tion 4980B (and contained in part 6 of subtitle B
of title I of the Employee Retirement Income Secu-
rity Act of 1974 and in title II of the Public Health
Service Act) shall not apply to—
‘‘(A) qualified long-term care insurance
contracts, or
‘‘(B) plans described in subsection (a)(2).
‘‘(2) EMPLOYER PLANS NOT TREATED AS DE-
FERRED COMPENSATION PLANS.—For purposes of
this title, a plan of an employer providing coverage
of qualified long-term care services shall not be
treated as a plan which provides for deferred com-
pensation by reason of providing such coverage.
‘‘(3) CONTRACTS
COVERING
PARENTS
AND
GRANDPARENTS.—For purposes of this title, if a
qualified long-term care insurance contract pur-
chased by or provided to a taxpayer provides cov-
erage with respect to one or more of the taxpayer’s
parents or grandparents (or, in the case of a joint
return, of either spouse), such coverage and all pay-
ments made pursuant to such coverage shall be
treated in the same manner as if the parents or
grandparents were dependents (as defined in section
152) of the taxpayer. For purposes of this para-
graph, the term ‘parent’ includes any stepmother or
stepfather, the term ‘grandparent’ includes any
stepgrandfather or stepgrandmother, and any rela-
tionship that exists by virtue of a legal adoption
shall be recognized to the same extent as relation-
ships by blood.
‘‘(4) WELFARE
BENEFIT
RULES
NOT
TO
APPLY.—For purposes of subpart D of part I of
subchapter D of chapter 1 (relating to treatment of
welfare benefit funds), qualified long-term care serv-
ices shall not be treated as a welfare benefit or a
medical benefit.
‘‘(5) DEDUCTIBILITY.—For purposes of this
title, no payment of a premium for a long-term care
insurance contract shall fail to be deductible in
whole or in part merely because the contract pro-
vides for level annual payments.
‘‘(e) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the re-
quirements of this section, including regulations to prevent
the avoidance of this section by providing qualified long-
term care services under a life insurance contract.’’.
(b) The table of sections for chapter 79 of the Inter-
nal Revenue Code of 1986 is amended by inserting after
the item relating to section 7702A the following new item:
‘‘Sec. 7702B. Treatment of long-term care insurance or plans.’’.
SEC. 303. QUALIFIED LONG-TERM SERVICES TREATED AS
MEDICAL CARE.
(a) Paragraph (1) of section 213(d) of the Internal
Revenue Code of 1986 (defining medical care) is amended
by striking ‘‘or’’ at the end of subparagraph (B), by redes-
ignating subparagraph (C) as subparagraph (D), and by
inserting after subparagraph (B) the following new sub-
paragraph:
‘‘(C) for qualified long-term care services
(as defined in section 7702B(c)), or’’.
(b)(1) Subparagraph (D) of section 213(d)(1) of the
Internal Revenue Code of 1986 (as redesigned by sub-
section (a)) is amended by striking ‘‘subparagraphs (A)
and (B)’’ and inserting ‘‘subparagraphs (A), (B), and
(C)’’.
(2) Paragraph (6) of section 213(d) of such Code is
amended—
(A) by striking ‘‘subparagraphs (A) and (B)’’
and inserting ‘‘subparagraphs (A), (B), and (C)’’,
and
(B) by striking ‘‘paragraph (1)(C)’’ in subpara-
graph (A) and inserting ‘‘paragraph (1)(D)’’.
(3) Paragraph (7) of section 213(d) of such Code is
amended by striking ‘‘subparagraphs (A) and (B)’’ and
inserting ‘‘subparagraphs (A), (B), and (C)’’.
SEC. 304. QUALIFIED LONG-TERM CARE INSURANCE CON-
TRACTS PERMITTED TO BE OFFERED IN CAF-
ETERIA PLANS.
Paragraph (2) of section 125(d) of the Internal Reve-
nue Code of 1986 (relating to the exclusion of deferred
compensation) is amended by adding at the end thereof
the following new subparagraph:
‘‘(D) EXCEPTION
FOR
LONG-TERM
CARE
INSURANCE CONTRACTS.—For purposes of sub-
paragraph (A), a plan shall not be treated as
providing deferred compensation by reason of
providing any long-term care insurance contract
(as defined in section 7702B(b)) if—
‘‘(i) the employee may elect to con-
tinue the insurance upon cessation of par-
ticipation in the plan, and
‘‘(ii) the amount paid or incurred dur-
ing any taxable year for such insurance
does not exceed the premium which would
have been payable for such year under a
level premium structure.’’.
SEC. 305. INCLUSION IN INCOME OF EXCESSIVE LONG-
TERM CARE BENEFITS.
(a) Part II of subchapter B of chapter 1 of the Inter-
nal Revenue Code of 1986 (relating to items specifically
included in gross income) is amended by adding at the
end the following new section:
‘‘SEC. 91. EXCESSIVE LONG-TERM CARE BENEFITS.
‘‘(a) GENERAL RULE.—Gross income for the taxable
year of any individual includes excessive long-term care
benefits received by or for the benefit of such individual
during the taxable year.
