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tion 7702B(c)(2)(B)) due to a loss of functional
capacity, or
‘‘(B) requires substantial supervision to
protect such individual from threats to health
and safety due to severe cognitive impairment
and is unable to perform, without reminding or
cuing assistance, at least one activity of daily
living (as so defined) or to the extent provided
in regulations prescribed by the Secretary (in
consultation with the Secretary of Health and
Human Services), is unable to engage in age ap-
propriate activities.
‘‘(4) SPECIAL RULES.—Rules similar to the rules
of paragraphs (1), (2), (3), (4), and (5) of section
21(e) shall apply for purposes of this subsection.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 2105. STUDY OF LONG-TERM CARE NEEDS IN THE 21ST
CENTURY.
(a) IN GENERAL.—The Secretary of Health and
Human Services (referred to in this section as the ‘‘Sec-
retary’’) shall on or after October 1, 2001, provide, in ac-
cordance with this section, for a study in order to
determine—
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(1) future demand for long-term health care serv-
ices (including institutional and home and commu-
nity-based services) in the United States in order to
meet the needs in the 21st century; and
(2) long-term options to finance the provision of
such services.
(b) DETAILS.—The study conducted under subsection
(a) shall include the following:
(1) An identification of the relevant demographic
characteristics affecting demand for long-term health
care services, at least through the year 2030.
(2) The viability and capacity of community-
based and other long-term health care services under
different federal programs, including through the
medicare and medicaid programs, grants to States,
housing services, and changes in tax policy.
(3) How to improve the quality of long-term
health care services.
(4) The integration of long-term health care serv-
ices for individuals between different classes of health
care providers (such as hospitals, nursing facilities,
and home care agencies) and different Federal pro-
grams (such as the medicare and medicaid pro-
grams).
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(5) The possibility of expanding private sector
initiatives, including long-term care insurance, to
meet the need to finance such services.
(6) An examination of the effect of enactment of
the Health Insurance Portability and Accountability
Act of 1996 on the provision and financing of long-
term health care services, including on portability
and affordability of private long-term care insurance,
the impact of insurance options on low-income older
Americans, and the options for eligibility to improve
access to such insurance.
(7) The financial impact of the provision of
long-term health care services on caregivers and other
family members.
(c) REPORT AND RECOMMENDATIONS.—
(1) IN GENERAL.—October 1, 2002, the Secretary
shall provide for a report on the study under this sec-
tion.
(2) 
RECOMMENDATIONS.—The 
report 
under
paragraph (1) shall include findings and rec-
ommendations regarding each of the following:
(A) The most effective and efficient manner
that the Federal Government may use its re-
sources to educate the public on planning for
needs for long-term health care services.
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(B) The public, private, and joint public-
private strategies for meeting identified needs for
long-term health care services.
(C) The role of States and local commu-
nities in the financing of long-term health care
services.
(3) INCLUSION OF COST ESTIMATES.—The report
under paragraph (1) shall include cost estimates of
the various options for which recommendations are
made.
(d) CONDUCT OF STUDY.—
(1) USE OF INSTITUTE OF MEDICINE.—The Sec-
retary of Health and Human Services shall seek to
enter into an appropriate arrangement with the In-
stitute of Medicine of the National Academy of
Sciences to conduct the study under this section. If
such an arrangement cannot be made, the Secretary
may provide for the conduct of the study by any other
qualified non-governmental entity.
(2) CONSULTATION.—The study should be con-
ducted under this section in consultation with experts
from a wide-range of groups from the public and pri-
vate sectors.
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Subtitle B—Medical Savings
Accounts
SEC. 2111. EXPANSION OF AVAILABILITY OF MEDICAL SAV-
INGS ACCOUNTS.
(a) REPEAL OF LIMITATIONS ON NUMBER OF MEDICAL
SAVINGS ACCOUNTS.—
(1) IN GENERAL.—Subsections (i) and (j) of sec-
tion 220 of the Internal Revenue Code of 1986 are
hereby repealed.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 220(c) of such
Code is amended by striking subparagraph (D).
