I
103D CONGRESS
1ST SESSION
H. R. 2407
To amend title XIX of the Social Security Act to improve coverage of
nursing facility services under the medicaid program and to amend
the Internal Revenue Code of 1986 to clarify the tax treatment of
long-term care insurance.
IN THE HOUSE OF REPRESENTATIVES
JUNE 14, 1993
Mrs. KENNELLY introduced the following bill; which was referred jointly to
the Committees on Energy and Commerce and Ways and Means
A BILL
To amend title XIX of the Social Security Act to improve
coverage of nursing facility services under the medicaid
program and to amend the Internal Revenue Code of
1986 to clarify the tax treatment of long-term care
insurance.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Partnership for Long-
Term Care Act of 1993’’.
TITLE I—MEDICAID PROGRAM
IMPROVEMENTS
SEC. 101. REQUIRING MEDICALLY NEEDY PROGRAM FOR
INDIVIDUALS WITH INCOMES BELOW THE
POVERTY LEVEL.
(a) IN GENERAL.—Section 1902(a)(10) of the Social
Security Act (42 U.S.C. 1396a(a)(10)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by inserting ‘‘and’’ at the end of subpara-
graph (F); and
(3) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) for making medical assistance
available under subparagraph (C) for all indi-
viduals—
‘‘(I) whose income (taking into ac-
count the costs incurred for medical care
or for any other type of remedial care rec-
ognized under State law) does not exceed
100 percent of the official poverty level (as
defined by the Office of Management and
Budget, and revised annually in accord-
ance with section 673(2) of the Omnibus
Budget Reconciliation Act of 1981) appli-
cable to a family of the size involved, and
‘‘(II) whose resources (as determined
under section 1613 for purposes of the
supplemental security income program) do
not exceed such level (at least equal to the
maximum amount of resources that an in-
dividual may have and obtain benefits
under that program) as the State estab-
lishes; and
‘‘(ii) for including in medical assistance
under clause (i)—
‘‘(I) for individuals described in sub-
paragraph (C)(ii), at least the care and
services listed in paragraphs (1) through
(5) and (17) of section 1905(a), and
‘‘(II) for other individuals at least
nursing facility services (and, to the extent
applicable, services under a waiver under
section 1915(c));’’.
(b) EFFECTIVE DATE.—(1) The amendments made
by this section apply (except as provided under paragraph
(2)) to payments under title XIX of the Social Security
Act for calendar quarters beginning on or after January
1, 1994, without regard to whether or not final regulations
to carry out such amendments have been promulgated by
such date.
(2) In the case of a State plan for medical assistance
under title XIX of the Social Security Act which the Sec-
retary of Health and Human Services determines requires
State legislation (other than legislation appropriating
funds) in order for the plan to meet the additional require-
ments imposed by the amendments made by this section,
the State plan shall not be regarded as failing to comply
with the requirements of such title solely on the basis of
its failure to meet these additional requirements before the
first day of the first calendar quarter beginning after the
close of the first regular session of the State legislature
that begins after the date of the enactment of this Act.
For purposes of the previous sentence, in the case of a
State that has a 2-year legislative session, each year of
such session shall be deemed to be a separate regular ses-
sion of the State legislature.
SEC. 102. PREMIUM SUBSIDY PROGRAM.
(a) REQUIREMENT
FOR
STATE
PLAN.—Section
1902(a) of the Social Security Act (42 U.S.C. 1396a(a))
is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(54);
(2) in the paragraph (55) inserted by section
4602(a)(3) of the Omnibus Budget Reconciliation
Act of 1990 (hereafter referred to as ‘‘OBRA–
1990’’), by striking the period at the end and insert-
ing a semicolon;
(3) by redesignating the paragraph (55) in-
serted by section 4604(b)(3) of OBRA–1990 as
paragraph (56), by transferring and inserting it
after the paragraph (55) inserted by section
4602(a)(3) of such Act, and by striking the period
at the end and inserting a semicolon;
(4) by placing paragraphs (57) and (58), in-
serted by section 4751(a)(1)(C) of OBRA–1990, im-
mediately after paragraph (56), as redesignated by
paragraph (3);
(5) in the paragraph (58) inserted by section
4751(a)(1)(C) of OBRA–1990, by striking the pe-
riod at the end and inserting a semicolon;
(6) by redesignating the paragraph (58) in-
serted by section 4752(c)(1)(C) of OBRA–1990 as
paragraph (59) and by transferring and inserting it
after the paragraph (58) inserted by section
4751(a)(1)(C) of such Act;
(7) by striking the period at the end of para-
graph (59) (as so redesignated) and inserting ‘‘;
and’’; and
(8) by inserting after paragraph (59) (as so re-
designated) the following new paragraph:
‘‘(60) meet the requirements of section 1928
(relating to a premium subsidy program for low in-
come individuals to purchase long-term care insur-
ance).’’.