‘‘(b) EXCESSIVE LONG-TERM CARE BENEFITS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘excessive long-term care benefits’
means the excess (if any) of—
‘‘(A) the aggregate amount from all poli-
cies which is not includible in the gross income
of the individual for the taxable year by reason
of the amendments made by the Private Long-
Term Care Insurance Incentive Amendments of
1994 (determined without regard to this sec-
tion), over
‘‘(B) the aggregate of $250 for each day
during the taxable year that such individual—
‘‘(i) was a chronically ill individual (as
defined in section 7702B(c)(2)), and
‘‘(ii) was confined to a qualified facil-
ity (as defined in section 7702B(c)(3)).
‘‘(5) ROUNDING.—If any dollar amount deter-
mined under this paragraph is not a multiple of $10,
such dollar amount shall be rounded to the nearest
multiple of $10 (or, if such dollar amount is a mul-
tiple of $5, such dollar amount shall be increased to
the next higher multiple of $10).
‘‘(6) COMPUTATION OF DAILY AMOUNT.—For
purposes of this section, the aggregate for each day
may be determined by using an average daily
amount for the month, computed by dividing the
amount of benefits for the month by the number of
days in the month.’’.
(b) The table of sections for part II of subchapter
B of chapter 1 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new item:
‘‘Sec. 91. Excessive long-term care benefits.’’.
SEC. 306. TAX RESERVES FOR QUALIFIED LONG-TERM
CARE INSURANCE CONTRACTS.
(a) Subparagraph (A) of section 807(d)(3) of the In-
ternal Revenue Code of 1986 (relating to tax reserve
methods) is amended by redesigning clause (iv) as clause
(v) and by inserting after clause (iii) the following new
clause:
‘‘(iv) QUALIFIED
LONG-TERM
CARE
INSURANCE
CONTRACTS.—In the case of
any qualified long-term care insurance con-
tract (as defined in section 7702B(c))—
‘‘(I) the reserve method pre-
scribed by the National Association of
Insurance Commissioners which cov-
ers such contract (as of the date of is-
suance), or
‘‘(II) if no reserve method has
been prescribed by the National Asso-
ciation of Insurance Commissioners
which covers such contract, a 1-year
full preliminary term method.’’.
(b)(1) Clause (iii) of section 807(d)(3)(A) of the In-
ternal Revenue Code of 1986 is amended by striking
‘‘noncancellable accident and health insurance contract,’’
and inserting ‘‘noncancellable accident and health insur-
ance contract (other than qualified long-term care insur-
ance contracts (as defined in section 7702B(c)),’’.
(2) Clause (v) of section 807(d)(3)(A) of such Code
(as redesignated by subsection (a)) is amended by striking
‘‘or (iii)’’ and inserting ‘‘(iii), or (iv)’’.
SEC. 307. EFFECTIVE DATE.
(a) Except as provided in subsection (b), the amend-
ments made by this title shall apply to policies issued in
taxable years beginning after the date of the enactment
of this Act.
(b) Policies issued prior to or during the taxable year
in which this Act is enacted that met the requirements
of the National Association of Insurance Commissioners’
Model Long-Term Care Act and Regulation when the pol-
icy was issued shall be considered qualified long-term care
insurance and the services provided under such policies
shall be considered qualified long-term care services.
TITLE IV—LONG-TERM CARE
INSURANCE STANDARDS
SEC. 400. SHORT TITLE.
This title may be cited as the ‘‘Long-Term Care
Insurance Standards Amendments of 1994’’.
SEC. 401. NATIONAL LONG-TERM CARE INSURANCE ADVI-
SORY COUNCIL.
(a) Congress shall appoint an advisory board to be
known as the National Long-Term Care Insurance Advi-
sory Council (hereinafter referred to as the ‘‘Advisory
Council’’).
(b) 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
or long-term care financing and delivery systems.
(c) The Advisory Council shall—
(1) provide advice, recommendations, and as-
sistance to Congress on matters relating to long-
term care insurance as specified in this section 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 congressional consideration pro-
posed models, standards, requirements, and proce-
dures relating to long-term care insurance, as appro-
priate; and
(4) monitor the development of the long-term
care insurance market and advise Congress concern-
ing the need for statutory changes.
(d) In order to carry out its responsibilities under this
section, 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;
(2) conduct meetings and hold hearings;
(3) conduct research (either directly or under
grant or contract);
(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 products; and develop proposed standards,
rules and procedures for regulatory programs, as
appropriate.
(e) There are authorized to be appropriated, for ac-
tivities of the Advisory Council, $1,500,000 for fiscal year
1995, and each subsequent year.
SEC. 402. POLICY REQUIREMENTS.
(a) Section 7702B of the Internal Revenue Code of
1986 (as added by section 302) is amended by inserting
after subsection (e) the following new subsection:
‘‘(f) CONSUMER PROTECTION PROVISIONS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met with respect to any contract if
any long-term care insurance policy issued under the
contract meets—
‘‘(A) the requirements of the model regula-
tion and model Act described in paragraph (2),
‘‘(B) the disclosure requirement of para-
graph (3),
‘‘(C) 
the 
requirements 
relating 
to
nonforfeitability under paragraph (4), and
‘‘(D) the requirements relating to rate sta-
bilization under the paragraph (5),
‘‘(2) REQUIREMENTS OF MODEL REGULATION
AND ACT.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to any pol-
icy if such policy meets—
‘‘(i) MODEL
REGULATION.—The fol-
lowing requirements of the model regula-
tion:
‘‘(I) Section 7A (relating to guar-
anteed renewal or noncancellability),
and the requirements of section 6B of
the model Act relating to such section
7A.