(B) Section 138 of such Code is amended by
striking subsection (f).
(b) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR
EMPLOYEES OF SMALL EMPLOYERS AND SELF-EMPLOYED
INDIVIDUALS.—
(1) IN GENERAL.—Section 220(c)(1)(A) of such
Code (relating to eligible individual) is amended to
read as follows:
‘‘(A) IN GENERAL.—The term ‘eligible indi-
vidual’ means, with respect to any month, any
individual if—
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‘‘(i) such individual is covered under a
high deductible health plan as of the 1st day
of such month, and
‘‘(ii) such individual is not, while cov-
ered under a high deductible health plan,
covered under any health plan—
‘‘(I) which is not a high deduct-
ible health plan, and
‘‘(II) which provides coverage for
any benefit which is covered under the
high deductible health plan.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 220(c)(1) of such Code is
amended by striking subparagraph (C).
(B) Section 220(c) of such Code is amended
by striking paragraph (4) (defining small em-
ployer) and by redesignating paragraph (5) as
paragraph (4).
(C) Section 220(b) of such Code is amended
by striking paragraph (4) (relating to deduction
limited by compensation) and by redesignating
paragraphs (5), (6), and (7) as paragraphs (4),
(5), and (6), respectively.
(c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED
FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—
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(1) IN
GENERAL.—Paragraph (2) of section
220(b) of such Code is amended to read as follows:
‘‘(2) MONTHLY LIMITATION.—The monthly limi-
tation for any month is the amount equal to 1⁄12 of
the annual deductible (as of the first day of such
month) of the individual’s coverage under the high de-
ductible health plan.’’.
(2) CONFORMING
AMENDMENT.—Clause (ii) of
section 220(d)(1)(A) of such Code is amended by
striking ‘‘75 percent of’’.
(d) BOTH EMPLOYERS AND EMPLOYEES MAY CON-
TRIBUTE
TO MEDICAL SAVINGS ACCOUNTS.—Paragraph
(4) of section 220(b) of such Code (as redesignated by sub-
section (b)(2)(C)) is amended to read as follows:
‘‘(4) COORDINATION WITH EXCLUSION FOR EM-
PLOYER
CONTRIBUTIONS.—The 
limitation 
which
would (but for this paragraph) apply under this sub-
section to the taxpayer for any taxable year shall be
reduced (but not below zero) by the amount which
would (but for section 106(b)) be includible in the
taxpayer’s gross income for such taxable year.’’.
(e) REDUCTION OF PERMITTED DEDUCTIBLES UNDER
HIGH DEDUCTIBLE HEALTH PLANS.—
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(1) IN GENERAL.—Subparagraph (A) of section
220(c)(2) of such Code (defining high deductible
health plan) is amended—
(A) by striking ‘‘$1,500’’ in clause (i) and
inserting ‘‘$1,000’’;
(B) by striking ‘‘$3,000’’ in clause (ii) and
inserting ‘‘$2,000’’; and
(C) by striking the matter preceding sub-
clause (I) in clause (iii) and inserting ‘‘pursuant
to which the annual out-of-pocket expenses (in-
cluding deductibles and co-payments) are re-
quired to be paid under the plan (other than for
premiums) for covered benefits and may not ex-
ceed—’’.
(2) CONFORMING
AMENDMENT.—Subsection (g)
of section 220 of such Code is amended to read as fol-
lows:
‘‘(g) COST-OF-LIVING ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 2002, each
dollar amount in subsection (c)(2) shall be increased
by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar year
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in which such taxable year begins by sub-
stituting ‘calendar year 2001’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(2) SPECIAL RULES.—In the case of the $1,000
amount in subsection (c)(2)(A)(i) and the $2,000
amount in subsection (c)(2)(A)(ii), paragraph (1)(B)
shall be applied by substituting ‘calendar year 2002’
for ‘calendar year 2001’.
‘‘(3) ROUNDING.—If any increase under para-
graph (1) or (2) is not a multiple of $50, such in-
crease shall be rounded to the nearest multiple of
$50.’’.
