I
103D CONGRESS
1ST SESSION
H. R. 2816
To amend the Internal Revenue Code of 1986 with respect to the treatment
of long-term care insurance policies, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 30, 1993
Mrs. JOHNSON of Connecticut (for herself, Mr. GOSS, Mr. BILIRAKIS, and Mr.
SUNDQUIST) introduced the following bill; which was referred jointly to
the Committees on Ways and Means and Energy and Commerce
A BILL
To amend the Internal Revenue Code of 1986 with respect
to the treatment of long-term care insurance policies,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) IN GENERAL.—This Act may be cited as the
‘‘Long-Term Care Security Act of 1993’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Section 1. Short title; table of contents.
TITLE I—TAX TREATMENT OF LONG-TERM CARE INSURANCE
Sec. 101. Treatment of long-term care insurance or plans.
Sec. 102. Exclusion for benefits provided under long-term care insurance; inclu-
sion of employer-provided coverage.
Sec. 103. Qualified long-term services treated as medical care.
Sec. 104. Certain exchanges of life insurance contracts for long-term care in-
surance contracts not taxable.
Sec. 105. Exclusion from gross income for amounts withdrawn from individual
retirement plans or 401(k) plans for long-term care insurance.
Sec. 106. Tax treatment of accelerated death benefits under life insurance con-
tracts.
Sec. 107. Effective date.
TITLE II—PROTECTION OF ASSETS UNDER MEDICAID THROUGH
USE OF QUALIFIED LONG-TERM CARE INSURANCE
Sec. 201. Protection of assets through use of qualified long-term care insur-
ance.
TITLE I—TAX TREATMENT OF
LONG-TERM CARE INSURANCE
SEC. 101. TREATMENT OF LONG-TERM CARE INSURANCE
OR PLANS.
(a) GENERAL RULE.—Subpart E of part I of sub-
chapter L of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after section 818 the follow-
ing new section:
‘‘SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE
OR PLANS.
‘‘(a) GENERAL RULE.—For purposes of this part, a
long-term care insurance contract shall be treated as an
accident or health insurance contract.
‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘long-term care insurance contract’ means
any insurance contract issued if—
‘‘(A) the only insurance protection pro-
vided under such contract is coverage of quali-
fied long-term care services and benefits inci-
dental to such coverage,
‘‘(B) the maximum benefit under the pol-
icy for expenses incurred for any day does not
exceed $200,
‘‘(C) such contract does not cover expenses
incurred for services or items to the extent that
such expenses are reimbursable under title
XVIII of the Social Security Act or would be so
reimbursable but for the application of a de-
ductible or coinsurance amount,
‘‘(D) such contract is guaranteed renew-
able,
‘‘(E) such contract does not have any cash
surrender value, and
‘‘(F) all refunds of premiums, and all pol-
icyholder dividends or similar amounts, under
such contract are to be applied as a reduction
in future premiums or to increase future bene-
fits.
‘‘(2) SPECIAL RULES.—
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be treated
as described in paragraph (1)(A) by reason of
payments being made on a per diem or other
periodic basis without regard to the expenses
incurred during the period to which the pay-
ments relate.
‘‘(B) CONTRACT
MAY
COVER
MEDICARE
REIMBURSABLE
EXPENSES
WHERE
MEDICARE
IS SECONDARY PAYOR.—Paragraph (1)(C) shall
not apply to expenses which are reimbursable
under title XVIII of the Social Security Act
only as a secondary payor.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(F) shall not apply to any refund of pre-
miums on surrender or cancellation of the con-
tract.
‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, pre-
ventive, therapeutic, and rehabilitative services, and
maintenance or personal care services, which—
‘‘(A) are required by a chronically ill indi-
vidual in a qualified facility, and
‘‘(B) are provided pursuant to a plan of
care prescribed by a licensed health care practi-
tioner.
‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘chronically
ill individual’ means any individual who has
been certified by a licensed health care practi-
tioner as—
‘‘(i)(I) being unable to perform (with-
out substantial assistance from another in-
dividual) at least 2 activities of daily living
(as defined in subparagraph (B)) for a pe-
riod of at least 90 days due to a loss of
functional capacity, or
‘‘(II) having a level of disability simi-
lar (as determined by the Secretary in con-
sultation with the Secretary of Health and
Human Services) to the level of disability
described in subclause (I), or
‘‘(ii) having a similar level of disabil-
ity due to cognitive impairment.
‘‘(B) ACTIVITIES OF DAILY LIVING.—For
purposes of subparagraph (A), each of the fol-
lowing is an activity of daily living:
‘‘(i) MOBILITY.—The process of walk-
ing or wheeling on a level surface which
may include the use of an assistive device
such as a cane, walker, wheelchair, or
brace.