‘‘(II) Section 7B (relating to pro-
hibitions on limitations and exclu-
sions).
‘‘(III) Section 7C (relating to ex-
tension of benefits).
‘‘(IV) Section 7D (relating to
continuation or conversion of cov-
erage).
‘‘(V) Section 7E (relating to dis-
continuance and replacement of poli-
cies).
‘‘(VI) Section 8 (relating to unin-
tentional lapse).
‘‘(VII) Section 9 (relating to dis-
closure), other than Section 9F there-
of.
‘‘(VIII) Section 10 (relating to
prohibitions against post-claims un-
derwriting).
‘‘(IX) Section 11 (relating to
minimum standards).
‘‘(X) Section 12 (relating to re-
quirement to offer inflation protec-
tion), except that any requirement for
a signature on a rejection of inflation
protection shall permit the signature
to be on an application or on a sepa-
rate form.
‘‘(XI) Section 23 (relating to pro-
hibition against preexisting conditions
and probationary periods in replace-
ment policies or certificates).
‘‘(ii) MODEL ACT.—The following re-
quirements of the model Act:
‘‘(I) Section 6C (relating to pre-
existing conditions).
‘‘(II) Section 6D (relating to
prior hospitalization).
‘‘(B) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) MODEL PROVISIONS.—The terms
‘model regulation’ and ‘model Act’ mean
the long-term care insurance model regula-
tion, and the long-term care insurance
model Act, respectively, promulgated by
the National Association of Insurance
Commissioners (as adopted in January of
1993).
‘‘(ii) COORDINATION.—Any provision
of the model regulation or model Act listed
under clause (i) or (ii) of subparagraph
(A) shall be treated as including any other
provision of such regulation or Act nec-
essary to implement the provision.
‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re-
quirement of this paragraph is met with respect to
any policy if such policy meets the requirements of
section 4980D(d)(1).
‘‘(4) NONFORFEITURE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to any level
premium long-term care insurance policy if the
issuer of such policy offers to the policyholder,
including 
any 
group 
policyholder, 
a
nonforfeiture provision.
‘‘(B) REQUIREMENTS OF PROVISION.—The
nonforfeiture provision required under subpara-
graph (A) shall meet the following require-
ments:
‘‘(i) The nonforfeiture provision shall
be appropriate captioned.
‘‘(ii) The nonforfeiture provision shall
provide for a benefit available in the event
of a default in the payment of any pre-
miums and the amount of the benefit may
be adjusted subsequent to being initially
granted only as necessary to reflect
changes in claims, persistency, and interest
as reflected in changes in rates for pre-
mium paying policies approved by the Sec-
retary for the same policy form.
‘‘(iii) The nonforfeiture provision shall
provide for a benefit based on an equitable
schedule where benefits returned are equal
to the asset share remaining in the policy
and which assures that persisting policy-
holders are not required to subsidize the
cost of insurance premiums for policy-
holders who terminate coverage. The cri-
teria for determining the actuarial value of
this benefit shall be developed by the Na-
tional Long-Term Care Insurance Advisory
Committee in consultation with the Amer-
ican Society of Actuaries and the National
Association of Insurance Commissioners
and shall be approved by Congress.
‘‘(5) RATE STABILIZATION.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to any
long-term care insurance policy, including any
group master policy, if—
‘‘(i) such policy contains the minimum
rate guarantees specified in subparagraph
(B), and
‘‘(ii) the issuer of such policy meets
the requirements specified in subparagraph
(C).
‘‘(B) MINIMUM RATE GUARANTEES.—The
minimum rate guarantees specified in this sub-
paragraph are as follows:
‘‘(i) Rates under the policy shall be
guaranteed for a period of at least 3 years
from the date of issue of the policy.
‘‘(ii) After the expiration of the 3-year
period required under clause (i), any rate
increase shall be guaranteed for a period of
at least 2 years from the effective date of
such rate increase.
‘‘(iii) In the case of any individual age
75 or older who has maintained coverage
under a long-term care insurance policy for
10 years, rate increase under such policy
shall not exceed 10 percent in any 12-
month period.
‘‘(C) INCREASES IN PREMIUMS.—The re-
quirements specified in this subparagraph are
as follows:
‘‘(i) IN GENERAL.—If an issuer of any
long-term care insurance policy, including
any group master policy, plans to increase
the premium rates for a policy, such issuer
shall, at least 90 days before the effective
date of the rate increase, offer to each in-
dividual policyholder under such policy the
option to remain insured under the policy
at a reduced level of benefits which main-
tains the premium rate at the rate in effect
on the day before the effective date of the
rate increase.
‘‘(ii) INCREASE
OF
MORE
THAN
PERCENT.—
‘‘(I) IN GENERAL.—If an issuer
of any long-term care insurance pol-
icy, including any group master pol-
icy, increases premium rates for a pol-
icy by more than 50 percent in any 3-
year period—
‘‘(aa) in the case of a group
master long-term care insurance
policy, 
the 
issuer 
shall 
dis-
continue issuing all group master
long-term care insurance policies
in any State in which the issuer
issues such policy for a period of
2 years from the effective date of
such premium increase; and
‘‘(bb) in the case of an indi-
vidual long-term care insurance
policy, 
the 
issuer 
shall 
dis-
continue issuing all individual
long-term care policies in any
State in which the issuer issues
such policy for a period of 2
years from the effective date of
such premium increase.
