373
Title II, Subtitle A
‘‘(A) the total number of units subject to
rebate for such quarter, as described in sub-
section (b)(1)(B), multiplied by
‘‘(B) the amount, if any, by which the av-
erage manufacturer retail price for covered
drugs of the manufacturer exceeds the average
manufacturer retail price for the base quarter,
increased by the percentage increase in the
Consumer Price Index for all urban consumers
(U.S. average) from the end of such base quar-
ter to the month before the beginning of such
calendar quarter.
‘‘(3) NEGOTIATED REBATE AMOUNT FOR NEW
DRUGS.—
‘‘(A) IN
GENERAL.—The Secretary may
negotiate with the manufacturer a per-unit re-
bate amount, in accordance with this para-
graph, for any covered outpatient drug (except
as provided under paragraph (4)) first mar-
keted after June 30, 1993—
‘‘(i) which is not marketed in any
country specified in section 802(b)(4)(A)
of the Federal Food, Drug, and Cosmetic
Act and for which the Secretary believes
374
Title II, Subtitle A
the average manufacturer’s retail price
may be excessive, or
‘‘(ii) which is marketed in one or more
of such countries, at prices significantly
lower than the average manufacturer retail
price.
‘‘(B) MAXIMUM
REBATE
AMOUNT
FOR
DRUGS MARKETED IN CERTAIN COUNTRIES.—
The rebate negotiated pursuant to this para-
graph for a drug described in subparagraph
(A)(ii) may be an amount up to the difference
between the average manufacturer retail price
and any price at which the drug is available to
wholesalers in a country specified in such sec-
tion 802(b)(4)(A).
‘‘(C) FACTORS
TO
BE
CONSIDERED.—In
making determinations with respect to the
prices of a covered drug described in subpara-
graph (A) and in negotiating a rebate amount
pursuant to this paragraph, the Secretary shall
take into consideration, as applicable and ap-
propriate, the prices of other drugs in the same
therapeutic class, cost information requested by
the Secretary and supplied by the manufacturer
or estimated by the Secretary, prescription vol-
375
Title II, Subtitle A
umes, economies of scale, product stability, spe-
cial manufacturing requirements, prices of the
drug in countries specified in subparagraph
(A)(i) (in the case of a drug described in such
subparagraph), and other relevant factors.
‘‘(D) OPTION TO EXCLUDE COVERAGE.—If
the Secretary is unable to negotiate with the
manufacturer an acceptable rebate amount with
respect to a covered outpatient drug pursuant
to this paragraph, the Secretary may exclude
such drug from coverage under this part.
‘‘(E) EFFECTIVE
DATE
OF
EXCLUSION
FROM COVERAGE.—An exclusion of a drug from
coverage pursuant to subparagraph (D) shall be
effective on and after—
‘‘(i) the date 6 months after the effec-
tive date of marketing approval of such
drug by the Food and Drug Administra-
tion (but in no event earlier than July 1,
1996), or
‘‘(ii) the date the manufacturer termi-
nates negotiations with the Secretary con-
cerning the rebate amount,
whichever is earlier.
376
Title II, Subtitle A
‘‘(4) NO
REBATE
REQUIRED
FOR
GENERIC
DRUGS.—Paragraphs (1) through (3) shall not apply
with respect to a covered outpatient drug that is not
a single source drug or an innovator multiple source
drug (as such terms are defined in section 1927(k)).
‘‘(5) DEPOSIT
OF
REBATES.—The Secretary
shall deposit rebates under this section in the Fed-
eral Supplementary Medical Insurance Trust Fund
established under section 1841.
‘‘(d) CONFIDENTIALITY OF INFORMATION.—Notwith-
standing any other provision of law, information disclosed
by a manufacturer under this section is confidential and
shall not be disclosed by the Secretary, except—
‘‘(A) as the Secretary determines to be nec-
essary to carry out this section,
‘‘(B) to permit the Comptroller General to re-
view the information provided, and
‘‘(C) to permit the Director of the Congres-
sional Budget Office to review the information pro-
vided.
‘‘(e) AGREEMENT TO GIVE EQUAL ACCESS TO DIS-
COUNTS.—An agreement under this subsection by a man-
ufacturer of covered outpatient drugs shall guarantee that
the manufacturer will offer, to each wholesaler or retailer
(or other purchaser representing a group of such whole-
377
Title II, Subtitle A
salers or retailers) that purchases such drugs on substan-
tially the same terms (including such terms as prompt
payment, cash payment, volume purchase, single-site de-
livery, the use of formularies by purchasers, and any other
terms effectively reducing the manufacturer’s costs) as
any other purchaser (including any institutional pur-
chaser) the same price for such drugs as is offered to such
other purchaser. In determining a manufacturer’s compli-
ance with the previous sentence, there shall not be taken
into account terms offered to the Department of Veterans
Affairs, the Department of Defense, or any public pro-
gram.
‘‘(f) DEFINITIONS.—For purposes of this section—
‘‘(1) 
AVERAGE
MANUFACTURER
RETAIL
PRICE.—The term ‘average manufacturer retail
price’ means, with respect to a covered outpatient
drug of a manufacturer for a calendar quarter, the
average price (inclusive of discounts for cash pay-
ment, prompt payment, volume purchases, and re-
bates (other than rebates under this section), but ex-
clusive of nominal prices) paid to the manufacturer
for the drug in the United States for drugs distrib-
uted to the retail pharmacy class of trade.
‘‘(2) AVERAGE
MANUFACTURER
NON-RETAIL
PRICE.—The term ‘average manufacturer non-retail
378
Title II, Subtitle A
price’ means, with respect to a covered outpatient
drug of a manufacturer for a calendar quarter, the
weighted average price (inclusive of discounts for
cash payment, prompt payment, volume purchases,
and rebates (other than rebates under this section),
but exclusive of nominal prices) paid to the manu-
facturer for the drug in the United States by hos-
pitals and other institutional purchasers that pur-
chase drugs for institutional use and not for resale.
‘‘(3) BASE QUARTER.—The term ‘base quarter’
means, with respect to a covered outpatient drug of
a manufacturer, the calendar quarter beginning
April 1, 1993, or (if later) the first full calendar
quarter during which the drug was marketed in the
United States.
‘‘(4) COVERED DRUG.—The term ‘covered drug’
includes each innovator multiple source drug and
single source drug, as those terms are defined in
section 1927(k)(7).
‘‘(5) MANUFACTURER.—The term ‘manufac-
turer’ means, with respect to a covered outpatient
drug—
‘‘(A) the entity whose National Drug Code
number (as issued pursuant to section 510(e) of
379
Title II, Subtitle A
the Federal Food, Drug, and Cosmetic Act) ap-
pears on the labeling of the drug; or
‘‘(B) if the number described in subpara-
graph (A) does not appear on the labeling of
the drug, the person named as the applicant in
a human drug application (in the case of a new
drug) or the product license application (in the
case of a biological product) for such drug ap-
proved by the Food and Drug Administration.’’.
(b) 
EXCLUSIONS
FROM
COVERAGE.—Section
1862(a) of such Act (42 U.S.C. 1395y(a)), as amended
by sections 4034(b)(4) and 4118(b), is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(15),
(2) by striking the period at the end of para-
graph (16) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (16) the fol-
lowing new paragraph:
‘‘(17) A covered outpatient drug (as described
in section 1861(t))—
‘‘(A) furnished during a year for which the
drug’s manufacturer does not have in effect a
rebate agreement with the Secretary that meets
the requirements of section 1850 for the year,
or
380
Title II, Subtitle A
‘‘(B) excluded from coverage during the
year by the Secretary pursuant to section
1850(c)(3)(D) (relating to negotiated rebate
amounts for certain new drugs).’’.
SEC. 2004. EXTENSION OF 25 PERCENT RULE FOR PORTION
OF PREMIUM ATTRIBUTABLE TO COVERED
OUTPATIENT DRUGS.
Section 1839(e) of the Social Security Act (42 U.S.C.
1395r(e)) is amended by adding at the end the following:
‘‘(3) Notwithstanding the provisions of subsection
(a), the portion of the monthly premium for each indi-
vidual enrolled under this part for each month after De-
cember 1998 that is attributable to covered outpatient
drugs shall be an amount equal to 50 percent of the por-
tion of the monthly actuarial rate for enrollees age 65 and
over, as determined under subsection (a)(1) and applicable
to such month, that is attributable to covered outpatient
drugs.’’.
SEC. 2005. COVERAGE OF HOME INFUSION DRUG THERAPY
SERVICES.
(a) IN GENERAL.—Section 1832(a)(2)(A) of the So-
cial Security Act (42 U.S.C. 1395k(a)(2)(A)) is amended
by inserting ‘‘and home infusion drug therapy services’’
before the semicolon.
381
Title II, Subtitle A
(b) HOME INFUSION DRUG THERAPY SERVICES DE-
FINED.—Section 1861 of such Act (42 U.S.C. 1395x) is
amended—
(1) by redesignating the subsection (jj) inserted
by section 4156(a)(2) of the Omnibus Budget Rec-
onciliation Act of 1990 as subsection (kk); and
(2) by inserting after such subsection the fol-
lowing new subsection:
‘‘Home Infusion Drug Therapy Services
‘‘(ll)(1) The term ‘home infusion drug therapy serv-
ices’ means the items and services described in paragraph
(2) furnished to an individual who is under the care of
a physician—
‘‘(A) in a place of residence used as the individ-
ual’s home,
‘‘(B) by a qualified home infusion drug therapy
provider (as defined in paragraph (3)) or by others
under arrangements with them made by that pro-
vider, and
‘‘(C) under a plan established and periodically
reviewed by a physician.
‘‘(2) The items and services described in this para-
graph are such nursing, pharmacy, and related services
(including medical supplies, intravenous fluids, delivery,
and equipment) as are necessary to conduct safely and ef-
382
Title II, Subtitle A
fectively a drug regimen through use of a covered home
infusion drug (as defined in subsection (t)(5)), but do not
include such covered home infusion drugs.
‘‘(3) The term ‘qualified home infusion drug therapy
provider’ means any entity that the Secretary determines
meets the following requirements:
‘‘(A) The entity is capable of providing or ar-
ranging for the items and services described in para-
graph (2) and covered home infusion drugs.
‘‘(B) The entity maintains clinical records on
all patients.
‘‘(C) The entity adheres to written protocols
and policies with respect to the provision of items
and services.
‘‘(D) The entity makes services available (as
needed) seven days a week on a 24-hour basis.
‘‘(E) The entity coordinates all service with the
patient’s physician.
‘‘(F) The entity conducts a quality assessment
and assurance program, including drug regimen re-
view and coordination of patient care.
‘‘(G) The entity assures that only trained per-
sonnel provide covered home infusion drugs (and any
other service for which training is required to pro-
vide the service safely).
383
Title II, Subtitle A
‘‘(H) The entity assumes responsibility for the
quality of services provided by others under arrange-
ments with the entity.
‘‘(I) In the case of an entity in any State in
which State or applicable local law provides for the
licensing of entities of this nature, the entity (i) is
licensed pursuant to such law, or (ii) is approved, by
the agency of such State or locality responsible for
licensing entities of this nature, as meeting the
standards established for such licensing.
‘‘(J) The entity meets such other requirements
as the Secretary may determine are necessary to as-
sure the safe and effective provision of home infu-
sion drug therapy services and the efficient adminis-
tration of the home infusion drug therapy benefit.’’.