‘‘(ii) DRESSING.—The overall complex
behavior of getting clothes from closets
and drawers and then getting dressed.
‘‘(iii) TOILETING.—The act of going
to the toilet room for bowel and bladder
function, transferring on and off the toilet,
cleaning after elimination, and arranging
clothes or the ability to voluntarily control
bowel and bladder function, or in the event
of incontinence, the ability to maintain a
reasonable level of personal hygiene.
‘‘(iv) TRANSFER.—The process of get-
ting in and out of bed or in and out of a
chair or wheelchair.
‘‘(v) EATING.—The process of getting
food from a plate or its equivalent into the
mouth.
‘‘(3) QUALIFIED FACILITY.—The term ‘quali-
fied facility’ means—
‘‘(A) a nursing, rehabilitative, hospice, or
adult day care facility (including a hospital, re-
tirement home, nursing home, skilled nursing
facility, intermediate care facility, or similar in-
stitution)—
‘‘(i) which is licensed under State law,
or
‘‘(ii) which is a certified facility for
purposes of title XVIII or XIX of the So-
cial Security Act, or
‘‘(B) an individual’s home if a licensed
health care practitioner certifies that without
home care the individual would have to be cared
for in a facility described in subparagraph (A).
‘‘(4) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is to provide needed assistance with any of the ac-
tivities of daily living described in paragraph (2)(B).
‘‘(5) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(d) CONTINUATION COVERAGE EXCISE TAX NOT
TO APPLY.—This section shall not apply in determining
whether section 4980B (relating to failure to satisfy con-
tinuation coverage requirements of group health plans) ap-
plies.
‘‘(e) INFLATION ADJUSTMENT
OF $200 BENEFIT
LIMIT.—
‘‘(1) IN GENERAL.—In the case of a calendar
year after 1994, the $200 amount contained in sub-
section (b)(1)(B) shall be increased for such cal-
endar year by the medical care cost adjustment for
such calendar year. If any increase determined
under the preceding sentence is not a multiple of
$10, such increase shall be rounded to the nearest
multiple of $10.
‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For
purposes of paragraph (1), the medical care cost ad-
justment for any calendar year is the percentage (if
any) by which—
‘‘(A) the medical care component of the
Consumer Price Index (as defined in section
1(f)(5)) for August of the preceding calendar
year, exceeds
‘‘(B) such component for August of 1993.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart E is amended by inserting after the item
relating to section 818 the following new item:
‘‘Sec. 818A. Treatment of long-term care insurance or plans.’’
SEC. 102. EXCLUSION FOR BENEFITS PROVIDED UNDER
LONG-TERM CARE INSURANCE; INCLUSION
OF EMPLOYER-PROVIDED COVERAGE.
(a) IN GENERAL.—Subsection (a) of section 104 of
the Internal Revenue Code of 1986 (relating to compensa-
tion for injuries or sickness) is amended by striking ‘‘and’’
at the end of paragraph (4), by striking the period at the
end of paragraph (5) and inserting ‘‘, and’’, and by insert-
ing after paragraph (4) the following new paragraph:
‘‘(6) benefits under a long-term care insurance
contract (as defined in section 818A(b)).’’
(b) INCLUSION
OF
EMPLOYER-PROVIDED
COV-
ERAGE.—Section 106 of such Code (relating to contribu-
tions by employer to accident and health plans) is amend-
ed by adding at the end thereof the following sentence:
‘‘The preceding sentence shall not apply to any plan pro-
viding coverage for long-term care services.’’
SEC. 103. QUALIFIED LONG-TERM SERVICES TREATED AS
MEDICAL CARE.
(a) GENERAL RULE.—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 redesignating subparagraph (C) as
subparagraph (D), and by inserting after subparagraph
(B) the following new subparagraph:
‘‘(C) for qualified long-term care services
(as defined in section 818A(c)), or’’.
(b) DEDUCTION FOR LONG-TERM CARE EXPENSES
FOR PARENT OR GRANDPARENT.—Section 213 of such
Code (relating to deduction for medical expenses) is
amended by adding at the end the following new sub-
section:
‘‘(g) SPECIAL RULE FOR CERTAIN LONG-TERM CARE
EXPENSES.—For purposes of subsection (a), the term ‘de-
pendent’ shall include any parent or grandparent of the
taxpayer for whom the taxpayer has expenses for long-
term care services described in section 818A(c), but only
to the extent of such expenses.’’
(c) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) of
such Code (as redesignated by subsection (a)) is
amended by striking ‘‘subparagraphs (A) and (B)’’
and inserting ‘‘subparagraphs (A), (B), and (C)’’.