‘‘(II) APPLICABILITY.—Subclause
(I) shall apply to any issuer of long-
term care insurance policies or any
other person that purchases or other-
wise acquires any long-term care in-
surance policies from another issuer
or person.
‘‘(D) MODIFICATIONS OR WAIVERS OF RE-
QUIREMENTS.—The Secretary may modify or
waive any of the requirements under this para-
graph if—
‘‘(i) such requirements will adversely
affect an issuer’s solvency;
‘‘(ii) such modification or waiver is re-
quired for the issuer to meet other State or
Federal requirements;
‘‘(iii) medical developments, new dis-
abling diseases, changes in long-term care
delivery, or a new method of financing
long-term care will result in changes to
mortality and morbidity patterns or as-
sumptions;
‘‘(iv) judicial interpretations of a pol-
icy’s benefit features results in unintended
claim liabilities; or
‘‘(v) in the case of a purchase or other
acquisition of long-term care insurance
policies of an issuer or other person, the
continued sale of other long-term care in-
surance policies by the purchasing issuer
or person is in the best interest of individ-
ual consumers.
‘‘(6) LONG-TERM CARE INSURANCE POLICY DE-
FINED.—For purposes of this subsection, the term
‘long-term care insurance policy’ has the meaning
given such term by section 4980C(e).’’.
SEC. 403. ADDITIONAL REQUIREMENTS FOR ISSUERS OF
LONG-TERM CARE INSURANCE POLICIES.
(a) Chapter 43 of the Internal Revenue Code of
1986 is amended by adding at the end the following
new section:
‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG-
TERM CARE INSURANCE POLICIES.
‘‘(a) GENERAL RULE.—There is hereby imposed on
any person failing to meet the requirements of subsection
(c) or (d) a tax in the amount determined under sub-
section (b).
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the amount of the tax shall not exceed the
greater of—
‘‘(A) 3 times the amount of any commis-
sions paid for each policy involved in the viola-
tion, or
‘‘(B) $10,000.
‘‘(2) WAIVER.—In the case of a failure which is
due to reasonable cause and not to willful neglect,
the Secretary may waive part or all of the tax im-
posed by subsection (a) to the extent that payment
of the tax would be excessive relative to the failure
involved.
‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require-
ments of this subjection are as follows:
‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—
‘‘(A) MODEL REGULATION.—The following
requirements of the model regulation must be
met:
‘‘(i) Section 13 (relating to application
forms and replacement coverage).
‘‘(ii) Section 14 (relating to reporting
requirements), except that the issuer shall
also report at least annually the number of
claims denied during the reporting period
for each class of business (expended as a
percentage of claims denied), other than
claims denied for failure to meet the
waiving period or because of any applicable
pre-existing condition.
‘‘(iii) Section 20 (relating to filing re-
quirements for marketing).
‘‘(iv) Section 21 (relating to standards
for marketing), including inaccurate com-
pletion of medical histories, other than sec-
tion 21C(1), 21(C)(3) and 21C(6) thereof,
except that—
‘‘(I) in addition to such require-
ments, no person shall in selling or of-
fering to sell a long-term care insur-
ance policy, misrepresent a material
fact;
‘‘(II) no such requirements shall
include a requirement to inquire or
identify whether a prospective appli-
cant or enrollee for long-term care in-
surance has accident and sickness in-
surance; and
‘‘(III) the association shall dis-
close in any long-term care insurance
solicitation the amount of compensa-
tion that the association receives from
endorsement or sale of the policy or
certificate to its members, expressed
as a percentage of annual premium
generated by such policies.
‘‘(v) Section 22 (relating to appro-
priateness of recommended purchase).
‘‘(vi) Section 24 (relating to standard
format outline of coverage).
‘‘(vii) Section 25 (relating to require-
ment to deliver shopper’s guide).
under section 7702B(b) of the Internal Revenue
Code of 1986.’.
‘‘(2) A statement that: ‘This policy is not in-
tended to be a qualified long-term care insurance
contract under section 7702B(b) of the Internal
Revenue Code of 1986.’.
‘‘(e) LONG-TERM CARE INSURANCE POLICY DE-
FINED.—For purposes of this section, the term ‘long-term
care insurance policy’ means any insurance policy or rider
advertised, marketed, offered or designed to provide cov-
erage for not less than 12 consecutive months for each
covered person on an expense incurred, indemnity, prepaid
or other basis; for one or more necessary diagnostic, pre-
ventive, therapeutic, rehabilitative, maintenance or per-
sonal care services, provided in a setting other than an
acute care unit of a hospital. Such term includes group
and individual annuities and life insurance policies or rid-
ers which provide directly or which supplement long-term
care insurance. Such term also includes a policy or rider
which provides for payment of benefits based upon cog-
nitive impairment or the loss of functional capacity. Long-
term care insurance may be issued by insurers; fraternal
benefit societies; nonprofit health, hospital and medical
service corporations; prepaid health plans; health mainte-
nance organizations or any similar organization to the ex-
tent such organizations are otherwise authorized to issue
life or health insurance. Long-term care insurance shall
not include any insurance policy which is offered primarily
to provide basic medicare supplement coverage, basic hos-
pital expense coverage, basic medical-surgical expense cov-
erage, hospital confinement indemnity coverage, major
medical expense coverage, disability income or related
asset-protection coverage, accident only coverage, specified
disease or specified accident coverage, or limited benefit
health coverage. With regard to life insurance, this term
does not include life insurance policies which accelerate
the death benefit specifically for one or more of the quali-
fying events of terminal illness, medical conditions requir-
ing extraordinary medical intervention, or permanent in-
stitutional confinement, and which provide the option of
a lump-sum payment for those benefits and in which nei-
ther the benefits nor the eligibility for the benefits is con-
ditioned upon the receipt of long-term care.’’.