(c) PAYMENT.—
(1) IN GENERAL.—Section 1833 of such Act
(42 U.S.C. 1395l) is amended—
(A) in subsection (a)(2)(B), by striking ‘‘or
(E)’’ and inserting ‘‘(E), or (F)’’,
(B) in subsection (a)(2)(D), by striking
‘‘and’’ at the end,
(C) in subsection (a)(2)(E), by striking the
semicolon and inserting ‘‘; and’’,
384
Title II, Subtitle A
(D) by inserting after subsection (a)(2)(E)
the following new subparagraph:
‘‘(F) with respect to home infusion drug
therapy services, the amounts described in sec-
tion 1834(j);’’, and
(E) in the first sentence of subsection (b),
by striking ‘‘services, (3)’’ and inserting ‘‘serv-
ices and home infusion drug therapy services,
(3)’’.
(2) AMOUNT
DESCRIBED.—Section 1834 of
such Act, as amended by section 13544(b)(i) of
OBRA–1993, is amended by adding at the end the
following new subsection:
‘‘(j) HOME INFUSION DRUG THERAPY SERVICES.—
‘‘(1) IN GENERAL.—With respect to home infu-
sion drug therapy services, payment under this part
shall be made in an amount equal to the lesser of
the actual charges for such services or the fee sched-
ule established under paragraph (2).
‘‘(2) ESTABLISHMENT
OF
FEE
SCHEDULE.—
The Secretary shall establish by regulation before
the beginning of 1996 and each succeeding year a
fee schedule for home infusion drug therapy services
for which payment is made under this part. A fee
385
Title II, Subtitle A
schedule established under this subsection shall be
on a per diem basis.’’.
(3) PROHIBITION ON CERTAIN REFERRALS.—
Section 1877(h)(6) of such Act (42 U.S.C.
1395nn(h)(6)), as amended by section 13562(a) of
OBRA–1993, is amended by adding at the end the
following:
‘‘(L) Home infusion drug therapy serv-
ices.’’.
(d) CERTIFICATION.—Section 1835(a)(2) of such Act
(42 U.S.C. 1395n(a)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E),
(2) by striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’, and
(3) by inserting after subparagraph (F) the fol-
lowing:
‘‘(G) in the case of home infusion drug
therapy services, (i) such services are or were
required because the individual needed such
services for the administration of a covered
home infusion drug, (ii) a plan for furnishing
such services has been established and is re-
viewed periodically by a physician, and (iii)
such services are or were furnished while the in-
386
Title II, Subtitle A
dividual is or was under the care of a physi-
cian.’’.
(e) CERTIFICATION
OF
HOME
INFUSION
DRUG
THERAPY PROVIDERS; INTERMEDIATE SANCTIONS FOR
NONCOMPLIANCE.—
(1) TREATMENT AS PROVIDER OF SERVICES.—
Section 1861(u) of such Act (42 U.S.C. 1395x(u))
is amended by inserting ‘‘home infusion drug ther-
apy provider,’’ after ‘‘hospice program,’’.
(2) CONSULTATION WITH STATE AGENCIES AND
OTHER ORGANIZATIONS.—Section 1863 of such Act
(42 U.S.C. 1395z) is amended by striking ‘‘and
(dd)(2)’’ and inserting ‘‘(dd)(2), and (ll)(3)’’.
(3) USE OF STATE AGENCIES IN DETERMINING
COMPLIANCE.—Section 1864(a) of such Act (42
U.S.C. 1395aa(a)) is amended—
(A) in the first sentence, by striking ‘‘an
agency is a hospice program’’ and inserting ‘‘an
agency or entity is a hospice program or a
home infusion drug therapy provider,’’; and
(B) in the second sentence—
(i) by striking ‘‘institution or agency’’
and inserting ‘‘institution, agency, or enti-
ty’’, and
387
Title II, Subtitle A
(ii) by striking ‘‘or hospice program’’
and inserting ‘‘hospice program, or home
infusion drug therapy provider’’.
(4) APPLICATION
OF
INTERMEDIATE
SANC-
TIONS.—Section 1846 of such Act (42 U.S.C.
1395w–2) is amended—
(A) in the heading, by adding ‘‘AND FOR
QUALIFIED
HOME
INFUSION
DRUG
THERAPY
PROVIDERS’’ at the end,
(B) in subsection (a), by inserting ‘‘or that
a qualified home infusion drug therapy provider
that is certified for participation under this title
no longer substantially meets the requirements
of section 1861(ll)(3)’’ after ‘‘under this part’’,
and
(C) in subsection (b)(2)(A)(iv), by insert-
ing ‘‘or home infusion drug therapy services’’
after ‘‘clinical diagnostic laboratory tests’’.
(f) USE OF REGIONAL INTERMEDIARIES IN ADMINIS-
TRATION OF BENEFIT.—Section 1816 of such Act (42
U.S.C. 1395h) is amended by adding at the end the fol-
lowing new subsection:
‘‘(k) With respect to carrying out functions relating
to payment for home infusion drug therapy services and
covered home infusion drugs, the Secretary may enter into
388
Title II, Subtitle A
contracts with agencies or organizations under this section
to perform such functions on a regional basis.’’.
(g) CONFORMING AMENDMENTS RELATING TO COV-
ERAGE OF ENTERAL AND PARENTERAL NUTRIENTS, SUP-
PLIES, AND EQUIPMENT.—(1) Section 1834(h)(4)(B) of
such Act (42 U.S.C. 1395m(h)(4)(B)) is amended by
striking ‘‘, except that’’ and all that follows through
‘‘equipment’’.
(2) Section 1861(s)(8) of such Act (42 U.S.C.
1395x(s)(8)) is amended by inserting after ‘‘dental’’ the
following: ‘‘devices or enteral and parenteral nutrients,
supplies, and equipment’’.
SEC. 2006. CONFORMING AMENDMENTS TO MEDICAID PRO-
GRAM.
(a) IN GENERAL.—
(1) REQUIRING MEDICARE REBATE AS CONDI-
TION OF COVERAGE.—The first sentence of section
1927(a)(1) of the Social Security Act (42 U.S.C.
1396r–8(a)(1)) is amended—
(A) in the first sentence of paragraph (1),
by striking ‘‘and paragraph (6)’’ and inserting
‘‘, paragraph (6), and (for calendar quarters be-
ginning on or after January 1, 1996) para-
graph (7)’’; and
389
Title II, Subtitle A
(B) by adding at the end the following new
paragraph:
‘‘(7) REQUIREMENT
RELATING
TO
REBATE
AGREEMENTS
FOR
COVERED
OUTPATIENT
DRUGS
UNDER
MEDICARE
PROGRAM.—A 
manufacturer
meets the requirements of this paragraph for quar-
ters in a year if the manufacturer has in effect an
agreement with the Secretary under section 1850 for
providing rebates for covered outpatient drugs fur-
nished to individuals under title XVIII during the
year.’’.
(2) NON-DUPLICATION
OF
REBATES.—Section
1927(b)(1) of such Act (42 U.S.C. 1396r–8(b)(1)) is
amended—
(A) by redesignating subparagraph (B) as
subparagraph (C), and
(B) by inserting after subparagraph (A)
the following new subparagraph:
‘‘(B) NON-DUPLICATION OF MEDICARE RE-
BATE.—Covered drugs furnished to an indi-
vidual eligible for benefits under part B of title
XVIII and enrolled in a State plan under this
title shall not be included in the determination
of units of covered outpatient drugs subject to
rebate under this section.’’.
390
Title II, Subtitle B
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to quarters beginning on or
after January 1, 1996.
SEC. 2007. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this subtitle shall apply to items and services furnished
on or after January 1, 1996.
Subtitle B—Long-Term Care
PART 1—STATE PROGRAMS FOR HOME AND COM-
MUNITY-BASED SERVICES FOR INDIVIDUALS
WITH DISABILITIES
SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY-
BASED SERVICES FOR INDIVIDUALS WITH
DISABILITIES.
(a) IN GENERAL.—Each State that has a plan for
the home and community-based services to individuals
with disabilities submitted to and approved by the Sec-
retary under section 2102(b) is entitled to payment in ac-
cordance with section 2108.
(b) NO INDIVIDUAL ENTITLEMENT ESTABLISHED.—
Nothing in this part shall be construed to create an enti-
tlement for individuals or a requirement that a State with
such an approved plan expend the entire amount of funds
to which it is entitled in any year.
391
Title II, Subtitle B
SEC. 2102. STATE PLANS.
(a) PLAN REQUIREMENTS.—In order to be approved
under subsection (b), a State plan for home and commu-
nity-based services for individuals with disabilities must
meet the following requirements:
(1) ELIGIBILITY.—
(A) IN
GENERAL.—Within the amounts
provided by the State (and under section 2108)
for such plan, the plan shall provide that serv-
ices under the plan will be available to individ-
uals with disabilities (as defined in section
2103(a)) in the State.
(B) INITIAL SCREENING.—The plan shall
provide a process for the initial screening of in-
dividuals who appear to have some reasonable
likelihood of being an individual with disabil-
ities.
(C) RESTRICTIONS.—The plan may not
limit the eligibility of individuals with disabil-
ities based on—
(i) income,
(ii) age,
(iii) geography,
(iv) nature, severity, or category of
disability,
392
Title II, Subtitle B
(v) residential setting (other than an
institutional setting), or
(vi) other grounds specified by the
Secretary.
(D) MAINTENANCE OF EFFORT.—The plan
must provide assurances that, in the case of an
individual receiving medical assistance for home
and community-based services under the State
medicaid plan as of the date of the enactment
of this Act, the State will continue to make
available (either under this plan, under the
State medicaid plan, or otherwise) to such indi-
vidual an appropriate level of assistance for
home and community-based services, taking
into account the level of assistance provided as
of such date and the individual’s need for home
and community-based services.
(2) SERVICES.—
(A) SPECIFICATION.—Consistent with sec-
tion 2104, the plan shall specify—
(i) the services made available under
the plan,
(ii) the extent and manner in which
such services are allocated and made avail-
able to individuals with disabilities, and
393
Title II, Subtitle B
(iii) the manner in which services
under the plan are coordinated with each
other and with health and long-term care
services available outside the plan for indi-
viduals with disabilities.
(B) ALLOCATION.—The State plan—
(i) shall specify how it will allocate
services under the plan, during and after
the 7-fiscal-year phase-in period beginning
with fiscal year 1996, among covered indi-
viduals with disabilities, and
(ii) may not allocate such services
based on the income or other financial re-
sources of such individuals.
(C) LIMITATION ON LICENSURE OR CER-
TIFICATION.—The State may not subject con-
sumer-directed providers of personal assistance
services to licensure, certification, or other re-
quirements which the Secretary finds not to be
necessary for the health and safety of individ-
uals with disabilities.
(D) CONSUMER
CHOICE.—To the extent
possible, the choice of an individual with dis-
abilities (and that individual’s family) regarding
which covered services to receive and the pro-
394
Title II, Subtitle B
viders who will provide such services shall be
followed.
(E) REQUIREMENT TO SERVE LOW-INCOME
INDIVIDUALS.—The plan shall assure that—
(i) the proportion of the population of
low-income individuals with disabilities in
the State that represents individuals with
disabilities who are provided home and
community-based services either under the
plan, under the State medicaid plan, or
under both, is not less than
(ii) the proportion of the population of
the State that represents individuals who
are low-income individuals.
(3) COST SHARING.—The plan shall impose cost
sharing with respect to covered services only in ac-
cordance with section 2105.
(4) TYPES OF PROVIDERS AND REQUIREMENTS
FOR PARTICIPATION.—The plan shall specify—
(A) the types of service providers eligible
to participate in the program under the plan,
which shall include consumer-directed providers,
and
(B) any requirements for participation ap-
plicable to each type of service provider.