(f) LIMITATION ON ADDITIONAL TAX ON DISTRIBU-
TIONS NOT USED FOR QUALIFIED MEDICAL EXPENSES.—
Section 220(f)(4) of such Code (relating to additional tax
on distributions not used for qualified medical expenses) is
amended by adding at the end the following:
‘‘(D) EXCEPTION IN CASE OF SUFFICIENT
ACCOUNT
BALANCE.—Subparagraph (A) shall
not apply to any payment or distribution in
any taxable year, but only to the extent such
payment or distribution does not reduce the fair
market value of the assets of the medical savings
account to an amount less than the annual de-
ductible for the high deductible health plan of the
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account holder (determined as of the earlier of
January 1 of the calendar year in which the tax-
able year begins or January 1 of the last cal-
endar year in which the account holder is cov-
ered under a high deductible health plan).’’.
(g) TREATMENT OF NETWORK-BASED MANAGED CARE
PLANS.—Section 220(c)(2)(B) of such Code (relating to spe-
cial rules for high deductible health plans) is amended by
adding at the end the following:
‘‘(iii) TREATMENT OF NETWORK-BASED
MANAGED CARE PLANS.—A plan which pro-
vides health care services through a network
of contracted or affiliated health care pro-
viders, if the benefits provided when services
are obtained through network providers
meet the requirements of subparagraph (A),
shall not fail to be treated as a high deduct-
ible health plan by reason of providing ben-
efits for services rendered by providers who
are not members of the network, so long as
the annual deductible and annual limit on
out-of-pocket expenses applicable to services
received from non-network providers are not
lower than those applicable to services re-
ceived from the network providers.’’.
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(h) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED
UNDER CAFETERIA PLANS.—Subsection (f) of section 125
of such Code is amended by striking ‘‘106(b),’’.
(i) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section shall
apply to taxable years beginning after December 31,
2001.
(2) LIMITATION ON ADDITIONAL TAX ON DIS-
TRIBUTIONS NOT USED
FOR QUALIFIED MEDICAL
EXPENSES.—The amendment made by subsection (f)
shall apply to taxable years beginning after December
31, 2005.
SEC. 2112. AMENDMENTS TO TITLE 5, UNITED STATES
CODE, RELATING TO MEDICAL SAVINGS AC-
COUNTS AND HIGH DEDUCTIBLE HEALTH
PLANS UNDER FEHBP.
(a) MEDICAL SAVINGS ACCOUNTS.—
(1) CONTRIBUTIONS.—Title 5, United States
Code, is amended by redesignating section 8906a as
section 8906c and by inserting after section 8906 the
following:
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‘‘§ 8906a. Government contributions to medical sav-
ings accounts
‘‘(a) An employee or annuitant enrolled in a high de-
ductible health plan is entitled, in addition to the Govern-
ment contribution under section 8906(b) toward the sub-
scription charge for such plan, to have a Government con-
tribution made, in accordance with succeeding provisions
of this section, to a medical savings account of such em-
ployee or annuitant.
‘‘(b)(1) The biweekly Government contribution under
this section shall, in the case of any such employee or annu-
itant, be equal to the amount (if any) by which—
‘‘(A) the biweekly equivalent of the maximum
Government contribution for the contract year in-
volved (as defined by paragraph (2)), exceeds
‘‘(B) the amount of the biweekly Government
contribution payable on such employee’s or annu-
itant’s behalf under section 8906(b) for the period in-
volved.
‘‘(2) For purposes of this section, the term ‘maximum
Government contribution’ means, with respect to a contract
year, the maximum Government contribution that could be
made for health benefits for an employee or annuitant for
such contract year, as determined under section 8906(b)
(disregarding paragraph (2) thereof).