(b) The table of sections for chapter 43 of the Inter-
nal Revenue Code of 1986 is amended by adding at the
end the following new item:
‘‘Sec. 4980C. Failure to meet requirements for long-term care insurance poli-
cies.’’.
SEC. 404. RELATION TO STATE LAW.
Insurance policies which have been deemed in compli-
ance with the requirements of this title and the Internal
Revenue Code of 1986 (as amended by this title) by the
State Insurance Commissioner in the State of domicile
shall be deemed approved for sale in any other State. No
State may prohibit an insurance carrier from selling out-
side the State of domicile long-term care insurance policies
which have been approved in the State of domicile.
SEC. 405. UNIFORM LANGUAGE AND DEFINITIONS.
(a) The Advisory Council shall develop recommenda-
tions for the use of uniform language and definitions in
long-term care insurance policies (as defined in section
4980C(e) of the Internal Revenue Code of 1986) for ap-
proval by Congress.
(b) Standards under subsection (a) may permit the
use of nonuniform language to the extent required to take
into account differences among States in the licensing of
nursing facilities and other providers of long-term care.
SEC. 406. EFFECTIVE DATES.
(a) The amendments made by section 402 shall apply
to contracts issued in taxable years beginning after the
date of the enactment of this Act.
(b) The amendments made by section 402 shall apply
to actions taken in taxable years beginning after the date
of the enactment of this Act.
TITLE V—FINANCIAL
ELIGIBILITY STANDARDS
SEC. 501. REVISIONS TO FINANCIAL ELIGIBILITY PROVI-
SIONS.
(a) Section 1902(a) of the Social Security Act (42
U.S.C. 1396a(a)) is amended—
(1) in paragraph (17)(C), by inserting ‘‘subject
to subsection (z),’’ before ‘‘provide’’, and
(2) by adding at the end the following new sub-
section:
‘‘(z)(1) For purposes of subsection (a)(17)(C), not-
withstanding any other provision of this title, the re-
sources of an individual, and the spouse of such individual,
which shall be used to determine financial eligibility for
nursing facility services under this title shall include—
‘‘(A) all of the real property owned by the indi-
vidual, including but not limited to, the individual’s
primary residence;
‘‘(B) all personal property of the individual, in-
cluding but not limited to, any automobiles owned by
the individual; and
‘‘(C) all liquid assets held by the individual, in-
cluding but not limited to, the asset value of any
trust established by such individual.
‘‘(2)(A) An individual shall not be eligible for nursing
facility services under this title if the total value of the
resources owned by the individual (individually or jointly
with his or her spouse, if any) exceeds the value of the
median price of a home in the geographic region in which
such individual resides.
‘‘(B) For purposes of subparagraph (A), the Sec-
retary shall establish a valuation system for single family
homes in appropriate geographic regions, taking appro-
priate account of the variation in values between urban
and rural areas. The valuation system established by the
Secretary shall be updated annually.
‘‘(C) Subparagraph (A) shall apply for a couple in
the same manner as such subparagraph applies for an in-
dividual where one member of the couple applies for nurs-
ing facility services under this title.
‘‘(D) For purposes of determining the total value of
resources in paragraph (A), the value of resources held
jointly with the individual’s spouse shall be considered
available to the individual applying for medical assistance
as determined under section 1924(d)(2).
‘‘(3) No provision under this subsection shall affect
the community spouse protections contained in section
1924.
‘‘(4) The Secretary shall provide grants to States for
demonstration projects to investigate the coordination of
private long-term care insurance benefits and financial eli-
gibility requirements under this title. Such demonstration
projects shall include, but not be limited to, investigations
of—
‘‘(A) a State policy which subtracts the
amounts paid by an individual for private long-term
care insurance from the individual’s resources which
are counted to determine financial eligibility; and
‘‘(B) a State policy which provides purchasers
of private long-term care insurance with impoverish-
ment protections by using medicaid as reinsurance.
‘‘(5) Eligibility requirements under paragraphs (1)
through (4) of this subsection shall not apply to services
provided under this title other than nursing facility serv-
ices.’’.
SEC. 502. EFFECTIVE DATE.
The amendments made by this title shall be effective
January 1, 1995.
TITLE VI—ESTABLISHMENT OF
PROGRAM FOR HOME AND
COMMUNITY-BASED 
SERV-
ICES FOR CERTAIN INDIVID-
UALS WITH DISABILITIES
SEC. 600. SHORT TITLE.
This title may be cited as the ‘‘Home and Commu-
nity-Based Services for Individuals with Disabilities Pro-
gram Amendments of 1994’’.
SEC. 601. ESTABLISHMENT OF PROGRAM.