395
Title II, Subtitle B
(5) BUDGET.—The plan shall specify how the
State will manage Federal and State funds available
under the plan for each fiscal year during the period
beginning with fiscal year 1996 and ending with fis-
cal year 2003 and for each 5-fiscal-year periods
thereafter to serve all categories of individuals with
disabilities and meet the requirements of this sub-
section. If the Secretary makes an adjustment under
section 2109(a)(5)(C) for a year, each State shall
update the specifications under this paragraph to re-
flect the impact of such an adjustment.
(6) PROVIDER REIMBURSEMENT.—
(A) PAYMENT METHODS.—The plan shall
specify the payment methods to be used to re-
imburse providers for services furnished under
the plan. Such methods may include retrospec-
tive reimbursement on a fee-for-service basis,
prepayment on a capitation basis, payment by
cash or vouchers to individuals with disabilities,
or any combination of these methods. In the
case of the use of cash or vouchers, the plan
shall specify how the plan will assure compli-
ance with applicable employment tax provisions.
(B) PAYMENT
RATES.—The plan shall
specify the methods and criteria to be used to
396
Title II, Subtitle B
set payment rates for services furnished under
the plan (including rates for cash payments or
vouchers to individuals with disabilities).
(C) PLAN
PAYMENT
AS
PAYMENT
IN
FULL.—The plan shall restrict payment under
the plan for covered services to those providers
that agree to accept the payment under the
plan (at the rates established pursuant to sub-
paragraph (B)) and any cost sharing permitted
or provided for under section 2105 as payment
in full for services furnished under the plan.
(7) QUALITY ASSURANCE AND SAFEGUARDS.—
The State plan shall provide for quality assurance
and safeguards for applicants and beneficiaries in
accordance with section 2106.
(8) ADVISORY GROUP.—The State plan shall—
(A) assure the establishment and mainte-
nance of an advisory group under section
2107(b), and
(B) include the documentation prepared by
the group under section 2107(b)(4).
(9) ADMINISTRATION.—
(A) STATE AGENCY.—The plan shall des-
ignate a State agency or agencies to administer
(or to supervise the administration of) the plan.
397
Title II, Subtitle B
(B) ADMINISTRATIVE
EXPENDITURES.—
Effective beginning with fiscal year 2003, the
plan shall contain assurances that not more
than 10 percent of expenditures under the plan
for all quarters in any fiscal year shall be for
administrative costs.
(C) COORDINATION.—The plan shall speci-
fy how the plan—
(i) will be integrated with the State
medicaid plan, titles V and XX of the So-
cial Security Act, programs under the
Older Americans Act of 1965, programs
under the Developmental Disabilities As-
sistance and Bill of Rights Act, the Indi-
viduals with Disabilities Education Act,
and any other Federal or State programs
that provide services or assistance targeted
to individuals with disabilities, and
(ii) will be coordinated with health
plans.
(10) REPORTS
AND
INFORMATION
TO
SEC-
RETARY; AUDITS.—The plan shall provide that the
State will furnish to the Secretary—
(A) such reports, and will cooperate with
such audits, as the Secretary determines are
398
Title II, Subtitle B
needed concerning the State’s administration of
its plan under this part, including the proc-
essing of claims under the plan, and
(B) such data and information as the Sec-
retary may require in order to carry out the
Secretary’s responsibilities.
(11) USE OF STATE FUNDS FOR MATCHING.—
The plan shall provide assurances that Federal
funds will not be used to provide for the State share
of expenditures under this part.
(12) HEALTH CARE WORKER REDEPLOYMENT
REQUIREMENT.—The plan provides for compliance
with the requirement of section 3074(a).
(b) APPROVAL OF PLANS.—The Secretary shall ap-
prove a plan submitted by a State if the Secretary deter-
mines that the plan—
(1) was developed by the State after consulta-
tion with individuals with disabilities and representa-
tives of groups of such individuals, and
(2) meets the requirements of subsection (a).
The approval of such a plan shall take effect as of the
first day of the first fiscal year beginning after the date
of such approval (except that any approval made before
January 1, 1996, shall be effective as of January 1, 1996).
In order to budget funds allotted under this part, the Sec-
399
Title II, Subtitle B
retary may establish a deadline for the submission of such
a plan before the beginning of a fiscal year as a condition
of its approval effective with that fiscal year.
(c) MONITORING.—The Secretary shall monitor the
compliance of State plans with the eligibility requirements
of section 2103 and may monitor the compliance of such
plans with other requirements of this part.
(d) REGULATIONS.—The Secretary shall issue such
regulations as may be appropriate to carry out this part
on a timely basis.
SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.
(a) IN GENERAL.—In this part, the term ‘‘individual
with disabilities’’ means any individual within one or more
of the following 4 categories of individuals:
(1) INDIVIDUALS REQUIRING HELP WITH AC-
TIVITIES OF DAILY LIVING.—An individual of any
age who—
(A) requires hands-on or standby assist-
ance, supervision, or cueing (as defined in regu-
lations) to perform three or more activities of
daily living (as defined in subsection (c)), and
(B) is expected to require such assistance,
supervision, or cueing over a period of at least
100 days.
400
Title II, Subtitle B
(2) INDIVIDUALS WITH SEVERE COGNITIVE OR
MENTAL IMPAIRMENT.—An individual of any age—
(A) whose score, on a standard mental sta-
tus protocol (or protocols) appropriate for
measuring the individual’s particular condition
specified by the Secretary, indicates either se-
vere cognitive impairment or severe mental im-
pairment, or both;
(B) who—
(i) requires hands-on or standby as-
sistance, supervision, or cueing with one or
more activities of daily living,
(ii) requires hands-on or standby as-
sistance, supervision, or cueing with at
least such instrumental activity (or activi-
ties) of daily living related to cognitive or
mental impairment as the Secretary speci-
fies, or
(iii) displays symptoms of one or more
serious behavioral problems (that is on a
list of such problems specified by the Sec-
retary) which create a need for supervision
to prevent harm to self or others; and
401
Title II, Subtitle B
(C) whose is expected to meet the require-
ments of subparagraphs (A) and (B) over a pe-
riod of at least 100 days.
(3) INDIVIDUALS WITH SEVERE OR PROFOUND
MENTAL RETARDATION.—An individual of any age
who has severe or profound mental retardation (as
determined according to a protocol specified by the
Secretary).
(4) SEVERELY DISABLED CHILDREN.—An indi-
vidual under 6 years of age who—
(A) has a severe disability or chronic med-
ical condition,
(B) but for receiving personal assistance
services or any of the services described in sec-
tion 2104(d)(1), would require institutionaliza-
tion in a hospital, nursing facility, or inter-
mediate care facility for the mentally retarded,
and
(C) is expected to have such disability or
condition and require such services over a pe-
riod of at least 100 days.
(b) DETERMINATION.—
(1) IN GENERAL.—The determination of wheth-
er an individual is an individual with disabilities
shall be made, by persons or entities specified under
402
Title II, Subtitle B
the State plan, using a uniform protocol consisting
of an initial screening and assessment specified by
the Secretary. A State may collect additional infor-
mation, at the time of obtaining information to
make such determination, in order to provide for the
assessment and plan described in section 2104(b) or
for other purposes. The State shall establish a fair
hearing process for appeals of such determinations.
(2) PERIODIC REASSESSMENT.—The determina-
tion that an individual is an individual with disabil-
ities shall be considered to be effective under the
State plan for a period of not more than 12 months
(or for such longer period in such cases as a signifi-
cant change in an individual’s condition that may af-
fect such determination is unlikely). A reassessment
shall be made if there is a significant change in an
individual’s condition that may affect such deter-
mination.
(c) ACTIVITY OF DAILY LIVING DEFINED.—In this
part, the term ‘‘activity of daily living’’ means any of the
following: eating, toileting, dressing, bathing, and trans-
ferring.
SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COV-
ERED UNDER STATE PLAN.
(a) SPECIFICATION.—
403
Title II, Subtitle B
(1) IN
GENERAL.—Subject to the succeeding
provisions of this section, the State plan under this
part shall specify—
(A) the home and community-based serv-
ices available under the plan to individuals with
disabilities (or to such categories of such indi-
viduals), and
(B) any limits with respect to such serv-
ices.
(2) FLEXIBILITY
IN
MEETING
INDIVIDUAL
NEEDS.—The services shall be specified in a manner
that permits sufficient flexibility for providers to
meet the needs of individuals with disabilities in a
cost 
effective 
manner. 
Subject 
to 
subsection
(e)(1)(B), such services may be delivered in an indi-
vidual’s home, a range of community residential ar-
rangements, or outside the home.
(b) REQUIREMENT FOR NEEDS ASSESSMENT AND
PLAN OF CARE.—
(1) IN GENERAL.—The State plan shall provide
for home and community-based services to an indi-
vidual with disabilities only if—
(A) a comprehensive assessment of the in-
dividual’s need for home and community-based
services (regardless of whether all needed serv-
404
Title II, Subtitle B
ices are available under the plan) has been
made,
(B) an individualized plan of care based on
such assessment is developed, and
(C) such services are provided consistent
with such plan of care.
(2) INVOLVEMENT OF INDIVIDUALS.—The indi-
vidualized plan of care under paragraph (1)(B) for
an individual with disabilities shall—
(A) be developed by qualified individuals
(specified under the State plan),
(B) be developed and implemented in close
consultation with the individual and the individ-
ual’s family,
(C) be approved by the individual (or the
individual’s representative), and
(D) be reviewed and updated not less often
than every 6 months.
(3) PLAN OF CARE.—The plan of care under
paragraph (1)(B) shall—
(A) specify which services specified under
the individual plan will be provided under the
State plan under this part,
(B) identify (to the extent possible) how
the individual will be provided any services
405
Title II, Subtitle B
specified under the plan of care and not pro-
vided under the State plan, and
(C) specify how the provision of services to
the individual under the plan will be coordi-
nated with the provision of other health care
services to the individual.
The State shall make reasonable efforts to identify
and arrange for services described in subparagraph
(B). Nothing in this subsection shall be construed as
requiring a State (under the State plan or other-
wise) to provide all the services specified in such a
plan.
(c) MANDATORY COVERAGE OF PERSONAL ASSIST-
ANCE SERVICES.—The State plan shall include, in the
array of services made available to each category of indi-
viduals with disabilities, both agency-administered and
consumer-directed personal assistance services (as defined
in subsection (g)).
(d) ADDITIONAL SERVICES.—
(1) TYPES OF SERVICES.—Subject to subsection
(e), services available under a State plan under this
part shall include any (or all) of the following:
(A) Case management.
(B) Homemaker and chore assistance.
(C) Home modifications.
406
Title II, Subtitle B
(D) Respite services.
(E) Assistive devices.
(F) Adult day services.
(G) Habilitation and rehabilitation.
(H) Supported employment.
(I) Home health services.
(J) Any other care or assistive services
(approved by the Secretary) that the State de-
termines will help individuals with disabilities to
remain in their homes and communities.
(2) CRITERIA FOR SELECTION OF SERVICES.—
The State plan shall specify—
(A) the methods and standards used to se-
lect the types, and the amount, duration, and
scope, of services to be covered under the plan
and to be available to each category of individ-
uals with disabilities, and
(B) how the types, and the amount, dura-
tion, and scope, of services specified meet the
needs of individuals within each of the 4 cat-
egories of individuals with disabilities.
