I
105TH CONGRESS
1ST SESSION
H. R. 1764
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 reimburse-
ment 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
JUNE 3, 1997
Mr. HILL (for himself, Mrs. CHENOWETH, and Mr. HUTCHINSON) introduced
the following bill; which was referred to the Committee on Commerce,
and in addition to the Committee on Ways and Means, for a period to
be subsequently determined by the Speaker, in each case for consider-
ation 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 individ-
uals 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 ar-
rangements, 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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. RESTRICTING MEDICAID LIENS AND MEDICAID
ESTATE RECOVERY FOR LONG-TERM CARE
SERVICES IN THE CASE OF CERTAIN INDIVID-
UALS 
WHO 
HAVE 
RECEIVED 
BENEFITS
UNDER LONG-TERM CARE INSURANCE POLI-
CIES FOR AT LEAST 3 YEARS.
(a) LIMITATION ON LIENS.—Subsection (a) of sec-
tion 1917 of the Social Security Act (42 U.S.C. 1396p)
is amended by adding at the end the following new para-
graph:
‘‘(4) No lien may be imposed under paragraph (1)(B)
on an individual’s home on account of medical assistance
paid with respect to the provision of long-term care serv-
ices (including nursing facility services and home health
care services) if the individual (as of the date of provision
of such services) had received benefits under a qualified
long-term care insurance contract (as defined in section
7702B(b)(1) of the Internal Revenue Code of 1986) for
at least 3 years during the 5-year period ending on such
date.’’.
(b) LIMITATION ON ESTATE RECOVERY.—Subsection
(b) of such section is amended—
(1) in paragraph (1)(C)(i), by inserting ‘‘and
except as provided in paragraph (5)’’ after ‘‘except
as provided in such clause’’, and
(2) by adding at the end the following new
paragraph:
‘‘(5) A State shall not seek adjustment or recovery
of any medical assistance correctly paid on behalf of an
individual under the State plan under this subsection in
the case of medical assistance for which a lien may not
be imposed under subsection (a)(4).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to adjustments or recoveries initi-
ated on or after the date of the enactment of this Act.
SEC. 2. TREATMENT OF CARRYOVERS AND LONG-TERM
CARE INSURANCE UNDER FLEXIBLE SPEND-
ING ARRANGEMENTS.
(a) ALLOWANCE OF CARRYOVERS, PERMITTED REIM-
BURSEMENT
OF LONG-TERM CARE INSURANCE PRE-
MIUMS (AND HEALTH INSURANCE PREMIUMS DURING
UNEMPLOYMENT), AND REPEAL OF INCOME INCLUSION
FOR LONG-TERM CARE INSURANCE.—Subsection (c) of
section 106 of the Internal Revenue Code of 1986 (relat-
ing to inclusion of long-term care benefits provided
through flexible spending arrangements) is amended to
read as follows:
‘‘(c) SPECIAL
RULES
RELATING
TO
FLEXIBLE
SPENDING ARRANGEMENTS FOR HEALTH.—
‘‘(1) CARRYOVER PERMITTED.—
‘‘(A) IN GENERAL.—For purposes of this
title, a flexible spending arrangement for health
shall not cease to be treated as such an ar-
rangement, and no amount shall be includible
in the gross income of the participant in such
arrangement, solely because the maximum
amount of reimbursement otherwise available to
a participant under such arrangement for any
year is increased by the carryover amount.
‘‘(B) CARRYOVER AMOUNT.—For purposes
of this paragraph, the term ‘carryover amount’
means, for any participant, for any year, and
with respect to any flexible spending arrange-
ment, the excess (if any) of—
‘‘(i) the maximum amount of reim-
bursement available to such participant
under such arrangement for the preceding
year (determined after the application of
this paragraph), over
‘‘(ii) the actual amount of reimburse-
ment to which such participant is entitled
under such arrangement for such preced-
‘‘(i) after separation of the taxpayer
from employment, and
‘‘(ii) to obtain insurance for the pe-
riod beginning on or after the date of such
separation and ending on or before the
earlier of—
‘‘(I) the date which is 18 months
after the date of such separation, or
‘‘(II) the date on which the tax-
payer becomes employed full-time.
‘‘(3) DEFINITIONS AND SPECIAL RULE REGARD-
ING INSURANCE PREMIUMS.—For purposes of para-
graph (2)—
‘‘(A) FAMILY MEMBER.—The term ‘family
member’ means, with respect to any taxpayer—
‘‘(i) the spouse of the taxpayer,
‘‘(ii) any child (within the meaning of
section 151) of the taxpayer, if such child
has not attained the age of 19 at the close
of the calendar year in which the taxable
year of the taxpayer begins, and
‘‘(iii) any parent or stepparent of the
taxpayer or of the taxpayer’s spouse.
‘‘(B) MEDICAL
INSURANCE.—The term
‘medical insurance’ means insurance covering
medical care referred to in subparagraph (A) or
(B) of section 213(d)(1).
‘‘(C) LIMITATION ON LONG-TERM CARE IN-
SURANCE PREMIUMS.—The rule of the last sen-
tence of section 213(d)(1) and the rules of sec-
tion 213(d)(10) (relating to eligible long-term
care premiums) shall apply.
‘‘(4) FLEXIBLE
SPENDING
ARRANGEMENT.—
For purposes of this subsection, a flexible spending
arrangement is a benefit program which provides
employees with coverage under which—
‘‘(A) specified incurred expenses may be
reimbursed (subject to reimbursement maxi-
mums and other reasonable conditions), and
‘‘(B) the maximum amount of reimburse-
ment which is reasonably available to a partici-
pant for such coverage is less than 500 percent
of the value of such coverage.
In the case of an insured plan, the maximum
amount reasonably available shall be determined on
the basis of the underlying coverage.
‘‘(5) COORDINATION
WITH
CAFETERIA
PLAN
PROVISIONS.—Section 125(a) shall not fail to apply
to a participant in a plan, and a plan shall not fail
to be treated as a cafeteria plan, solely because a
flexible spending arrangement available under the
plan—
‘‘(A) increases the maximum amount of re-
imbursement otherwise available by the carry-
over amount, as described in paragraph (1), or
‘‘(B) treats premium payments as reim-
bursable expenses as described paragraph (2).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after the date
of the enactment of this Act.
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