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‘‘(3) Notwithstanding any other provision of this sec-
tion, no contribution under this section shall be payable to
any medical savings account of an employee or annuitant
for any period—
‘‘(A) if, as of the first day of the month before
the month in which such period commences, such em-
ployee or annuitant (or the spouse of such employee
or annuitant, if coverage is for self and family) is en-
titled to benefits under part A of title XVIII of the
Social Security Act;
‘‘(B) to the extent that such contribution, when
added to previous contributions made under this sec-
tion for that same year with respect to such employee
or annuitant, would cause the total to exceed—
‘‘(i) the limitation under paragraph (1) of
section 220(b) of the Internal Revenue Code of
1986 (determined without regard to paragraph
(3) thereof) which is applicable to such employee
or annuitant for the calendar year in which such
period commences; or
‘‘(ii) such lower amount as the employee or
annuitant may specify in accordance with regu-
lations of the Office, including an election not to
receive contributions under this section for a
year or the remainder of a year; or
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‘‘(C) for which any information (or documenta-
tion) under subsection (d) that is needed in order to
make such contribution has not been timely sub-
mitted.
‘‘(4) Notwithstanding any other provision of this sec-
tion, no contribution under this section shall be payable to
any medical savings account of an employee for any period
in a contract year unless that employee was enrolled in a
health benefits plan under this chapter as an employee for
not less than—
‘‘(A) the 1 year of service immediately before the
start of such contract year, or
‘‘(B) the full period or periods of service between
the last day of the first period, as prescribed by regu-
lations of the Office of Personnel Management, in
which he is eligible to enroll in the plan and the day
before the start of such contract year,
whichever is shorter.
‘‘(5) The Office shall provide for the conversion of bi-
weekly rates of contributions specified by paragraph (1) to
rates for employees and annuitants whose pay or annuity
is provided on other than a biweekly basis, and for this
purpose may provide for the adjustment of the converted
rate to the nearest cent.
‘‘(c) A Government contribution under this section—
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‘‘(1) shall be made at the same time that, and
the same frequency with which, Government contribu-
tions under section 8906(b) are made for the benefit
of the employee or annuitant involved; and
‘‘(2) shall be payable from the same appropria-
tion, fund, account, or other source as would any
Government contributions under section 8906(b) with
respect to the employee or annuitant involved.
‘‘(d) The Office shall by regulation prescribe the time,
form, and manner in which an employee or annuitant shall
submit any information (and supporting documentation)
necessary to identify any medical savings account to which
contributions under this section are requested to be made.
‘‘(e) Nothing in this section shall be considered to enti-
tle an employee or annuitant to any Government contribu-
tion under this section with respect to any period for which
such employee or annuitant is ineligible for a Government
contribution under section 8906(b).
‘‘§ 8906b. Individual contributions to medical savings
accounts
‘‘(a) Upon the written request of an employee or annu-
itant enrolled in a high deductible health plan, there shall
be withheld from the pay or annuity of such employee or
annuitant and contributed to the medical savings account
identified by such employee or annuitant in accordance
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with applicable regulations under subsection (c) such
amount as the employee or annuitant may specify.
‘‘(b) Notwithstanding subsection (a), no withholding
under this section may be made from the pay or annuity
of an employee or annuitant for any period—
‘‘(1) if, or to the extent that, a Government con-
tribution for such period under section 8906a would
not be allowable by reason of subparagraph (A) or
(B)(i) of subsection (b)(3) thereof;
‘‘(2) for which any information (or documenta-
tion) that is needed in order to make such contribu-
tion has not been timely submitted; or
‘‘(3) if the employee or annuitant submits a re-
quest for termination of withholdings, beginning on
or after the effective date of the request and before the
end of the year.
‘‘(c) The Office of Personnel Management shall pre-
scribe any regulations necessary to carry out this section,
including provisions relating to the time, form, and manner
in which any request for withholdings under this section
may be made, changed, or terminated.’’.
(2) RULES OF CONSTRUCTION.—Nothing in this
section or in any amendment made by this section
shall be considered—
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(A) to permit or require that any contribu-
tions to a medical savings account (whether by
the Government or through withholdings from
pay or annuity) be paid into the Employees
Health Benefits Fund; or
(B) to affect any authority under section
1005(f) of title 39, United States Code, to vary,
add to, or substitute for any provision of chapter
89 of title 5, United States Code, as amended by
this section.