(e) EXCLUSIONS AND LIMITATIONS.—
(1) IN GENERAL.—A State plan may not pro-
vide for coverage of—
(A) room and board,
407
Title II, Subtitle B
(B) services furnished in a hospital, nurs-
ing facility, intermediate care facility for the
mentally retarded, or other institutional setting
specified by the Secretary, or
(C) items and services to the extent cov-
erage is provided for the individual under a
health plan or the medicare program.
(2) TAKING INTO ACCOUNT INFORMAL CARE.—
A State plan may take into account, in determining
the amount and array of services made available to
covered individuals with disability, the availability of
informal care.
(f) PAYMENT FOR SERVICES.—A State plan may pro-
vide for the use of—
(1) vouchers,
(2) cash payments directly to individuals with
disabilities,
(3) capitation payments to health plans, and
(4) payment to providers,
to pay for covered services.
(g) PERSONAL ASSISTANCE SERVICES.—
(1) IN
GENERAL.—In this section, the term
‘‘personal assistance services’’ means those services
specified under the State plan as personal assistance
services and shall include at least hands-on and
408
Title II, Subtitle B
standby assistance, supervision, and cueing with ac-
tivities of daily living, whether agency-administered
or consumer-directed (as defined in paragraph (2)).
(2) CONSUMER-DIRECTED; 
AGENCY-ADMINIS-
TERED.—In this part:
(A) The term ‘‘consumer-directed’’ means,
with reference to personal assistance services or
the provider of such services, services that are
provided by an individual who is selected and
managed (and, at the individual’s option,
trained) by the individual receiving the services.
(B) 
The 
term 
‘‘agency-administered’’
means, with respect to such services, services
that are not consumer-directed.
SEC. 2105. COST SHARING.
(a) NO OR NOMINAL COST SHARING FOR POOR-
EST.—The State plan may not impose any cost sharing
(other than nominal cost sharing) for individuals with in-
come (as determined under subsection (c)) less than 150
percent of the official poverty line (referred to in section
1902(25)(A)) applicable to a family of the size involved
(determined without regard to section 1902(25)(B)).
(b) SLIDING SCALE FOR REMAINDER.—The State
plan shall impose cost sharing in the form of coinsurance
409
Title II, Subtitle B
(based on the amount paid under the State plan for a serv-
ice)—
(1) at a rate of 10 percent for individuals with
disabilities with income not less than 150 percent,
and less than 200 percent, of such official poverty
line (as so applied);
(2) at a rate of 20 percent for such individuals
with income not less than 200 percent, and less than
250 percent, of such official poverty line (as so ap-
plied); and
(3) at a rate of 25 percent for such individuals
with income equal to at least 250 percent of such of-
ficial poverty line (as so applied).
(c) DETERMINATION OF INCOME FOR PURPOSES OF
COST SHARING.—The State plan shall specify the process
to be used to determine the income of an individual with
disabilities for purposes of this section. Such process shall
be consistent with standards specified by the Secretary.
SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.
(a) QUALITY ASSURANCE.—The State plan shall
specify how the State will ensure and monitor the quality
of services, including—
(1) safeguarding the health and safety of indi-
viduals with disabilities,
410
Title II, Subtitle B
(2) the minimum standards for agency pro-
viders and how such standards will be enforced,
(3) the minimum competency requirements for
agency provider employees who provide direct serv-
ices under this part and how the competency of such
employees will be enforced,
(4) obtaining meaningful consumer input, in-
cluding consumer surveys that measure the extent to
which participants receive the services described in
the plan of care and participant satisfaction with
such services,
(5) participation in quality assurance activities,
and
(6) specifying the role of the long-term care om-
budsman (under the Older Americans Act of 1965)
and the Protection and Advocacy Agency (under the
Developmental Disabilities Assistance and Bill of
Rights Act) in assuring quality of services and pro-
tecting the rights of individuals with disabilities.
(b) SAFEGUARDS.—
(1) CONFIDENTIALITY.—The State plan shall
provide safeguards which restrict the use or disclo-
sure of information concerning applicants and bene-
ficiaries to purposes directly connected with the ad-
411
Title II, Subtitle B
ministration of the plan (including performance re-
views under section 2602).
(2) SAFEGUARDS AGAINST ABUSE.—The State
plans shall provide safeguards against physical, emo-
tional, or financial abuse or exploitation (specifically
including appropriate safeguards in cases where pay-
ment for program benefits is made by cash pay-
ments or vouchers given directly to individuals with
disabilities).
SEC. 2107. ADVISORY GROUPS.
(a) FEDERAL ADVISORY GROUP.—
(1) ESTABLISHMENT.—The Secretary shall es-
tablish an advisory group, to advise the Secretary
and States on all aspects of the program under this
part.
(2) COMPOSITION.—The group shall be com-
posed of individuals with disabilities and their rep-
resentatives, providers, Federal and State officials,
and local community implementing agencies. A ma-
jority of its members shall be individuals with dis-
abilities and their representatives.
(b) STATE ADVISORY GROUPS.—
(1) IN GENERAL.—Each State plan shall pro-
vide for the establishment and maintenance of an
412
Title II, Subtitle B
advisory group to advise the State on all aspects of
the State plan under this part.
(2) COMPOSITION.—Members of each advisory
group shall be appointed by the Governor (or other
chief executive officer of the State) and shall include
individuals with disabilities and their representa-
tives, providers, State officials, and local community
implementing agencies. A majority of its members
shall be individuals with disabilities and their rep-
resentatives.
(3) SELECTION
OF
MEMBERS.—Each State
shall establish a process whereby all residents of the
State, including individuals with disabilities and
their representatives, shall be given the opportunity
to nominate members to the advisory group.
(4) PARTICULAR
CONCERNS.—Each advisory
group shall—
(A) before the State plan is developed, ad-
vise the State on guiding principles and values,
policy directions, and specific components of the
plan,
(B) meet regularly with State officials in-
volved in developing the plan, during the devel-
opment phase, to review and comment on all as-
pects of the plan,
413
Title II, Subtitle B
(C) participate in the public hearings to
help assure that public comments are addressed
to the extent practicable,
(D) document any differences between the
group’s recommendations and the plan,
(E) document specifically the degree to
which the plan is consumer-directed, and
(F) meet regularly with officials of the des-
ignated State agency (or agencies) to provide
advice on all aspects of implementation and
evaluation of the plan.
SEC. 2108. PAYMENTS TO STATES.
(a) IN GENERAL.—Subject to section 2102(a)(9)(B)
(relating to limitation on payment for administrative
costs), the Secretary, in accordance with the Cash Man-
agement Improvement Act, shall authorize payment to
each State with a plan approved under this part, for each
quarter (beginning on or after January 1, 1996), from its
allotment under section 2109(b), an amount equal to—
(1) the Federal matching percentage (as de-
fined in subsection (b)) of amount demonstrated by
State claims to have been expended during the quar-
ter for home and community-based services under
the plan for individuals with disabilities; plus
414
Title II, Subtitle B
(2) an amount equal to 90 percent of amount
expended during the quarter under the plan for ac-
tivities (including preliminary screening) relating to
determination of eligibility and performance of needs
assessment; plus
(3) an amount equal to 90 percent (or, begin-
ning with quarters in fiscal year 2003, 75 percent)
of the amount expended during the quarter for the
design, development, and installation of mechanical
claims processing systems and for information re-
trieval; plus
(4) an amount equal to 50 percent of the re-
mainder of the amounts expended during the quar-
ter as found necessary by the Secretary for the prop-
er and efficient administration of the State plan.
(b) FEDERAL MATCHING PERCENTAGE.—
(1) IN GENERAL.—In subsection (a), the term
‘‘Federal matching percentage’’ means, with respect
to a State, the reference percentage specified in
paragraph (2) increased by 28 percentage points, ex-
cept that the Federal matching percentage shall in
no case be less than 78 percent or more than 95
percent.
(2) REFERENCE PERCENTAGE.—
415
Title II, Subtitle B
(A) IN GENERAL.—The reference percent-
age specified in this paragraph is 100 percent
less the State percentage specified in subpara-
graph (B), except that—
(i) the percentage under this para-
graph shall in no case be less than 50 per-
cent or more than 83 percent, and
(ii) the percentage for Puerto Rico,
the Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa
shall be 50 percent.
(B) STATE PERCENTAGE.—The State per-
centage specified in this subparagraph is that
percentage which bears the same ratio to 45
percent as the square of the per capita income
of such State bears to the square of the per
capita income of the continental United States
(including Alaska) and Hawaii.
(c) PAYMENTS ON ESTIMATES WITH RETROSPECTIVE
ADJUSTMENTS.—The method of computing and making
payments under this section shall be as follows:
(1) The Secretary shall, prior to the beginning
of each quarter, estimate the amount to be paid to
the State under subsection (a) for such quarter,
based on a report filed by the State containing its
416
Title II, Subtitle B
estimate of the total sum to be expended in such
quarter, and such other information as the Secretary
may find necessary.
(2) From the allotment available therefore, the
Secretary shall provide for payment of the amount
so estimated, reduced or increased, as the case may
be, by any sum (not previously adjusted under this
section) by which the Secretary finds that the esti-
mate of the amount to be paid the State for any
prior period under this section was greater or less
than the amount which should have been paid.
(d) APPLICATION OF RULES REGARDING LIMITA-
TIONS ON PROVIDER-RELATED DONATIONS AND HEALTH
CARE
RELATED
TAXES.—The provisions of section
1903(w) of the Social Security Act shall apply to pay-
ments to States under this section in the same manner
as they apply to payments to States under section 1903(a)
of such Act .
SEC. 2109. TOTAL FEDERAL BUDGET; ALLOTMENTS TO
STATES.
(a) TOTAL FEDERAL BUDGET.—
(1) FISCAL YEARS 1996 THROUGH 2003.—Sub-
ject to paragraph (5)(C), for purposes of this part,
the total Federal budget for State plans under this
417
Title II, Subtitle B
part for each of fiscal years 1996 through 2003 is
the following:
(A) For fiscal year 1996, $4.5 billion.
(B) For fiscal year 1997, $7.8 billion.
(C) For fiscal year 1998, $11.0 billion.
(D) For fiscal year 1999, $14.7 billion.
(E) For fiscal year 2000, $18.7 billion.
(F) For fiscal year 2001, $26.7 billion.
(G) For fiscal year 2002, $35.5 billion.
(H) For fiscal year 2003, $38.3 billion.
(2) SUBSEQUENT
FISCAL
YEARS.—For pur-
poses of this part, the total Federal budget for State
plans under this part for each fiscal year after fiscal
year 2003 is the total Federal budget under this
subsection for the preceding fiscal year multiplied
by—
(A) a factor (described in paragraph (3))
reflecting the change in the CPI for the fiscal
year, and
(B) a factor (described in paragraph (4))
reflecting the change in the number of individ-
uals with disabilities for the fiscal year.
(3) CPI INCREASE FACTOR.—For purposes of
paragraph (2)(A), the factor described in this para-
graph for a fiscal year is the ratio of—
418
Title II, Subtitle B
(A) the annual average index of the con-
sumer price index for the preceding fiscal year,
to—
(B) such index, as so measured, for the
second preceding fiscal year.
(4) DISABLED POPULATION FACTOR.—For pur-
poses of paragraph (2)(B), the factor described in
this paragraph for a fiscal year is 100 percent plus
(or minus) the percentage increase (or decrease)
change in the disabled population of the United
States (as determined for purposes of the most re-
cent update under subsection (b)(3)(D)).