(b) PREMIUM SUBSIDY PROGRAM.—Title XIX of
such Act is amended—
(1) by transferring section 1928 to the end;
(2) by redesignating section 1928 as section
1931; and
(3) by inserting after section 1927 the following
new section:
‘‘PREMIUM SUBSIDY PROGRAM
‘‘SEC. 1928. (a) In order to meet the requirements
of this section, a State must establish and maintain a pro-
gram to assist low income individuals in the purchase of
qualified long-term care insurance.
‘‘(b) Under the program, each low income individual
(as defined in subsection (c)(1) is entitled to payment of
a subsidy, expressed as a percentage of the premium oth-
erwise required for a qualified long-term care insurance,
equal to 50 percent minus 40 percent multiplied by the
factor (P–100 percent)/100 percent, where ‘P’ is the indi-
vidual’s family’s income expressed as a percent of the offi-
cial poverty level.
‘‘(c) In this section:
‘‘(1) The term ‘low income individual’ means an
individual in a family—
‘‘(A) the income of which (as determined
under section 1612 for purposes of the supple-
mental security income program) is at least 100
percent, but does not exceed 200 percent, of the
official poverty level, and
‘‘(B) the resources of which (as determined
under section 1613 for purposes of the supple-
mental security income program) do not exceed
an amount established by the State.
The resource level established by a State under sub-
paragraph (B) may not be less than twice the maxi-
mum amount of resources that an individual may
have and obtain benefits under the supplemental se-
curity income program under title XVI.
‘‘(2) The term ‘official poverty line’ means such
term as defined by the Office of Management and
Budget, and revised annually in accordance with sec-
tion 673(2) of the Omnibus Budget Reconciliation
Act of 1981.
‘‘(3) The term ‘qualified long-term care insur-
ance’ means insurance against the costs of nursing
facility services and related long-term care services
which meets requirements established by the State.
In establishing such requirements, the State shall
take into consideration model requirements estab-
lished with respect to such insurance by the Na-
tional Association of Insurance Commissioners as
well as requirements imposed with respect to medi-
care supplemental policies under section 1882.’’.
(c) EFFECTIVE DATE.—(1) The amendments made
by this section apply (except as provided under paragraph
(2)) to payments under title XIX of the Social Security
Act for calendar quarters beginning on or after Janu-
ary 1, 1994, without regard to whether or not final regula-
tions to carry out such amendments have been promul-
gated by such date.
(2) In the case of a State plan for medical assistance
under title XIX of the Social Security Act which the Sec-
retary of Health and Human Services determines requires
State legislation (other than legislation appropriating
funds) in order for the plan to meet the additional require-
ment imposed by the amendments made by this section,
the State plan shall not be regarded as failing to comply
with the requirements of such title solely on the basis of
its failure to meet this additional requirement before the
first day of the first calendar quarter beginning after the
close of the first regular session of the State legislature
that begins after the date of the enactment of this Act.
For purposes of the previous sentence, in the case of a
State that has a 2-year legislative session, each year of
such session shall be deemed to be a separate regular ses-
sion of the State legislature.
TITLE 
II—MEDICAID 
AMEND-
MENTS RELATING TO TREAT-
MENT OF PAYMENTS UNDER
QUALIFIED LONG-TERM CARE
INSURANCE POLICIES
SEC. 201. PROTECTION OF ASSETS TO THE EXTENT OF PAY-
MENTS UNDER QUALIFIED LONG-TERM CARE
INSURANCE POLICIES.