(3) CONFORMING AMENDMENTS.—
(A) The table of sections at the beginning of
chapter 89 of title 5, United States Code, is
amended by striking the item relating to section
8906a and inserting the following:
‘‘8906a. Government contributions to medical savings accounts.
‘‘8906b. Individual contributions to medical savings accounts.
‘‘8906c. Temporary employees.’’.
(B) Section 8913(b)(4) of title 5, United
States Code, is amended by striking ‘‘8906a(a)’’
and inserting ‘‘8906c(a)’’.
(b) INFORMATIONAL REQUIREMENTS.—Section 8907 of
title 5, United States Code, is amended by adding at the
end the following:
‘‘(c) In addition to any information otherwise required
under this section, the Office shall make available to all em-
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ployees and annuitants eligible to enroll in a high deduct-
ible health plan, information relating to—
‘‘(1) the conditions under which Government
contributions under section 8906a shall be made to a
medical savings account;
‘‘(2) the amount of any Government contribu-
tions under section 8906a to which an employee or
annuitant may be entitled (or how such amount may
be ascertained);
‘‘(3) the conditions under which contributions to
a medical savings account may be made under section
8906b through withholdings from pay or annuity;
and
‘‘(4) any other matter the Office considers appro-
priate in connection with medical savings accounts.’’.
(c) HIGH DEDUCTIBLE HEALTH PLAN AND MEDICAL
SAVINGS ACCOUNT DEFINED.—Section 8901 of title 5,
United States Code, is amended—
(1) in paragraph (10) by striking ‘‘and’’ after
the semicolon;
(2) in paragraph (11) by striking the period and
inserting a semicolon; and
(3) by adding at the end the following:
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‘‘(12) the term ‘high deductible health plan’
means a plan described by section 8903(5) or section
8903a(d); and
‘‘(13) the term ‘medical savings account’ has the
meaning given such term by section 220(d) of the In-
ternal Revenue Code of 1986.’’.
(d) AUTHORITY TO CONTRACT FOR HIGH DEDUCT-
IBLE HEALTH PLANS, ETC.—
(1) CONTRACTS FOR HIGH DEDUCTIBLE HEALTH
PLANS.—Section 8902 of title 5, United States Code,
is amended by adding at the end the following:
‘‘(p)(1) The Office shall contract under this chapter for
a high deductible health plan with any qualified carrier
that offers such a plan and, as of the date of enactment
of this subsection, offers a health benefits plan under this
chapter.
‘‘(2) The Office may contract under this chapter for
a high deductible health plan with any qualified carrier
that offers such a plan, but does not, as of the date of enact-
ment of this subsection, offer a health benefits plan under
this chapter.’’.
(2) COMPUTATION OF GOVERNMENT CONTRIBU-
TIONS TO PLANS UNDER CHAPTER 89 NOT AFFECTED
BY HIGH DEDUCTIBLE HEALTH PLANS.—Paragraph
(2) of section 8906(a) of title 5, United States Code,
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is amended by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’,
and adding at the end the following:
‘‘(B) Notwithstanding any other provision of this sec-
tion, the subscription charges for, and the number of enroll-
ees enrolled in, high deductible health plans shall be dis-
regarded for purposes of determining any weighted average
under paragraph (1).’’.
(e) DESCRIPTION
OF HIGH DEDUCTIBLE HEALTH
PLANS AND BENEFITS TO BE PROVIDED THEREUNDER.—
(1) IN
GENERAL.—Section 8903 of title 5,
United States Code, is amended by adding at the end
the following:
‘‘(5) HIGH DEDUCTIBLE HEALTH PLANS.—(A)
One or more plans described by paragraph (1), (2),
(3), or (4), which—
‘‘(i) are high deductible health plans (as de-
fined by section 220(c)(2) of the Internal Rev-
enue Code of 1986); and
‘‘(ii) provide benefits of the types referred to
by section 8904(a)(5).
‘‘(B) 
Nothing 
in 
this 
section 
shall 
be
considered—
‘‘(i) to prevent a carrier from simulta-
neously offering a plan described by subpara-