(5) ADDITIONAL
FUNDS
DUE
TO
MEDICAID
OFFSETS.—
(A) IN
GENERAL.—Each participating
State must provide the Secretary with informa-
tion concerning offsets and reductions in the
medicaid program resulting from home and
community-based services provided disabled in-
dividuals under this part, that would have been
paid for such individuals under the State med-
icaid plan but for the provision of similar serv-
ices under the program under this part. At the
time a State first submits its plan under this
title and before each subsequent fiscal year
419
Title II, Subtitle B
(through fiscal year 2003), the State also must
provide the Secretary with such budgetary in-
formation (for each fiscal year through fiscal
year 2003), as the Secretary determines to be
necessary to carry out this paragraph.
(B) REPORTS.—Each State with a pro-
gram under this part shall submit such reports
to the Secretary as the Secretary may require
in order to monitor compliance with subpara-
graph (A).
(C) ADJUSTMENTS
TO
FEDERAL
BUDG-
ET.—
(i) IN GENERAL.—For each fiscal year
(beginning with fiscal year 1996 and end-
ing with fiscal year 2003) and based on a
review of information submitted under sub-
paragraph (A), the Secretary shall deter-
mine the amount by which the total Fed-
eral budget under subsection (a) will in-
crease. The amount of such increase for a
fiscal year shall be limited to the reduction
in Federal expenditures of medical assist-
ance (as determined by Secretary) that
would have been made under title XIX of
the Social Security Act for home and com-
420
Title II, Subtitle B
munity based services for disabled individ-
uals but for the provision of similar serv-
ices under the program under this part.
(ii) ANNUAL PUBLICATION.—The Sec-
retary shall publish before the beginning of
such fiscal year, the revised total Federal
budget under this subsection for such fis-
cal year (and succeeding fiscal years before
fiscal year 2003).
(D) NO DUPLICATE PAYMENT.—No pay-
ment may be made to a State under this section
for any services to the extent that the State re-
ceived payment for such services under section
1903(a) of the Social Security Act.
(E) CONSTRUCTION.—Nothing in this sub-
section shall be construed as requiring States to
determine eligibility for medical assistance
under the State medicaid plan on behalf of indi-
viduals receiving assistance under this part.
(b) ALLOTMENTS TO STATES.—
(1) IN GENERAL.—The Secretary shall allot to
each State for each fiscal year an amount that bears
the same ratio to the total Federal budget for the
fiscal year (specified under paragraph (1) or (2) of
subsection (a)) as the State allotment factor (under
421
Title II, Subtitle B
paragraph (2) for the State for the fiscal year) bears
to the sum of such factors for all States for that fis-
cal year.
(2) STATE ALLOTMENT FACTOR.—
(A) IN GENERAL.—For each State for each
fiscal year, the Secretary shall compute a State
allotment factor equal to the sum of—
(i) the base allotment factor (specified
in subparagraph (B)), and
(ii) the low income allotment factor
(specified in subparagraph (C)),
for the State for the fiscal year.
(B) BASE ALLOTMENT FACTOR.—The base
allotment factor, specified in this subparagraph,
for a State for a fiscal year is equal to the
product of the following:
(i) NUMBER
OF
INDIVIDUALS
WITH
DISABILITIES.—The number of individuals
with disabilities in the State (determined
under paragraph (3)) for the fiscal year.
(ii) 80 PERCENT OF THE NATIONAL
PER CAPITA BUDGET.—80 percent of the
national average per capita budget amount
(determined under paragraph (4)) for the
fiscal year.
422
Title II, Subtitle B
(iii) WAGE
ADJUSTMENT
FACTOR.—
The wage adjustment factor (determined
under paragraph (5)) for the State for the
fiscal year.
(iv) FEDERAL MATCHING RATE.—The
Federal matching rate (determined under
section 2108(b)) for the fiscal year.
(C) LOW INCOME ALLOTMENT FACTOR.—
The low income allotment factor, specified in
this subparagraph, for a State for a fiscal year
is equal to the product of the following:
(i) NUMBER
OF
INDIVIDUALS
WITH
DISABILITIES.—The number of individuals
with disabilities in the State (determined
under paragraph (3)) for the fiscal year.
(ii) 10 PERCENT OF THE NATIONAL
PER CAPITA BUDGET.—10 percent of the
national average per capita budget amount
(determined under paragraph (4)) for the
fiscal year.
(iii) WAGE
ADJUSTMENT
FACTOR.—
The wage adjustment factor (determined
under paragraph (5)) for the State for the
fiscal year.
423
Title II, Subtitle B
(iv) FEDERAL MATCHING RATE.—The
Federal matching rate (determined under
section 2108(b)) for the fiscal year.
(v) LOW INCOME INDEX.—The low in-
come index (determined under paragraph
(6)) for the State for the preceding fiscal
year.
(3) NUMBER OF INDIVIDUALS WITH DISABIL-
ITIES.—The number of individuals with disabilities
in a State for a fiscal year shall be determined as
follows:
(A) BASE.—The Secretary shall determine
the number of individuals in the State by age,
sex, and income category, based on the 1990
decennial census, adjusted (as appropriate) by
the March 1994 current population survey.
(B) DISABILITY
PREVALENCE
LEVEL
BY
POPULATION CATEGORY.—The Secretary shall
determine, for each such age, sex, and income
category, the national average proportion of the
population of such category that represents in-
dividuals with disabilities. The Secretary may
conduct periodic surveys in order to determine
such proportions.
424
Title II, Subtitle B
(C) BASE
DISABLED
POPULATION
IN
A
STATE.—The number of individuals with dis-
abilities in a State in 1994 is equal to the sum
of the products, for such each age, sex, and in-
come category, of—
(i) the population of individuals in the
State in the category (determined under
subparagraph (A)), and
(ii) the national average proportion
for such category (determined under sub-
paragraph (B)).
(D) UPDATE.—The Secretary shall deter-
mine the number of individuals with disabilities
in a State in a fiscal year equal to the number
determined under subparagraph (C) for the
State increased (or decreased) by the percent-
age increase (or decrease) in the disabled popu-
lation of the State as determined under the cur-
rent population survey from 1994 to the year
before the fiscal year involved.
(4) NATIONAL PER CAPITA BUDGET AMOUNT.—
The national average per capita budget amount, for
a fiscal year, is—
425
Title II, Subtitle B
(A) the total Federal budget specified
under subsection (a) for the fiscal year; divided
by
(B) the sum, for the fiscal year, of the
numbers of individuals with disabilities (deter-
mined under paragraph (3)) for all the States
for the fiscal year.
(5) WAGE
ADJUSTMENT
FACTOR.—The wage
adjustment factor, for a State for a fiscal year, is
equal to the ratio of—
(A) the average hourly wages for service
workers (other than household or protective
services) in the State, to
(B) the national average hourly wages for
service workers (other than household or protec-
tive services).
The hourly wages shall be determined under this
paragraph based on data from the most recent de-
cennial census for which such data are available.
(6) LOW
INCOME
INDEX.—The low income
index for each State for a fiscal year is the ratio, de-
termined for the preceding fiscal year, of—
(A) the percentage of the State’s popu-
lation that has income below 150 percent of the
poverty level, to
426
Title II, Subtitle B
(B) the percentage of the population of the
United States that has income below 150 per-
cent of the poverty level.
Such percentages shall be based on data from the
most recent decennial census for which such data
are available, adjusted by data from the most recent
current population survey as determined appropriate
by the Secretary.
(c) STATE ENTITLEMENT.—This part constitutes
budget authority in advance of appropriations Acts, and
represents the obligation of the Federal Government to
provide for the payment to States of amounts described
in subsection (a).
PART 2—MEDICAID NURSING HOME
IMPROVEMENTS
SEC. 2201. REFERENCE TO AMENDMENTS.
For amendments to the medicaid program under title
XIX of the Social Security Act to improve nursing home
benefits under such program, see part 2 of subtitle C of
title IV.
427
Title II, Subtitle B
PART 3—PRIVATE LONG-TERM CARE INSURANCE
Subpart A—General Provisions
SEC. 2301. FEDERAL REGULATIONS; PRIOR APPLICATION
OR CERTAIN REQUIREMENTS.
(a) IN GENERAL.—The Secretary, with the advice
and assistance of the Advisory Council, as appropriate,
shall promulgate regulations as necessary to implement
the provisions of this part, in accordance with the time-
table specified in subsection (b).
(b) TIMETABLE
FOR PUBLICATION
OF REGULA-
TIONS.—
(1) FEDERAL REGISTER NOTICE.—Within 120
days after the date a majority of the members are
first appointed to the Advisory Council pursuant to
section 2302, the Secretary shall publish in the Fed-
eral Register a notice setting forth the projected
timetable for promulgation of regulations required
under this part. Such timetable shall indicate which
regulations are proposed to be published by the end
of the first, second, and third years after appoint-
ment of the Advisory Council.
(2) FINAL DEADLINE.—All regulations required
under this part shall be published by the end of the
third year after appointment of the Advisory Coun-
cil.
428
Title II, Subtitle B
(c) PROVISIONS EFFECTIVE WITHOUT REGARD TO
PROMULGATION OF REGULATIONS.—
(1) IN GENERAL.—Notwithstanding any other
provision of this part, insurers shall be required, not
later than 6 months after the enactment of this Act,
regardless of whether final implementing regulations
have been promulgated by the Secretary, to comply
with the following provisions of this part:
(A) Section 2321(c) (standard outline of
coverage);
(B) Section 2321(d) (reporting to State in-
surance commissioners);
(C) Section 2322(b) (preexisting condition
exclusions);
(D) Section 2322(c) (limiting conditions on
benefits);
(E) Section 2322(d) (inflation protection);
(F) Section 2324 (sales practices);
(G) Section 2325 (continuation, renewal,
replacement, conversion, and cancellation of
policies); and
(H) Section 2326 (payment of benefits).
(2) INTERIM REQUIREMENTS.—Before the ef-
fective date of applicable regulations promulgated by
the Secretary implementing requirements of this
429
Title II, Subtitle B
part as specified below, such requirements will be
considered to be met—
(A) in the case of section 2321(c) (requir-
ing a standard outline of coverage), if the long-
term care insurance policy meets the require-
ments of section 6.G.(2) of the NAIC Model
Act and of section 24 of the NAIC Model Regu-
lation;
(B) in the case of section 2321(d) (requir-
ing reporting to the State insurance commis-
sioner), if the insurer meets the requirements of
section 14 of the NAIC Model Regulation;
(C) in the case of section 2322(c)(1) (gen-
eral requirements concerning limiting conditions
on benefits), if such policy meets the require-
ments of section 6.D. of the NAIC Model Act;
(D) in the case of section 2322(c)(2) (lim-
iting conditions on home health care or commu-
nity-based services) if such policy meets the re-
quirements of section 11 of the NAIC Model
Regulations;
(E) in the case of section 2322(d) (con-
cerning inflation protection), if the insurer
meets the requirements of section 12 of the
NAIC Model Regulation;
430
Title II, Subtitle B
(F) in the case of section 2324(b) (con-
cerning applications for the purchase of insur-
ance), if the insurer meets the requirements of
section 10 of the NAIC Model Regulation;
(G) in the case of section 2324(d) (con-
cerning compensation for the sale of policies), if
the insurer meets the requirements of the op-
tional regulation entitled ‘‘Permitted Compensa-
tion Arrangements’’ included in the NAIC
Model Regulation;
(H) in the case of section 2324(g) (con-
cerning sales through employers or membership
organizations), if the insurer and the member-
ship organization meet the requirements of sec-
tion 21.C. of the NAIC Model Regulation;
(I) in the case of section 2324(h) (con-
cerning interstate sales of group policies), if the
insurer and the policy meet the requirements of
section 5 of the NAIC Model Act; and
(J) in the case of section 2325(f) (con-
cerning continuation, renewal, replacement, and
conversion of policies), if the insurer and the
policy meet the requirements of section 7 of the
NAIC Model Regulation.