(a) IN GENERAL.—Section 1902(a) of the Social Se-
curity Act (42 U.S.C. 1396a(a)), as amended by section
102(a), is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(59);
(2) by striking the period at the end of para-
graph (60) and inserting ‘‘, and’’; and
(3) by inserting after paragraph (60) the fol-
lowing new paragraph:
‘‘(61) notwithstanding paragraph (17), in deter-
mining the eligibility of an individual for medical as-
sistance under the plan, provide for reducing the
amount of assets the individual is considered to have
by the amount of any payments made with respect
to, and for the benefit of, the individual under a pol-
icy of qualified long-term care insurance (as defined
in section 1928(c)(3)).’’.
(b) EFFECTIVE DATE.—(1) The amendments made
by this section apply (except as provided under paragraph
(2)) to payments under title XIX of the Social Security
Act for calendar quarters beginning on or after January
1, 1994, without regard to whether or not final regulations
to carry out such amendments have been promulgated by
such date.
(2) In the case of a State plan for medical assistance
under title XIX of the Social Security Act which the Sec-
retary of Health and Human Services determines requires
State legislation (other than legislation appropriating
funds) in order for the plan to meet the additional require-
ment imposed by the amendments made by this section,
the State plan shall not be regarded as failing to comply
with the requirements of such title solely on the basis of
its failure to meet this additional requirement before the
first day of the first calendar quarter beginning after the
close of the first regular session of the State legislature
that begins after the date of the enactment of this Act.
For purposes of the previous sentence, in the case of a
State that has a 2-year legislative session, each year of
such session shall be deemed to be a separate regular ses-
sion of the State legislature.
TITLE III—TAX TREATMENT OF
LONG-TERM CARE INSURANCE
SEC. 301. QUALIFIED LONG-TERM CARE INSURANCE DE-
FINED 
AND 
TREATED 
AS 
ACCIDENT 
OR
HEALTH INSURANCE.
(a) IN GENERAL.—Section 818 of the Internal Reve-
nue Code of 1986 (relating to definitions) is amended by
adding at the end thereof the following new subsection:
‘‘(g) QUALIFIED
LONG-TERM
CARE
INSURANCE
TREATED AS ACCIDENT OR HEALTH INSURANCE.—For
purposes of this subchapter—
‘‘(1) 
IN
GENERAL.—Any 
reference 
to
noncancellable accident or health insurance contracts
shall be treated as including a reference to qualified
long-term care insurance.
‘‘(2) QUALIFIED
LONG-TERM
CARE
INSUR-
ANCE.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the term ‘qualified long-
term care insurance’ means insurance under a
policy or rider, issued by a qualified issuer, to
be advertised, marketed, offered, or designed to
provide coverage—
‘‘(i) for not less than 12 consecutive
months for each covered person,
‘‘(ii) on an expense incurred, indem-
nity, prepaid or other basis,
‘‘(iii) for 1 or more necessary or medi-
cally necessary diagnostic services, preven-
tive services, therapeutic services, rehabili-
tation services, maintenance services, or
personal care services,
‘‘(iv) for the loss of functional capac-
ity, and
‘‘(v) provided in a setting other than
an acute care unit of a hospital.
‘‘(B) QUALIFIED
ISSUER.—For purposes
of subparagraph (A), the term ‘qualified issuer’
means any of the following provided they are
subject to the jurisdiction and regulation of at
least one State insurance department:
‘‘(i) Private insurance company.
‘‘(ii) Fraternal benefit society.
‘‘(iii) Nonprofit health corporation.
‘‘(iv) Nonprofit hospital corporation.
‘‘(v) Nonprofit medical service cor-
poration.
‘‘(vi) Prepaid health plan.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
SEC. 302. QUALIFIED LONG-TERM CARE INSURANCE TREAT-
ED AS ACCIDENT AND HEALTH INSURANCE
FOR PURPOSES OF EXCLUSION FOR BENE-
FITS RECEIVED UNDER SUCH INSURANCE
AND FOR EMPLOYER CONTRIBUTIONS FOR
SUCH INSURANCE.
(a) IN GENERAL.—Section 105 of the Internal Reve-
nue Code of 1986 (relating to amounts received under ac-
cident and health plans) is amended by adding at the end
thereof the following new subsection:
‘‘(j) SPECIAL
RULES
RELATING
TO
QUALIFIED
LONG-TERM CARE INSURANCE.—For purposes of section
104, this section, and section 106—
‘‘(1) BENEFITS
TREATED
AS
PAYABLE
FOR
SICKNESS, ETC.—Any benefit received through quali-
fied long-term care insurance (as defined in section
818(g)) shall be treated as amounts received
through accident or health insurance for personal in-
juries or sickness.
‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT
PROVIDED UNDER QUALIFIED LONG-TERM CARE IN-
SURANCE
TREATED
AS
INCURRED
FOR
MEDICAL
CARE OR FUNCTIONAL LOSS.—Expenses incurred by
an individual to the extent of benefits paid under
qualified long-term care insurance (as defined in sec-
tion 818(g)) shall be treated for purposes of sub-
section (b) as incurred for medical care (as defined
in section 213(d)) and for purposes of subsection (c)
as payment for the permanent loss or loss of use of
a member or function of the body or the permanent
disfigurement of the taxpayer, his spouse, any de-
pendent of the taxpayer, or any parent of the tax-
payer of his spouse.
‘‘(3) REFERENCES TO ACCIDENT AND HEALTH
PLANS.—Any reference to an accident or health plan
shall be treated as including a reference to a plan
providing qualified long-term care insurance (as de-
fined in section 818(g)).’’
(b) CURRENT DEDUCTION
FOR EMPLOYER PRE-
MIUMS FOR LONG-TERM CARE POLICIES.—Subparagraph
(B) of section 404(b)(2) of such Code (relating to plans
providing certain deferred benefits) is amended by striking
‘‘or’’ at the end of clause (i), by striking the period at
the end of clause (ii) and inserting ‘‘, or’’, and by adding
at the end thereof the following new clause:
‘‘(iii) any benefit provided under a
policy of qualified long-term care insurance
(as defined in section 818(g)) through the
payment (in whole or in part) of premiums
by an employer pursuant to a plan for its
active or retired employees, but only if any
refund of premiums is applied to reduce
the future costs of the plan or increase
benefits under the plan.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 303. EARLY DISTRIBUTION PENALTY TAX NOT TO
APPLY 
TO 
AMOUNTS 
WITHDRAWN 
FROM
QUALIFIED PLANS, INDIVIDUAL RETIREMENT
PLANS, ETC. FOR QUALIFIED LONG-TERM IN-
SURANCE.
(a) IN GENERAL.—Paragraph (1) of section 72(t) of
the Internal Revenue Code of 1986 (relating to 10-percent
additional tax on early distributions from qualified retire-
ment plans) is amended by adding at the end thereof the
following new subparagraph:
‘‘(D) 
DISTRIBUTIONS
FOR
QUALIFIED
LONG-TERM CARE INSURANCE PREMIUMS.—Any
distribution to the extent used during the tax-
able year to pay premiums for any policy of
qualified long-term care insurance (as defined
in section 818(g)) or to pay for services de-
scribed in section 818(g)(2)(A)(iii) (relating to
services provided under long-term care insur-
ance) for the benefit of the payee or distributee,
the spouse of the payee or distributee, any de-
pendent of the payee or distributee, or any par-
ent of the payee or distributee or such spouse.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
SEC. 304. DEDUCTION OF EXPENSES RELATING TO QUALI-
FIED LONG-TERM CARE.
(a) IN GENERAL.—Paragraph (1) of section 213(d)
of the Internal Revenue Code of 1986 (relating to the defi-
nition of medical care) is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(B), and
(2) by redesignating subparagraph (C) as sub-
paragraph (D) and by inserting after subparagraph
(B) the following new subparagraph:
‘‘(C) for those services described in section
818(g)(2)(A)(iii) (relating to services provided
under qualified long-term care insurance), or’’.
(b) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) of
such Code, as redesignated by subsection (a), is
amended by striking ‘‘subparagraphs (A) and (B)’’
and inserting ‘‘subparagraphs (A), (B), and (C)’’.
(2) Paragraph (6) of section 213(d) of such
Code is amended—
(A) by striking ‘‘subparagraphs (A) and
(B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’, and
(B) by striking ‘‘paragraph (1)(C)’’ and in-
serting ‘‘paragraph (1)(D)’’.
(3) Paragraph (7) of section 213(d) of such
Code is amended by striking ‘‘subparagraphs (A)
and (B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 305. TREATMENT OF PREFUNDED LONG-TERM CARE
BENEFITS.
(a) IN GENERAL.—