(a) ESTABLISHMENT OF PROGRAM.—Title XIX of
the Social Security Act (42 U.S.C. 1396 et seq.) is amend-
ed by redesignating section 1931 as section 1932 and by
inserting after section 1931 the following new section:
‘‘HOME AND COMMUNITY-BASED SERVICES FOR
INDIVIDUALS WITH DISABILITIES.
‘‘SEC. 1932. (a) IN GENERAL.—There is hereby es-
tablished a program under which States will be required
to provide for home and community-based services as de-
scribed in this section on behalf of individuals with disabil-
ities who meet the requirements described in this section.
This program is established notwithstanding any other
provisions of this title, and such services must be provided
to all such individuals by a State that has an approved
State plan under this title. The State shall not have re-
sponsibility to cover such services under this title to the
extent that such services are provided to an individual
under any other public programs. All provisions of this
title shall be applicable to the program established under
this section except as are inconsistent with this section.
‘‘(b) ELIGIBILITY.—
‘‘(1) INDIVIDUALS
WITH
DISABILITIES
DE-
FINED.—In this section, the term ‘individual with
disabilities’ means any individual who falls within
one or both of the following 2 categories of individ-
uals:
‘‘(A) INDIVIDUALS REQUIRING HELP WITH
ACTIVITIES OF DAILY LIVING.—An individual of
any age who—
‘‘(i) requires hands-on or standby as-
sistance, supervision, or cueing (as defined
in regulations) to perform 3 or more activi-
ties of daily living (as defined in paragraph
(2)), and
‘‘(ii) is expected to require such as-
sistance, supervision, or cueing over a pe-
riod of at least 100 days.
‘‘(B) INDIVIDUALS WITH MODERATE COG-
NITIVE OR MENTAL IMPAIRMENT.—An individ-
ual of any age—
‘‘(i) whose score, on a standard men-
tal status protocol (or protocols) appro-
priate for measuring the individual’s par-
ticular condition specified by the Secretary,
indicates either moderate cognitive impair-
ment or moderate mental impairment, or
both;
‘‘(ii) who displays symptoms of one or
more serious behavioral problems (that is
on a list of such problems specified by the
Secretary) which create a need for super-
vision to prevent harm to self or others;
and
‘‘(iii) who is expected to meet the con-
ditions of clauses (i) or (ii) over a period
of at least 100 days.
‘‘(2) ACTIVITY
OF
DAILY
LIVING
DE-
FINED.—In this section, the term ‘activity of
daily living’ means any of the following: eating,
toileting (dressing and bathing), transferring,
and mobility.
‘‘(c) SCREENING.—
‘‘(1) INITIAL SCREENING.—The State shall pro-
vide for an initial screening of all individuals who
appear to have some reasonable likelihood of being
an individual with disabilities. Such a screening may
be conducted by a qualified case manager, or by any
other person or entity designated by the State under
criteria specified by the Secretary. Such assessment
shall be conducted using a uniform protocol specified
by the Secretary. A State may specify the collection
of addition information, or an alternative protocol, if
approved in advance by the Secretary. Such assess-
ment shall include, at a minimum an assessment of
the individual’s—
‘‘(A) ability or inability to perform any ac-
tivities of daily living;
‘‘(B) health status;
‘‘(C) mental status;
‘‘(D) current living arrangement; and
‘‘(E) use of formal and informal long-term
care support systems.
‘‘(2) PERIODIC REASSESSMENT.—For any indi-
vidual who receives services under this program, the
State shall arrange for a reassessment of the indi-
vidual’s need for services under this section after a
significant change in an individual’s condition that
may affect the individual’s need for such services,
within 6 months of the most recent assessment, or
for such longer period in such cases as a significant
change in an individual’s condition that may affect
such determination is unlikely.
‘‘(d) CARE PLAN DEVELOPMENT.—
‘‘(1) IN GENERAL.—The State shall assign a
qualified case manager to any individual who quali-
fies for coverage under this section. The qualified
case manager shall arrange for the development of,
or develop, an individualized written plan of care
based upon the comprehensive assessment. The care
plan shall be developed under any criteria that may
be specified by the State based upon any criteria
that the Secretary may specify. At a minimum, such
plan shall identify—
‘‘(A) the long-term problems and needs of
the individual;
‘‘(B) the mix of formal and informal serv-
ices and support systems that are available to
meet the long-term care and service needs of
the individual;
‘‘(C) goals for the individual which shall be
measurable to the extent practicable;
‘‘(D) the appropriate services necessary to
meet such needs; and
‘‘(E) the manner in which covered services
will be provided.
‘‘(2) PROVISION OF SERVICES.—
‘‘(A) COVERED SERVICES.—The qualified
case manager, in consultation with the individ-
ual, the individual’s family and the individual’s
primary medical care provider, shall arrange
for, or provide, the appropriate covered services
in a cost-effective manner, consistent with ob-
taining quality care. The qualified case man-
ager also shall assist in making the necessary
arrangements for the delivery of such services
and the implementation of the care plan.
‘‘(B) NON-COVERED SERVICES.—The State
may require the qualified case manager to as-
sist the individual in obtaining non-covered
services, at the individual’s own expense, or
through other programs that may be available.
Nothing in this section shall be construed to
make the State responsible for payment under
this section for any services that are not cov-
ered services, as defined in subsection (f)(1), or
from prohibiting the individual, or other indi-
viduals, from paying for non-covered services or
services in excess of the amount or type ap-
proved by the case manager.