431
Title II, Subtitle B
SEC. 2302. NATIONAL LONG-TERM CARE INSURANCE ADVI-
SORY COUNCIL.
(a) APPOINTMENT.—The Secretary shall appoint an
advisory board to be known as the National Long-Term
Care Insurance Advisory Council.
(b) COMPOSITION.—
(1) NUMBER
AND
QUALIFICATIONS
OF
MEM-
BERS.—The Advisory Council shall consist of 5
members, each of whom has substantial expertise in
matters relating to the provision and regulation of
long-term care insurance. At least one member shall
have experience as a State insurance commissioner
or legislator with expertise in policy development
with respect to, and regulation of, long-term care in-
surance.
(2) TERMS OF OFFICE.—
(A) IN
GENERAL.—Except as otherwise
provided in this subsection, members shall be
appointed for terms of office of 5 years.
(B) INITIAL
MEMBERS.—Of the initial
members of the Council, one shall be appointed
for a term of 5 years, one for 4 years, one for
3 years, one for 2 years, and one for 1 year.
(C) TWO-TERM LIMIT.—No member shall
be eligible to serve in excess of two consecutive
432
Title II, Subtitle B
terms, but may continue to serve until such
member’s successor is appointed.
(3) VACANCIES.—Any member appointed to fill
a vacancy occurring before the expiration of the
term of such member’s predecessor shall be ap-
pointed for the remainder of such term.
(4) REMOVAL.—No member may be removed
during the member’s term of office except for just
and sufficient cause.
(c) CHAIRPERSON.—The Secretary shall appoint a
Chairperson from among the members.
(d) COMPENSATION.—
(1) IN GENERAL.—Except as provided in para-
graph (3), members of the Advisory Council, while
serving on business of the Advisory Council, shall be
entitled to receive compensation at a rate not to ex-
ceed the daily equivalent of the rate specified for
level V of the Executive Schedule under section 5316
of title 5, United States Code.
(2) TRAVEL.—Except as provided in paragraph
(3), members of the Advisory Council, while serving
on business of the Advisory Council away from their
homes or regular places of business, may be allowed
travel expenses (including per diem in lieu of sub-
sistence) as authorized by section 5703(b) of title 5,
433
Title II, Subtitle B
United States Code, for persons in the Government
service employed intermittently.
(3) RESTRICTION.—A member of the Advisory
Council may not be compensated under this section
if the member is receiving compensation or travel ex-
penses from another source while serving on busi-
ness of the Advisory Council.
(e) MEETINGS.—The Advisory Council shall meet not
less often than 2 times a year at the direction of the Chair-
person.
(f) STAFF AND SUPPORT.—
(1) IN GENERAL.—The Advisory Council shall
have a salaried executive director appointed by the
Chairperson, and staff appointed by the executive di-
rector with the approval of the Chairperson.
(2) FEDERAL
ENTITIES.—The head of each
Federal department and agency shall make available
to the Advisory Council such information and other
assistance as it may require to carry out its respon-
sibilities.
(g) GENERAL
RESPONSIBILITIES.—The Advisory
Council shall—
(1) provide advice, recommendations, and as-
sistance to the Secretary on matters relating to long-
434
Title II, Subtitle B
term care insurance as specified in this part and as
otherwise required by the Secretary;
(2) collect, analyze, and disseminate informa-
tion relating to long-term care insurance in order to
increase the understanding of insurers, providers,
consumers, and regulatory bodies of the issues relat-
ing to, and to facilitate improvements in, such insur-
ance;
(3) develop for the Secretary’s consideration
proposed models, standards, requirements, and pro-
cedures relating to long-term care insurance, as ap-
propriate, with respect to the content and format of
insurance policies, agent and insurer practices con-
cerning the sale and servicing of such policies, and
regulatory activities; and
(4) monitor the development of the long-term
care insurance market (including policies, marketing
practices, 
pricing, 
eligibility 
and 
benefit 
pre-
conditions, and claims payment procedures) and ad-
vise the Secretary concerning the need for regulatory
changes.
(h) SPECIFIC MATTERS FOR CONSIDERATION.—The
Advisory Council shall consider, and provide views and
recommendations to the Secretary concerning, the fol-
lowing matters relating to long-term care insurance:
435
Title II, Subtitle B
(1) UNIFORM TERMS, DEFINITIONS, AND FOR-
MATS.—The Advisory Council shall develop and pro-
pose to the Secretary uniform terminology, defini-
tions, and formats for use in long-term care insur-
ance policies.
(2) STANDARD OUTLINE OF COVERAGE.—The
Advisory Council shall develop and propose to the
Secretary a standard format for use by all insurers
offering long-term care policies for the outline of
coverage required pursuant to section 2321(c).
(3) PREMIUMS.—The Advisory Council shall
consider, and make recommendations to the Sec-
retary concerning—
(A) whether Federal standards should be
established governing the amounts of and rates
of increase in premiums in long-term care poli-
cies, and
(B) if so, what factors should be taken into
account (and whether such factors should in-
clude the age of the insured, actuarial informa-
tion, cost of care, lapse rates, financial reserve
requirements, insurer solvency, and tax treat-
ment of premiums, and benefits.
(4) UPGRADES OF COVERAGE.—The Advisory
Council shall consider, and make recommendations
436
Title II, Subtitle B
to the Secretary concerning, whether Federal stand-
ards are needed governing the terms and conditions
insurers may place on insured individuals’ eligibility
to obtain improved coverage (including any restric-
tions considered advisable with respect to premium
increases, agent commissions, medical underwriting,
and age rating).
(5) THRESHOLD CONDITIONS FOR PAYMENT OF
BENEFITS.—The Advisory Council shall—
(A) consider, and make recommendations
to the Secretary concerning, the advisability of
establishing standardized sets of threshold con-
ditions (based on degrees of functional or cog-
nitive impairment or on other conditions) for
payment of covered benefits;
(B) to the extent found appropriate, rec-
ommend to the Secretary specific sets of thresh-
old conditions to be used for such purpose;
(C) develop and propose to the Secretary,
with respect to assessments of insured individ-
uals’ levels of need for purposes of receipt of
covered benefits—
(i) professional qualification standards
applicable to individuals making such de-
terminations; and
437
Title II, Subtitle B
(ii) uniform procedures and formats
for use in performing and documenting
such assessments.
(6) 
DISPUTE
RESOLUTION.—The 
Advisory
Council shall consider, and make recommendations
to the Secretary concerning, procedures that insur-
ers and States should be required to implement to
afford insured individuals a reasonable opportunity
to dispute denial of benefits under a long-term care
insurance policy.
(7) SALES AND SERVICING OF POLICIES.—The
Advisory Council shall consider, and make rec-
ommendations to the Secretary concerning—
(A) training and certification to be re-
quired of agents involved in selling or servicing
long-term care insurance policies;
(B) appropriate limits on commissions or
other compensation paid to agents for the sale
or servicing of such policies;
(C) sales practices that should be prohib-
ited or limited with respect to such policies (in-
cluding any financial limits that should be ap-
plied concerning the individuals to whom such
policies may be sold); and
438
Title II, Subtitle B
(D) appropriate standards and require-
ments with respect to sales of such policies by
or through employers and other entities, to em-
ployees, members, or affiliates of such entities.
(8) CONTINUING
CARE
RETIREMENT
COMMU-
NITIES.—The Advisory Council shall consider, and
make recommendations to the Secretary concerning,
the extent to which the long-term care insurance as-
pects of continuing care retirement community ar-
rangements should be subject to regulation under
this part (and the Secretary, in consultation with the
Secretary of the Treasury, shall consider such rec-
ommendations and promulgate appropriate regula-
tions).
(i) ACTIVITIES.—In order to carry out its responsibil-
ities under this part, the Advisory Council is authorized
to—
(1) consult individuals and public and private
entities with experience and expertise in matters re-
lating to long-term care insurance (and shall consult
the National Association of Insurance Commis-
sioners);
(2) conduct meetings and hold hearings;
(3) conduct research (either directly or under
grant or contract);
439
Title II, Subtitle B
(4) collect, analyze, publish, and disseminate
data and information (either directly or under grant
or contract); and
(5) develop model formats and procedures for
insurance policies and marketing materials; and de-
velop proposed standards, rules, and procedures for
regulatory programs.
(j) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated, for activities of the Ad-
visory Council, $1,500,000 for fiscal year 1995, and
$2,000,000 for each succeeding fiscal year.
SEC. 2303. RELATION TO STATE LAW.
Nothing in this part shall be construed as preventing
a State from applying standards that provide greater pro-
tection to insured individuals under long-term care insur-
ance policies than the standards promulgated under this
part, except that such State standards may not be incon-
sistent with any of the requirements of this part or of reg-
ulations hereunder.
SEC. 2304. DEFINITIONS.
For purposes of this part:
(1) ACTIVITY OF DAILY LIVING.—The term ‘‘ac-
tivity of daily living’’ means any of the following:
eating, toileting, dressing, bathing, and transferring.
440
Title II, Subtitle B
(2) ADULT DAY CARE.—The term ‘‘adult day
care’’ means a program providing social and health-
related services during the day to six or more adults
with disabilities (or such smaller number as the Sec-
retary may specify in regulations) in a community
group setting outside the home.
(3) ADVISORY COUNCIL.—The term ‘‘Advisory
Council’’ means the National Long-Term Care In-
surance Advisory Council established pursuant to
section 2302.
(4) 
CERTIFICATE.—The 
term 
‘‘certificate’’
means a document issued to an individual as evi-
dence of such individual’s coverage under a group
insurance policy.
(5) CONTINUING
CARE
RETIREMENT
COMMU-
NITY.—The term ‘‘continuing care retirement com-
munity’’ means a residential community operated by
a private entity that enters into contractual agree-
ments with residents under which such entity guar-
antees, in consideration for residents’ purchase of or
periodic payment for membership in the community,
to provide for such residents’ future long-term care
needs.
(6) DESIGNATED REPRESENTATIVE.—The term
‘‘designated representative’’ means the person des-
441
Title II, Subtitle B
ignated by an insured individual (or, if such indi-
vidual is incapacitated, pursuant to an appropriate
administrative or judicial procedure) to communicate
with the insurer on behalf of such individual in the
event of such individual’s incapacitation.
(7) HOME
HEALTH
CARE.—The term ‘‘home
health care’’ means medical and nonmedical services
including such services as homemaker services, as-
sistance with activities of daily living, and respite
care provided to individuals in their residences.
(8) INSURED INDIVIDUAL.—The term ‘‘insured
individual’’ means, with respect to a long-term care
insurance policy, any individual who has coverage of
benefits under such policy.
(9) INSURER.—The term ‘‘insurer’’ means any
person that offers or sells an individual or group
long-term care insurance policy under which such
person is at risk for all or part of the cost of bene-
fits under the policy, and includes any agent of such
person.
(10) LONG-TERM CARE INSURANCE POLICY.—
The term ‘‘long-term care insurance policy’’ has the
meaning given that term in section 4 of the NAIC
Model Act, except that the last sentence of such sec-
tion shall not apply.
442
Title II, Subtitle B
(11) NAIC MODEL
ACT.—The term ‘‘NAIC
Model Act’’ means the Long-Term Care Insurance
Model Act published by the NAIC, as amended
through January 1993.
