) to payments to States under title

25 XIX of the Social Security Act for calendar quarters
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1 beginning on or after one year after the date of the

2 enactment of this Act, without regard to whether

3 regulations to implement such amendment are pro4 mulgated by such date.

5 (2) DELAY PERMITTED IF STATE LEGISLATION

6 REQUIRED.—In the case of a State plan for medical

7 assistance under title XIX of the Social Security Act

8 which the Secretary of Health and Human Services

9 determines requires State legislation (other than leg10 islation authorizing or appropriating funds) in order

11 for the plan to meet the additional requirements im12 posed by the amendments made by this section, the

13 State plan shall not be regarded as failing to comply

14 with the requirements of such title solely on the

15 basis of its failure to meet these additional require16 ments before the first day of the first calendar quar17 ter beginning after the close of the first regular ses18 sion of the State legislature that begins after the

19 date of the enactment of this Act. For purposes of

20 the previous sentence, in the case of a State that has

21 a 2-year legislative session, each year of such session

22 shall be deemed to be a separate regular session of

23 the State legislature.

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