(2)(A) Paragraph (1) of section 213(d) of such
Code is amended by adding at the end thereof the
following new flush sentence:
‘‘In the case of a long-term care insurance contract
(as defined in section 818A), only eligible long-term
care premiums (as defined in paragraph (10)) shall
be taken into account under subparagraph (D).’’
(B) Subsection (d) of section 213 is amended
by adding at the end the following new paragraph:
‘‘(10) ELIGIBLE
LONG-TERM
CARE
PRE-
MIUMS.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any long-term care insurance con-
tract (as defined in section 818A) covering an
individual, to the extent such amount does not
exceed the limitation determined under the fol-
lowing table:
‘‘In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less ...................................................................
$200
More than 40 but not more than 50 .........................
375
More than 50 but not more than 60 .........................
750
More than 60 but not more than 70 .........................
1,600
More than 70 .............................................................
2,000.
‘‘(B) INDEXING.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1993, each dollar amount contained
in paragraph (1) shall be increased by the
medical care cost adjustment of such
amount for such calendar year. If any in-
crease determined under the preceding sen-
tence is not a multiple of $10, such in-
crease shall be rounded to the nearest mul-
tiple of $10.
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the
medical care cost adjustment for any cal-
endar year is the percentage (if any) by
which—
‘‘(I) the medical care component
of the Consumer Price Index (as de-
fined in section 1(f)(5)) for August of
the preceding calendar year, exceeds
‘‘(II) such component for August
of 1991.’’
(3) 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 sub-
paragraph 
(A) 
and 
inserting 
‘‘paragraph
(1)(D)’’.
(4) 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. 104. CERTAIN EXCHANGES OF LIFE INSURANCE CON-
TRACTS FOR LONG-TERM CARE INSURANCE
CONTRACTS NOT TAXABLE.
Subsection (a) of section 1035 of the Internal Reve-
nue Code of 1986 (relating to certain exchanges of insur-
ance contracts) is amended by striking the period at the
end of paragraph (3) and inserting ‘‘; or’’, and by adding
at the end thereof the following new paragraph:
‘‘(4) a contract of life insurance or an endow-
ment or annuity contract for a long-term care insur-
ance contract (as defined in section 818A).’’
SEC. 105. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
WITHDRAWN 
FROM 
INDIVIDUAL 
RETIRE-
MENT PLANS OR 401(k) PLANS FOR LONG-
TERM CARE INSURANCE.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
ACCOUNTS AND SECTION 401(k) PLANS FOR
LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount includible in the
gross income of an individual for the taxable year by rea-
son of qualified distributions during such taxable year
shall not exceed the excess of—
‘‘(1) the amount which would (but for this sec-
tion) be so includible by reason of such distributions,
over
‘‘(2) the aggregate premiums paid by such indi-
vidual during such taxable year for any long-term
care insurance contract (as defined in section 818A)
for the benefit of such individual or the spouse of
such individual.
‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of
this section, the term ‘qualified distribution’ means any
distribution to an individual from an individual retirement
account or a section 401(k) plan if such individual has
attained age 591⁄2 on or before the date of the distribution
(and, in the case of a distribution used to pay premiums
for the benefit of the spouse of such individual, such
spouse has attained age 591⁄2 on or before the date of the
distribution).
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The
term ‘individual retirement account’ has the mean-
ing given such term by section 408(a).
‘‘(2) SECTION 401(k) PLAN.—The term ‘section
401(k) plan’ means any employer plan which meets
the requirements of section 401(a) and which in-
cludes a qualified cash or deferred arrangement (as
defined in section 401(k)).
‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—
‘‘(1) WITHDRAWALS
CANNOT
EXCEED
ELEC-
TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR
DEFERRED ARRANGEMENT.—This section shall not
apply to any distribution from a section 401(k) plan
to the extent the aggregate amount of such distribu-
tions for the use described in subsection (a) exceeds
the aggregate employer contributions made pursuant
to the employee’s election under section 401(k)(2).
‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI-
FICATION.—A plan shall not be treated as failing to
satisfy the requirements of section 401, and an ar-
rangement shall not be treated as failing to be a
qualified cash or deferred arrangement (as defined
in section 401(k)(2)), merely because under the plan
or arrangement distributions are permitted which
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, any amount paid or advanced to an individual
under a life insurance contract on the life of an in-
sured—
‘‘(A) who is a terminally ill individual, or
‘‘(B) who is a chronically ill individual (as
defined in section 818A(c)(2)) who is confined
to a qualified facility (as defined in section
818A(c)(3)(A)),
shall be treated as an amount paid by reason of the
death of such insured.
‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur-
poses of this subsection, the term ‘terminally ill indi-
vidual’ means an individual who has been certified
by a physician as having an illness or physical condi-
tion which can reasonably be expected to result in
death in 12 months or less.
‘‘(3) PHYSICIAN.—For purposes of this sub-
section, the term ‘physician’ has the meaning given
to such term by section 213(d)(4).’’
SEC. 107. EFFECTIVE DATE.
The amendments made by this title shall apply to tax-
able years beginning after December 31, 1993.
TITLE II—PROTECTION OF AS-
SETS 
UNDER 
MEDICAID
THROUGH USE OF QUALIFIED
LONG-TERM 
CARE 
INSUR-
ANCE
SEC. 201. PROTECTION OF ASSETS THROUGH USE OF
QUALIFIED LONG-TERM CARE INSURANCE.
(a) IN GENERAL.—Title XIX of the Social Security
Act is amended by adding at the end the following new
section:
‘‘SPECIAL RULES FOR ASSET DISREGARD IN THE CASE OF
QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS
‘‘SEC. 1931. (a) IN GENERAL.—Each State plan
under this title, as a condition for the receipt of payment
under section 1903(a) with respect to long-term care serv-
ices (as defined in subsection (c)(1)), shall provide that
in determining the eligibility of an individual for medical
assistance under the plan with respect to such services
there shall be disregarded some or all of the individual’s
assets which are attributable (as determined under sub-
section (c)(2)) to coverage under a qualified long-term
care insurance contract (as defined in subsection (b)).
‘‘(b) QUALIFIED
LONG-TERM
CARE
INSURANCE
CONTRACT DEFINED.—In this section, the term ‘qualified
long-term care insurance contract’ means, with respect to
a State, a long-term care insurance contract (as defined
in section 818A(b) of the Internal Revenue Code of 1986)
which—
‘‘(1) provides such protection against the costs
of receiving long-term care services as the State may
require by law;
‘‘(2) provides that benefits under the contract
shall be paid without regard to eligibility for medical
assistance under this title; and
‘‘(3) meets such other requirements (such as re-
quirements relating to premiums, disclosure, mini-
mum benefits, rights of conversion, and standards
for claims processing) as the State may determine to
be appropriate.
‘‘(c) OTHER DEFINITIONS.—In this section:
‘‘(1) LONG-TERM CARE SERVICES.—The term
‘long-term care services’ means nursing facility serv-
ices, home health care services, and home and com-
munity-based services, and includes such other simi-
lar items and services described in section 1905(a)
as a State may specify.
‘‘(2) ATTRIBUTION RULES.—An individual’s as-
sets are considered to be ‘attributable’ to a qualified
long-term care insurance contract to the extent spec-
ified under the State plan. Such a plan shall provide
for at least one of the following:
‘‘(A) All assets are considered attributable
if the insurance contract provides coverage for
at least a specified period of coverage (of not
less than 3 years and of not more than 6 years)
for long-term care services.
‘‘(B) An amount of assets, up to the dollar
limitation on benefits for long-term care serv-
ices under the contract, is considered attrib-
utable to the contract.’’.
(b) 
CONFORMING
AMENDMENT.—Section
1902(a)(17)(A) of such Act (42 U.S.C. 1396a(a)(17)(A))
is amended by inserting ‘‘and section 1931’’ after ‘‘objec-
tives of this title’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply (except as provided under
paragraph (2)) to payments to States under title
XIX of the Social Security Act for calendar quarters
beginning on or after one year after the date of the
enactment of this Act, without regard to whether
regulations to implement such amendment are pro-
mulgated by such date.
(2) DELAY PERMITTED IF STATE LEGISLATION
REQUIRED.—In the case of a State plan for medical
assistance under title XIX of the Social Security Act
which the Secretary of Health and Human Services
determines requires State legislation (other than leg-
islation authorizing or appropriating funds) in order
for the plan to meet the additional requirements im-
posed by the amendments made by this section, the
State plan shall not be regarded as failing to comply
with the requirements of such title solely on the
basis of its failure to meet these additional require-
ments before the first day of the first calendar quar-
ter beginning after the close of the first regular ses-
sion of the State legislature that begins after the
date of the enactment of this Act. For purposes of
the previous sentence, in the case of a State that has
a 2-year legislative session, each year of such session
shall be deemed to be a separate regular session of
the State legislature.
TITLE III—STUDIES
SEC. 301. FEASIBILITY OF ENCOURAGING HEALTH CARE
PROVIDERS TO DONATE SERVICES TO HOME-
BOUND PATIENTS.
The Comptroller General of the United States shall
conduct a study on the feasibility of encouraging health