(12) NAIC MODEL
REGULATION.—The term
‘‘NAIC Model Regulation’’ means the Long-Term
Care Insurance Model Regulation published by the
NAIC, as amended through January 1993.
(13) NURSING FACILITY.—The term ‘‘nursing
facility’’ means a facility licensed by the State to
provide to residents—
(A) skilled nursing care and related serv-
ices for residents who require medical or nurs-
ing care;
(B) rehabilitation services for the rehabili-
tation of injured, disabled, or sick individuals,
or
(C) on a regular basis, health-related care
and services to individuals who because of their
mental or physical condition require care and
services (above the level of room and board)
which can be made available to them only
through institutional facilities.
443
Title II, Subtitle B
(14) POLICYHOLDER.—The term ‘‘policyholder’’
means the entity which is the holder of record of a
group long-term care insurance policy.
(15) RESIDENTIAL CARE FACILITY.—The term
‘‘residential care facility’’ means a facility (including
a nursing facility) that—
(A) provides to residents medical or per-
sonal care services (including at a minimum as-
sistance with activities of daily living) in a set-
ting other than an individual or single-family
home, and
(B) does not provide services of a higher
level than can be provided by a nursing facility.
(16) RESPITE CARE.—The term ‘‘respite care’’
means the temporary provision of care (including as-
sistance with activities of daily living) to an indi-
vidual, in the individual’s home or another setting in
the community, for the purpose of affording such in-
dividual’s unpaid caregiver a respite from the re-
sponsibilities of such care.
(17) STATE INSURANCE COMMISSIONER.—The
term ‘‘State insurance commissioner’’ means the
State official bearing such title, or, in the case of a
jurisdiction where such title is not used, the State
444
Title II, Subtitle B
official with primary responsibility for the regulation
of insurance.
Subpart B—Federal Standards and Requirements
SEC. 
2321. 
REQUIREMENTS 
TO 
FACILITATE 
UNDER-
STANDING AND COMPARISON OF BENEFITS.
(a) IN GENERAL.—The Secretary, after considering
(where appropriate) recommendations of the Advisory
Council, shall promulgate regulations designed to stand-
ardize formats and terminology used in long-term care in-
surance policies, to require insurers to provide to cus-
tomers and beneficiaries information on the range of pub-
lic and private long-term care coverage available, and to
establish such other requirements as may be appropriate
to promote consumer understanding and facilitate com-
parison of benefits, which shall include at a minimum the
requirements specified in this section.
(b) UNIFORM
TERMS, DEFINITIONS, AND
FOR-
MATS.—Insurers shall be required to use, in long-term
care insurance policies, uniform terminology, definitions of
terms, and formats, in accordance with regulations pro-
mulgated by the Secretary, after considering recommenda-
tions of the Advisory Council.
(c) STANDARD OUTLINE OF COVERAGE.—
(1) IN GENERAL.—Insurers shall be required to
develop for each long-term care insurance policy of-
445
Title II, Subtitle B
fered or sold, to include as a part of each such pol-
icy, and to make available to each potential pur-
chaser and furnish to each insured individual and
policyholder, an outline of coverage under such pol-
icy that—
(A) includes the elements specified in para-
graph (2),
(B) is in a uniform format (as prescribed
by Secretary on the basis of recommendations
by the Advisory Council),
(C) accurately and clearly reflects the con-
tents of the policy, and
(D) is updated periodically on such time-
table as may be required by the Secretary (or
more frequently as necessary to reflect signifi-
cant changes in outlined information).
(2) CONTENTS OF OUTLINE.—The outline of
coverage for each long-term care insurance policy
shall include at least the following:
(A) BENEFITS.—A description of—
(i) the principal benefits covered, in-
cluding the extent of—
(I) benefits for services furnished
in residential care facilities, and
(II) other benefits,
446
Title II, Subtitle B
(ii) the principal exclusions from and
limitations on coverage,
(iii) the terms and conditions, if any,
upon which the insured individual may ob-
tain upgraded benefits, and
(iv) the threshold conditions for enti-
tlement to receive benefits.
(B) CONTINUATION, RENEWAL, AND CON-
VERSION.—A statement of the terms under
which a policy may be—
(i) returned (and premium refunded)
during an initial examination period,
(ii) continued in force or renewed,
(iii) converted to an individual policy
(in the case of coverage under a group pol-
icy),
(C) CANCELLATION.—A statement of the
circumstances in which a policy may be termi-
nated, and the refund or nonforfeitures benefits
(if any) applicable in each such circumstance,
including—
(i) death of the insured individual,
(ii) nonpayment of premiums,
(iii) election by the insured individual
not to renew,
447
Title II, Subtitle B
(iv) any other circumstance.
(D) PREMIUM.—A statement of—
(i) the total annual premium, and the
portion of such premium attributable to
each covered benefit,
(ii) any reservation by the insurer of
a right to change premiums,
(iii) any limit on annual premium in-
creases,
(iv) any expected premium increases
associated with automatic or optional ben-
efit increases (including inflation protec-
tion), and
(v) any circumstances under which
payment of premium is waived.
(E) 
DECLARATION
CONCERNING
SUM-
MARY.—A statement, in bold face type on the
face of the document in language understand-
able to the average individual, that the outline
of coverage is a summary only, not a contract
of insurance, and that the policy contains the
contractual provisions that govern.
(F) COST/VALUE COMPARISON.—
(i) Information on average costs (and
variation in such costs) for nursing facility
448
Title II, Subtitle B
care (and such other care as the Secretary
may specify) and information on the value
of benefits relative to such costs.
(ii) A comparison of benefits, over a
period of at least 20 years, for policies
with and without inflation protection.
(iii) A declaration as to whether the
amount of benefits will increase over time,
and, if so, a statement of the type and
amount of, any limitations on, and any
premium increases for, such benefit in-
creases.
(G) TAX TREATMENT.—A statement of the
Federal income tax treatment of premiums and
benefits under the policy, as determined by the
Secretary of the Treasury.
(H) OTHER.—Such other information as
the Secretary may require.
(d) REPORTING
TO STATE INSURANCE COMMIS-
SIONER.—Each insurer shall be required to report at least
annually, to the State insurance commissioner of each
State in which any long-term care insurance policy of the
insurer is sold, such information, in such format, as the
Secretary may specify with respect to each such policy,
including—
449
Title II, Subtitle B
(1) the standard outline of coverage required
pursuant to subsection (c);
(2) lapse rates and replacement rates for such
policies;
(3) the ratio of premiums collected to benefits
paid;
(4) reserves;
(5) written materials used in sale or promotion
of such policy; and
(6) any other information the Secretary may re-
quire.
(e) COMPARISON OF LONG-TERM CARE COVERAGE
ALTERNATIVES.—Each insurer shall be required to fur-
nish to each individual before a long-term care insurance
policy of the insurer is sold to the individual information
on the conditions of eligibility for, and benefits under, each
of the following:
(1) POLICIES OFFERED BY THE INSURER.—The
standard outline of coverage, and such other infor-
mation as the Secretary may specify, with respect to
each long-term care insurance policy offered by the
insurer.
(2) COMPARISON
TO
OTHER
AVAILABLE
PRI-
VATE INSURANCE.—Information, in such format as
may be required under this part, on—
450
Title II, Subtitle B
(A) benefits offered under long-term care
insurance policies of the insurer (and the
threshold conditions for receipt by an insured
individual of each such benefit); and
(B) additional benefits available under
policies offered by other private insurers (to the
extent such information is made available by
the State insurance commissioner).
(3) 
PUBLIC
PROGRAMS; 
REGIONAL
ALLI-
ANCES.—Information furnished to the insurer, pur-
suant to section 2342(b)(2), by the State in which
such individual resides, on conditions of eligibility
for, and long-term care benefits (or the lack of such
benefits) under—
(A) each public long-term care program
administered by the State,
(B) the Medicare programs under title
XVIII of the Social Security Act; and
(C) each regional alliance operating in the
State.
SEC. 2322. REQUIREMENTS RELATING TO COVERAGE.
(a) IN GENERAL.—The Secretary, after considering
(where appropriate) recommendations of the Advisory
Council, shall promulgate regulations establishing require-
ments with respect to the terms of and benefits under
451
Title II, Subtitle B
long-term care insurance policies, which shall include at
a minimum the requirements specified in this section.
(b) LIMITATIONS ON PREEXISTING CONDITION EX-
CLUSIONS.—
(1) INITIAL POLICIES.—A long-term care insur-
ance policy may not exclude or limit coverage for
any service or benefit, the need for which is the re-
sult of a medical condition or disability because an
insured individual received medical treatment for, or
was diagnosed as having, such condition before the
issuance of the policy, unless—
(A) the insurer, prior to issuance of the
policy, determines and documents (with evi-
dence including written evidence that such con-
dition has been treated or diagnosed by a quali-
fied health care professional) that the insured
individual had such condition during the 6-
month period (or such longer period as the Sec-
retary may specify) ending on the effective date
of the policy; and
(B) the need or such service or benefit be-
gins within 6 months (or such longer period as
the Secretary may specify) following the effec-
tive date of the policy.
452
Title II, Subtitle B
(2) REPLACEMENT POLICIES.—Solely for pur-
poses of the requirements of paragraph (1), with re-
spect to an insured individual, the effective date of
a long-term care insurance policy issued to replace
a previous policy, with respect to benefits which are
the same as or substantially equivalent to benefits
under such previous policy, shall be considered to be
the effective date of such previous policy with re-
spect to such individual.
(c) LIMITING CONDITIONS ON BENEFITS.—
(1) IN GENERAL.—A long-term care insurance
policy may not—
(A) condition eligibility for benefits for a
type of service on the need for or receipt of any
other type of service (such as prior hospitaliza-
tion or institutionalization, or a higher level of
care than the care for which benefits are cov-
ered);
(B) condition eligibility for any benefit
(where the need for such benefit has been es-
tablished by an independent assessment of im-
pairment) on any particular medical diagnosis
(including any acute condition) or on one of a
group of diagnoses;
453
Title II, Subtitle B
(C) condition eligibility for benefits fur-
nished by licensed or certified providers on com-
pliance by such providers with conditions not
required under Federal or State law; or
(D) condition coverage of any service on
provision of such service by a provider, or in a
setting, providing a higher level of care than
that required by an insured individual.
(2) HOME CARE OR COMMUNITY-BASED SERV-
ICES.—A long-term care insurance policy that pro-
vides benefits for any home care or community-based
services provided in a setting other than a residen-
tial care facility—
(A) may not limit such benefits to services
provided by registered nurses or licensed prac-
tical nurses;
(B) may not limit such benefits to services
furnished by persons or entities participating in
programs under titles XVIII and XIX of the
Social Security Act and in part 1 of this sub-
title; and
(C) must provide, at a minimum, benefits
for personal assistance with activities of daily
living, home health care, adult day care, and
respite care.
454
Title II, Subtitle B
(3) NURSING FACILITY SERVICES.—A long-term
care insurance policy that provides benefits for any
nursing facility services—
(A) must provide benefits for such services
provided by all types of nursing facilities li-
censed by the State, and
(B) may provide benefits for care in other
residential facilities.
(4) PROHIBITION ON DISCRIMINATION BY DIAG-
NOSIS.—A long-term care insurance policy may not
provide for treatment of—
(A) Alzheimer’s disease or any other pro-
gressive degenerative dementia of an organic or-
igin,
(B) any organic or inorganic mental ill-
ness,
(C) mental retardation or any other cog-
nitive or mental impairment, or
(D) HIV infection or AIDS,
different from the treatment of any other medical
condition for purposes of determining whether
threshold conditions for the receipt of benefits have
been met, or the amount of benefits under the pol-
icy.