‘‘(C) INDIVIDUAL
CHOICE.—The accept-
ance of benefits under this provision is a vol-
untary choice of the individual or his or her
representative. Nothing in this section shall be
construed to require an individual to accept the
services available under this section, or to ac-
cept benefits under this section instead of en-
tering a nursing facility, skilled nursing facility,
or intermediate care facility for the mentally re-
tarded. An individual shall not be denied other
covered services under this section solely be-
cause he or she refuses to accept one such cov-
ered service, unless the failure to accept that
one covered service would vitiate the effective-
ness of the other covered services, and no cost-
effective alternative acceptable to the individual
is reasonably available. To the extent possible,
the case manager shall follow the choice of an
individual with disabilities regarding which cov-
ered services to receive and the providers who
will provide such services.
‘‘(3) COORDINATION.—The plan shall specify
how the plan will integrate services provided under
this section with services provided under titles V and
XX of this Act and the Housing and Urban Devel-
opment Act, programs under the Older Americans
Act of 1965, and any other Federal or State pro-
grams that provide services or assistance targeted to
the aged and individuals with disabilities.
‘‘(4) INVOLVEMENT
OF
INDIVIDUALS.—The
qualified case manager shall be responsible for ar-
ranging for the involvement of appropriate persons
in the comprehensive assessment and development of
the plan of care. In addition, the plan of care shall
be developed and implemented in close consultation
with the individual and individual’s family.
‘‘(5) CARE PLAN MONITORING.—The qualified
case manager shall monitor the delivery of services
to the individual, the qualify of care provided, and
the status of individual. Periodic reassessments of
the status and needs of the individual, and revisions
of the care plan, shall be made by the qualified case
manager as appropriate. Such reassessments shall
be conducted not less than every 6 months. If the
individual is no longer eligible for benefits as a re-
sult of improved health conditions or death, the
qualified case manager, in consultation with the in-
dividual’s primary medical care provider, shall dis-
charge the case.
‘‘(6) QUALIFIED CASE MANAGER.—In this sec-
tion, the term ‘qualified case manager’ means a per-
son or entity which—
‘‘(A) provides case management services to
an individual who is eligible for home and com-
munity-based services;
‘‘(B) is not a relative of the individual re-
ceiving such case management services;
‘‘(C) has experience in assessing individ-
uals’ functional and cognitive impairment;
‘‘(D) has experience or has been trained in
establishing, and in periodically reviewing and
revising, individual community care plans, and
in the provision of case management services to
individuals who are eligible for home and com-
munity-based services under this section;
‘‘(E) completes the individual care plan in
a timely manner and reviews and discusses new
and revised individual care plans with the indi-
vidual or such individual’s representative or
both; and
‘‘(F) meets such other standards estab-
lished by the Secretary or the State which may
include standards which assure—
‘‘(i) the quality of the case manage-
ment services; and
‘‘(ii) that individuals whose home and
community-based services such person or
entity manages are not at risk of financial
exploitation due to such a manager.
‘‘(7) RELATIVE DEFINED.—In this section, the
term ‘relative’ means an individual bearing a rela-
tionship to another individual which is described in
paragraphs (1) through (8) of section 152(a) of the
Internal Revenue Code of 1986.
‘‘(e) TYPES OF PROVIDERS AND REQUIREMENTS FOR
PARTICIPATION.—
‘‘(1) IN GENERAL.—The State plan shall speci-
fy—
‘‘(A) the types of services eligible to par-
ticipate in the program under the plan; and
‘‘(B) any requirements for participation
applicable to each type of service provider.
‘‘(2) SERVICE
PROVIDER
DEFINED.—In this
section, the term ‘service provider’ means a provider
who is licensed under State law or who meets other
criteria as the Secretary or State may specify.
‘‘(f) COVERED SERVICES.—
‘‘(1) IN GENERAL.—In this section, the term
‘covered services’ includes—
‘‘(A) case management;
‘‘(B) adult day services;
‘‘(C) habilitation and rehabilitation serv-
ices;
‘‘(D) home health care;
‘‘(E) respite services; and
‘‘(F) hospice services.
‘‘(2) DELIVERY OF SERVICES.—Subject to the
limits in subsection (g), covered services may be de-
livered in an individual’s home, a range of commu-
nity residential arrangements, or outside the home.
‘‘(3) AMOUNT, SCOPE, AND DURATION.—In es-
tablishing the amount, scope, and duration of serv-
ices required to be provided, covered services shall be
treated as required services under this title.
‘‘(g) EXCLUSIONS AND LIMITATIONS.—
‘‘(1) IN GENERAL.—The following are specifi-
cally excluded from coverage under this section:
‘‘(A) Room and board.
‘‘(B) Items or services otherwise covered to
the extent that such items or services are cov-
ered under an insurance plan or program other
than a State health program.
‘‘(C) Services provided to an individual
who otherwise would be institutionalized in a
nursing facility or intermediate care facility for
the mentally retarded, unless the State, or if
delegated, the qualified case manager reason-
ably estimates (under methods specified by the
Secretary) that the cost of covered services
under this section would be lower than if the in-
dividual were so institutionalized.
‘‘(D) Services specified in the plan of care
which are not specified as covered services
under subsection (f)(1).