(d) INFLATION PROTECTION.—
455
Title II, Subtitle B
(1) REQUIREMENT TO OFFER.—An insurer of-
fering for sale any long-term care insurance policy
shall be required to afford the purchaser the option
to obtain coverage under such policy (upon payment
of increased premiums) of annual increases in bene-
fits at rates in accordance with paragraph (2).
(2) RATE INCREASE IN BENEFITS.—For pur-
poses of paragraph (1), the benefits under a policy
for each year shall be increased by a percentage of
the full value of benefits under the policy for the
previous year, which shall be not less than 5 percent
of such value (or such other rate of increase as may
be determined by the Secretary to be adequate to
offset increases in the costs of long-term care serv-
ices for which coverage is provided under the policy).
(3) REQUIREMENT OF WRITTEN REJECTION.—
Inflation protection in accordance with paragraph
(1) may be excluded from the coverage under a pol-
icy only if the insured individual (or, if different, the
person responsible for payment of premiums) has re-
jected in writing the option to obtain such coverage.
SEC. 2323. REQUIREMENTS RELATING TO PREMIUMS.
(a) IN GENERAL.—The Secretary, after considering
(where appropriate) recommendations of the Advisory
Council, shall promulgate regulations establishing require-
456
Title II, Subtitle B
ments applicable to premiums for long-term care insur-
ance policies, which shall include at a minimum the re-
quirements specified in this section.
(b) LIMITATIONS ON RATES AND INCREASES.—The
Secretary, after considering recommendations of the Advi-
sory Council, may establish by regulation such standards
and requirements as may be determined appropriate with
respect to—
(1) mandatory or optional State procedures for
review and approval of premium rates and rate in-
creases or decreases;
(2) limitations on the amount of initial pre-
miums, or on the rate or amount of premium in-
creases;
(3) the factors to be taken into consideration by
an insurer in proposing, and by a State in approving
or disapproving, premium rates and increases; and
(4) the extent to which consumers should be en-
titled to participate or be represented in the rate-set-
ting process and to have access to actuarial and
other information relied on in setting rates.
SEC. 2324. REQUIREMENTS RELATING TO SALES PRAC-
TICES.
(a) IN GENERAL.—The Secretary, after considering
(where appropriate) recommendations of the Advisory
457
Title II, Subtitle B
Council, shall promulgate regulations establishing require-
ments applicable to the sale or offering for sale of long-
term care insurance policies, which shall include at a min-
imum the requirements specified in this section.
(b) APPLICATIONS.—Any insurer that offers any
long-term care insurance policy (including any group pol-
icy) shall be required to meet such requirements with re-
spect to the content, format, and use of application forms
for long-term care insurance as the Secretary may require
by regulation.
(c) AGENT TRAINING AND CERTIFICATION.—An in-
surer may not sell or offer for sale a long-term care insur-
ance policy through an agent who does not comply with
minimum standards with respect to training and certifi-
cation established by the Secretary after consideration of
recommendations by the Advisory Council.
(d) COMPENSATION FOR SALE OF POLICIES.—Com-
pensation by an insurer to an agent or agents for the sale
of an original long-term care insurance policy, or for serv-
icing or renewing such a policy, may not exceed amounts
(or percentage shares of premiums or other reference
amounts) specified by the Secretary in regulations, after
considering recommendations of the Advisory Council.
(e) PROHIBITED SALES PRACTICES.—The following
practices by insurers shall be prohibited with respect to
458
Title II, Subtitle B
the sale or offer for sale of long-term care insurance poli-
cies:
(1) FALSE
AND
MISLEADING
REPRESENTA-
TIONS.—Making any statement or representation—
(A) which the insurer knows or should
know is false or misleading (including the inac-
curate, incomplete, or misleading comparison of
long-term care insurance policies or insurers),
and
(B) which is intended, or would be likely,
to induce any person to purchase, retain, termi-
nate, forfeit, permit to lapse, pledge, assign,
borrow against, convert, or effect a change with
respect to, any long-term care insurance policy.
(2) INACCURATE
COMPLETION
OF
MEDICAL
HISTORY.—Making or causing to be made (by any
means including failure to inquire about or to record
information relating to preexisting conditions) state-
ments or omissions, in records detailing the medical
history of an applicant for insurance, which the in-
surer knows or should know render such records
false, incomplete, or misleading in any way material
to such applicant’s eligibility for or coverage under
a long-term care insurance policy.
459
Title II, Subtitle B
(3) 
UNDUE
PRESSURE.—Employing 
force,
fright, threat, or other undue pressure, whether ex-
plicit or implicit, which is intended, or would be like-
ly, to induce the purchase of a long-term care insur-
ance policy.
(4) COLD LEAD ADVERTISING.—Using, directly
or indirectly, any method of contacting consumers
(including any method designed to induce consumers
to contact the insurer or agent) for the purpose of
inducing the purchase of long-term care insurance
(regardless of whether such purpose is the sole or
primary purpose of the contact) without conspicu-
ously disclosing such purpose.
(f) PROHIBITION ON SALE OF DUPLICATE BENE-
FITS.—An insurer or agent may not sell or issue to an
individual a long-term care insurance policy that the in-
surer or agent knows or should know provides for coverage
that duplicates coverage already provided in another long-
term care insurance policy held by such individual (unless
the policy is intended to replace such other policy).
(g) SALES THROUGH EMPLOYERS OR MEMBERSHIP
ORGANIZATIONS.—
(1) REQUIREMENTS
CONCERNING
SUCH
AR-
RANGEMENTS.—In any case where an employer, or-
ganization, association, or other entity (referred to
460
Title II, Subtitle B
as a ‘‘membership entity’’) endorses a long-term
care insurance policy to, or such policy is marketed
or sold through such membership entity to, employ-
ees, members, or other individuals affiliated with
such membership entity—
(A) the insurer offering such policy shall
not permit its marketing or sale through such
entity unless the requirements of this sub-
section are met; and
(B) a membership entity that receives any
compensation for such sale, marketing, or en-
dorsement of such policy shall be considered the
agent of the insurer for purposes of this part.
(2) DISCLOSURE AND INFORMATION REQUIRE-
MENTS.—A membership entity that endorses a long-
term care insurance policy, or through which such
policy is sold, to individuals affiliated with such enti-
ty, shall—
(A) disclose prominently, in a form and
manner designed to ensure that each such indi-
vidual who receives information concerning any
such policy through such entity is aware of and
understands such disclosure—
(i) the manner in which the insurer
and policy were selected;
461
Title II, Subtitle B
(ii) the extent (if any) to which a per-
son independent of the insurer with exper-
tise in long-term care insurance analyzed
the advantages and disadvantages of such
policy from the standpoint of such individ-
uals (including such matters as the merits
of the policy compared to other available
benefit packages, and the financial stability
of the insurer), and the results of any such
analysis;
(iii) any organizational or financial
ties between the entity (or a related entity)
and the insurer (or a related entity); and
(iv) the nature of compensation ar-
rangements (if any) and the amount of
compensation (including all fees, commis-
sions, and other forms of financial sup-
port) for the endorsement or sale of such
policy; and
(B) make available to such individuals, ei-
ther directly or through referrals, appropriate
counseling to assist such individuals to make
educated and informed decisions concerning the
purchase of such policies.
462
Title II, Subtitle B
SEC. 2325. CONTINUATION, RENEWAL, REPLACEMENT, CON-
VERSION, AND CANCELLATION OF POLICIES.
(a) IN GENERAL.—The Secretary, after considering
(where appropriate) recommendations of the Advisory
Council, shall promulgate regulations establishing require-
ments applicable to the renewal, replacement, conversion,
and cancellation of long-term care insurance policies,
which shall include at a minimum the requirements speci-
fied in this section.
(b) INSURED’S RIGHT TO CANCEL DURING EXAM-
INATION PERIOD.—Each individual insured (or, if dif-
ferent, each individual liable for payment of premiums)
under a long-term care insurance policy shall have the un-
conditional right to return the policy within 30 days after
the date of its issuance and delivery, and to obtain a full
refund of any premium paid.
(c) INSURER’S RIGHT TO CANCEL (OR DENY BENE-
FITS) BASED ON FRAUD OR NONDISCLOSURE.—An in-
surer shall have the right to cancel a long-term care insur-
ance policy, or to refuse to pay a claim for benefits, based
on evidence that the insured falsely represented or failed
to disclose information material to the determination of
eligibility to purchase such insurance, but only if—
(1) the insurer presents written documentation,
developed at the time the insured applied for such
insurance, of the insurer’s request for the informa-
479
Title II, Subtitle B
(4) TECHNICAL
ASSISTANCE
TO
INSURERS.—
Provision of technical assistance to insurers to help
them to understand and comply with the require-
ments of this part, and other State laws, concerning
long-term care insurance policies and business prac-
tices.
(c) STATE ENFORCEMENT AUTHORITIES.—A State
program meeting the requirements of this subpart shall
ensure that the State insurance commissioner (or other
appropriate official or agency) has the following authority
with respect to long-term care insurers and policies:
(1) PROHIBITION OF SALE.—Authority to pro-
hibit the sale, or offering for sale, of any long-term
care insurance policy that fails to comply with all
applicable requirements under this part.
(2) PLANS
OF
CORRECTION.—Authority, in
cases where the business practices of an insurer are
determined not to comply with requirements under
this part, to require the insurer to develop, submit
for State approval, and implement a plan of correc-
tion which must be fulfilled within the shortest pe-
riod possible (not to exceed a year) as a condition
of continuing to do business in the State.
(3) CORRECTIVE ACTION ORDERS.—Authority,
in cases where an insurer is determined to have
493
Title II, Subtitle B
models covering the entire array of services and
benefits described in paragraph (1).
(c) ELIGIBILITY CRITERIA.—The Secretary shall es-
tablish eligibility criteria for individuals who may receive
services under demonstrations under this section. Under
such criteria, any of the following may be found to be eligi-
ble populations for such demonstrations:
(1) Individuals with disabilities who are entitled
to services and benefits under a State program
under part 1 of this subtitle.
(2) Individuals who are entitled to benefits
under parts A and B of title XVIII of the Social Se-
curity Act.
(3) Individuals who are entitled to medical as-
sistance under a State plan under title XIX of the
Social Security Act, and are also—
(A) individuals described in paragraph (2),
or
(B) individuals eligible for supplemental
security income under title XVI of that Act.
(d) APPLICATION.—
(1) IN GENERAL.—Each entity seeking to par-
ticipate in a demonstration under this section shall
submit an application, in such format and con-
taining such information as the Secretary may re-
529
Title III, Subtitle A
fied in subsection (b)(2), in the case of an institution that
submits to the Secretary an application for such year in
accordance with subsection (d), the Secretary shall make
payments for the year to the institution for the purpose
specified in subsection (c). The Secretary shall make the
payments in an amount determined in accordance with
subsection (e), and may administer the payments as a con-
tract, grant, or cooperative agreement.
(b) INSTITUTIONS LOSING SPECIALTY POSITIONS;
RELEVANT YEARS REGARDING PAYMENTS.—
(1) INSTITUTIONS
LOSING
SPECIALTY
POSI-
TIONS.—The Secretary may make payments under
subsection (a) to an institution only if, with respect
to the calendar year involved, the institution meets
the following conditions:
(A) The institution operates one or more
programs that—
(i) are approved physician training
programs; and
(ii) are receiving payments under sec-
tion 3031 for such year.
(B) The aggregate number of speciality po-
sitions in such programs (in the medical speci-
alities with respect to which such payments are
made) is below the aggregate number of such