‘‘(2) 
TAKING
INTO
ACCOUNT
INFORMAL
CARE.—A State plan may take into account, in de-
termining the amount and array of services made
available to covered individuals with disabilities, the
availability of informal care.
‘‘(h) MAINTENANCE OF EFFORT.—The State plan
must provide assurances that, in the case of an individual
receiving medical assistance for home and community-
based services under this title as of the date of the enact-
ment of this section, the State will continue to make avail-
able (either under this title or otherwise) to such individ-
ual an appropriate level of assistance for home and com-
munity-based services, taking into account the level of as-
sistance provided as of such date and the individual’s need
for home and community-based services.
‘‘(i) QUALITY ASSURANCE AND SAFEGUARDS.—
‘‘(1) QUALITY
ASSURANCE.—The State shall
ensure and monitor the quality of services, includ-
ing—
‘‘(A) safeguarding the health and safety of
individuals with disabilities;
‘‘(B) establishing minimum standards for
care managers and providers and enforcing
those standards,
‘‘(C) establishing the minimum competency
requirements for provider employees who pro-
vide direct services under this section and how
the competency of such employees will be en-
forced;
‘‘(D) 
obtaining 
meaningful 
consumer
input, including consumer surveys that measure
the extent to which participants receive the
services described in the plan of care and par-
ticipant satisfaction with such services;
‘‘(E) participation in quality assurance ac-
tivities; and
‘‘(F) specifying the role of the long-term
care ombudsman (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 protecting the rights of
individuals with disabilities.
‘‘(2) SAFEGUARDS.—
‘‘(A) CONFIDENTIALITY.—The State shall
provide safeguards which restrict the use or dis-
closure of information concerning applicants
and beneficiaries to purposes directly connected
with the administration of the program.
‘‘(B) SAFEGUARDS AGAINST ABUSE.—The
State shall provide safeguards against physical,
emotional, or financial abuse or exploitation in
the provision of care management and covered
services.
‘‘(j) PROVIDER REIMBURSEMENT.—
‘‘(1) PAYMENT
METHODS.—The State shall
specify the payment methods to be used to reim-
burse providers and case managers for services fur-
nished under the plan. Such methods may include
reimbursement on a fee-for-service basis, prepay-
ment on a capitation basis, or a combination of
these methods. The State, if it chooses, may provide
the case manager with authority to negotiate rates
with individual providers.
‘‘(2) PAYMENT RATES.—The State shall specify
the methods and criteria to be used to set payment
rates for services furnished under the plan. In addi-
tion to any other requirements, such payments must
be sufficient to ensure that the requirements of
1902(a)(30)(A) are satisfied.
‘‘(3) PAYMENT IN FULL.—Except as specified
in subsection (d)(2)(B), the State shall restrict pay-
ment for covered services to those providers that
agree to accept the payment under the plan (at rates
established pursuant to subparagraph (2)) as pay-
ment in full for services furnished under this section.
‘‘(k) APPROVAL OF STATE PLAN AMENDMENTS.—
Each state shall take whatever action is necessary to have
an amendment to its State plan under this title approved
by October 1, 1996, that implements this section for that
State not later than October 1, 1997, except that where
an Act of the State legislature is necessary to effectuate
such State plan amendment and said legislature is not in
session as of the date of the enactment of this section,
the State shall have said amendment approved not later
than 6 months after the commencement of the session of
its legislature that begins immediately subsequent to such
date of enactment, if such date is later than October 1,
1996.’’.
SEC. 602. INCREASED RESOURCE DISREGARDS FOR NURS-
ING FACILITY RESIDENTS.
Section 1902(a)(10) of the Social Security Act (42
U.S.C. 1396a(a)(10)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (F); and
(2) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G) that, in determining the eligibility of
any individual who is an inpatient in a nursing
facility or intermediate care facility for the
mentally retarded, in the case of an unmarried
individual, the first $12,000 of resources shall
be disregarded.’’.
TITLE VII—ASSET TRANSFERS
SEC. 701. TRANSFERS OF ASSETS.
Section 1917(c)(1)(B)(i) of the Social Security Act
(42 U.S.C. 1396p(c)(1)(B)(i)) is amended to read as
follows:
‘‘(B)(i) The look-back date specified in this sub-
paragraph is a date that is 60 months before the
date specified in clause (ii).’’.
SEC. 702. TREATMENT OF CERTAIN TRUSTS.
Section 1917(c)(2) of the Social Security Act (42
U.S.C. 1396p(c)(2)) is amended by adding at the end the
following new flush sentences:
‘‘In order for the income or assets of an income cap trust,
nonprofit asset trust or other such trust arrangement to
be exempt under this paragraph, the trust must be irrev-
ocable and all amounts remaining in the beneficiary’s ac-
count must be paid to the State upon the death of the
beneficiary. For purposes of this section, the term ‘trust’
shall not include a personal service contract annuity for
a family member within the 60-month period even if such
transfer is for fair market value. The Secretary shall pro-
hibit, by regulation, the use of family limited partnerships
to convert available assets into an exempt status; pur-
chases of interests in third-party assets for the purpose
of rendering otherwise includable assets unavailable, and
not subject to liens; and purchase of care services agree-
ments for past services by family members to reduce
countable assets.’’.
SEC. 703. EFFECTIVE DATE.
The amendments made by this title shall be effective
January 1, 1995.
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