[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2407 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 2407

 To amend title XIX of the Social Security Act to improve coverage of 
 nursing facility services under the medicaid program and to amend the 
Internal Revenue Code of 1986 to clarify the tax treatment of long-term 
                            care insurance.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 14, 1993

Mrs. Kennelly introduced the following bill; which was referred jointly 
      to the Committees on Energy and Commerce and Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend title XIX of the Social Security Act to improve coverage of 
 nursing facility services under the medicaid program and to amend the 
Internal Revenue Code of 1986 to clarify the tax treatment of long-term 
                            care insurance.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Partnership for Long-Term Care Act 
of 1993''.

                 TITLE I--MEDICAID PROGRAM IMPROVEMENTS

SEC. 101. REQUIRING MEDICALLY NEEDY PROGRAM FOR INDIVIDUALS WITH 
              INCOMES BELOW THE POVERTY LEVEL.

    (a) In General.--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 subparagraph (E);
            (2) by inserting ``and'' at the end of subparagraph (F); 
        and
            (3) by inserting after subparagraph (F) the following new 
        subparagraph:
                    ``(G)(i) for making medical assistance available 
                under subparagraph (C) for all individuals--
                            ``(I) whose income (taking into account the 
                        costs incurred for medical care or for any 
                        other type of remedial care recognized under 
                        State law) does not exceed 100 percent of the 
                        official poverty level (as defined by the 
                        Office of Management and Budget, and revised 
                        annually in accordance with section 673(2) of 
                        the Omnibus Budget Reconciliation Act of 1981) 
                        applicable to a family of the size involved, 
                        and
                            ``(II) whose resources (as determined under 
                        section 1613 for purposes of the supplemental 
                        security income program) do not exceed such 
                        level (at least equal to the maximum amount of 
                        resources that an individual may have and 
                        obtain benefits under that program) as the 
                        State establishes; and
                    ``(ii) for including in medical assistance under 
                clause (i)--
                            ``(I) for individuals described in 
                        subparagraph (C)(ii), at least the care and 
                        services listed in paragraphs (1) through (5) 
                        and (17) of section 1905(a), and
                            ``(II) for other individuals at least 
                        nursing facility services (and, to the extent 
                        applicable, services under a waiver under 
                        section 1915(c));''.
    (b) Effective Date.--(1) The amendments made by this section apply 
(except as provided under paragraph (2)) to payments under title XIX of 
the Social Security Act for calendar quarters beginning on or after 
January 1, 1994, without regard to whether or not final regulations to 
carry out such amendments have been promulgated by such date.
    (2) 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 legislation 
appropriating funds) in order for the plan to meet the additional 
requirements imposed 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 requirements before the first day of the first calendar 
quarter beginning after the close of the first regular session 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.

SEC. 102. PREMIUM SUBSIDY PROGRAM.

    (a) Requirement for State Plan.--Section 1902(a) of the Social 
Security Act (42 U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (54);
            (2) in the paragraph (55) inserted by section 4602(a)(3) of 
        the Omnibus Budget Reconciliation Act of 1990 (hereafter 
        referred to as ``OBRA-1990''), by striking the period at the 
        end and inserting a semicolon;
            (3) by redesignating the paragraph (55) inserted by section 
        4604(b)(3) of OBRA-1990 as paragraph (56), by transferring and 
        inserting it after the paragraph (55) inserted by section 
        4602(a)(3) of such Act, and by striking the period at the end 
        and inserting a semicolon;
            (4) by placing paragraphs (57) and (58), inserted by 
        section 4751(a)(1)(C) of OBRA-1990, immediately after paragraph 
        (56), as redesignated by paragraph (3);
            (5) in the paragraph (58) inserted by section 4751(a)(1)(C) 
        of OBRA-1990, by striking the period at the end and inserting a 
        semicolon;
            (6) by redesignating the paragraph (58) inserted by section 
        4752(c)(1)(C) of OBRA-1990 as paragraph (59) and by 
        transferring and inserting it after the paragraph (58) inserted 
        by section 4751(a)(1)(C) of such Act;
            (7) by striking the period at the end of paragraph (59) (as 
        so redesignated) and inserting ``; and''; and
            (8) by inserting after paragraph (59) (as so redesignated) 
        the following new paragraph:
            ``(60) meet the requirements of section 1928 (relating to a 
        premium subsidy program for low income individuals to purchase 
        long-term care insurance).''.
    (b) Premium Subsidy Program.--Title XIX of such Act is amended--
            (1) by transferring section 1928 to the end;
            (2) by redesignating section 1928 as section 1931; and
            (3) by inserting after section 1927 the following new 
        section:

                       ``premium subsidy program

    ``Sec. 1928. (a) In order to meet the requirements of this section, 
a State must establish and maintain a program to assist low income 
individuals in the purchase of qualified long-term care insurance.
    ``(b) Under the program, each low income individual (as defined in 
subsection (c)(1) is entitled to payment of a subsidy, expressed as a 
percentage of the premium otherwise required for a qualified long-term 
care insurance, equal to 50 percent minus 40 percent multiplied by the 
factor (P-100 percent)/100 percent, where `P' is the individual's 
family's income expressed as a percent of the official poverty level.
    ``(c) In this section:
            ``(1) The term `low income individual' means an individual 
        in a family--
                    ``(A) the income of which (as determined under 
                section 1612 for purposes of the supplemental security 
                income program) is at least 100 percent, but does not 
                exceed 200 percent, of the official poverty level, and
                    ``(B) the resources of which (as determined under 
                section 1613 for purposes of the supplemental security 
                income program) do not exceed an amount established by 
                the State.
        The resource level established by a State under subparagraph 
        (B) may not be less than twice the maximum amount of resources 
        that an individual may have and obtain benefits under the 
        supplemental security income program under title XVI.
            ``(2) The term `official poverty line' means such term as 
        defined by the Office of Management and Budget, and revised 
        annually in accordance with section 673(2) of the Omnibus 
        Budget Reconciliation Act of 1981.
            ``(3) The term `qualified long-term care insurance' means 
        insurance against the costs of nursing facility services and 
        related long-term care services which meets requirements 
        established by the State. In establishing such requirements, 
        the State shall take into consideration model requirements 
        established with respect to such insurance by the National 
        Association of Insurance Commissioners as well as requirements 
        imposed with respect to medicare supplemental policies under 
        section 1882.''.
    (c) Effective Date.--(1) The amendments made by this section apply 
(except as provided under paragraph (2)) to payments under title XIX of 
the Social Security Act for calendar quarters beginning on or after 
Janu ary 1, 1994, without regard to whether or not final regulations to 
carry out such amendments have been promulgated by such date.
    (2) 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 legislation 
appropriating funds) in order for the plan to meet the additional 
requirement imposed 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 this 
additional requirement before the first day of the first calendar 
quarter beginning after the close of the first regular session 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 II--MEDICAID AMENDMENTS RELATING TO TREATMENT OF PAYMENTS UNDER 
              QUALIFIED LONG-TERM CARE INSURANCE POLICIES

SEC. 201. PROTECTION OF ASSETS TO THE EXTENT OF PAYMENTS UNDER 
              QUALIFIED LONG-TERM CARE INSURANCE POLICIES.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)), as amended by section 102(a), is amended--
            (1) by striking ``and'' at the end of paragraph (59);
            (2) by striking the period at the end of paragraph (60) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (60) the following new 
        paragraph:
            ``(61) notwithstanding paragraph (17), in determining the 
        eligibility of an individual for medical assistance under the 
        plan, provide for reducing the amount of assets the individual 
        is considered to have by the amount of any payments made with 
        respect to, and for the benefit of, the individual under a 
        policy of qualified long-term care insurance (as defined in 
        section 1928(c)(3)).''.
    (b) Effective Date.--(1) The amendments made by this section apply 
(except as provided under paragraph (2)) to payments under title XIX of 
the Social Security Act for calendar quarters beginning on or after 
January 1, 1994, without regard to whether or not final regulations to 
carry out such amendments have been promulgated by such date.
    (2) 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 legislation 
appropriating funds) in order for the plan to meet the additional 
requirement imposed 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 this 
additional requirement before the first day of the first calendar 
quarter beginning after the close of the first regular session 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--TAX TREATMENT OF LONG-TERM CARE INSURANCE

SEC. 301. QUALIFIED LONG-TERM CARE INSURANCE DEFINED AND TREATED AS 
              ACCIDENT OR HEALTH INSURANCE.

    (a) In General.--Section 818 of the Internal Revenue Code of 1986 
(relating to definitions) is amended by adding at the end thereof the 
following new subsection:
    ``(g) Qualified Long-Term Care Insurance Treated as Accident or 
Health Insurance.--For purposes of this subchapter--
            ``(1) In general.--Any reference to noncancellable accident 
        or health insurance contracts shall be treated as including a 
        reference to qualified long-term care insurance.
            ``(2) Qualified long-term care insurance.--For purposes of 
        this subsection--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), the term `qualified long-term care insurance' 
                means insurance under a policy or rider, issued by a 
                qualified issuer, to be advertised, marketed, offered, 
                or designed to provide coverage--
                            ``(i) for not less than 12 consecutive 
                        months for each covered person,
                            ``(ii) on an expense incurred, indemnity, 
                        prepaid or other basis,
                            ``(iii) for 1 or more necessary or 
                        medically necessary diagnostic services, 
                        preventive services, therapeutic services, 
                        rehabilitation services, maintenance services, 
                        or personal care services,
                            ``(iv) for the loss of functional capacity, 
                        and
                            ``(v) provided in a setting other than an 
                        acute care unit of a hospital.
                    ``(B) Qualified issuer.--For purposes of 
                subparagraph (A), the term `qualified issuer' means any 
                of the following provided they are subject to the 
                jurisdiction and regulation of at least one State 
                insurance department:
                            ``(i) Private insurance company.
                            ``(ii) Fraternal benefit society.
                            ``(iii) Nonprofit health corporation.
                            ``(iv) Nonprofit hospital corporation.
                            ``(v) Nonprofit medical service 
                        corporation.
                            ``(vi) Prepaid health plan.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1993.

SEC. 302. QUALIFIED LONG-TERM CARE INSURANCE TREATED AS ACCIDENT AND 
              HEALTH INSURANCE FOR PURPOSES OF EXCLUSION FOR BENEFITS 
              RECEIVED UNDER SUCH INSURANCE AND FOR EMPLOYER 
              CONTRIBUTIONS FOR SUCH INSURANCE.

    (a) In General.--Section 105 of the Internal Revenue Code of 1986 
(relating to amounts received under accident and health plans) is 
amended by adding at the end thereof the following new subsection:
    ``(j) Special Rules Relating to Qualified Long-Term Care 
Insurance.--For purposes of section 104, this section, and section 
106--
            ``(1) Benefits treated as payable for sickness, etc.--Any 
        benefit received through qualified long-term care insurance (as 
        defined in section 818(g)) shall be treated as amounts received 
        through accident or health insurance for personal injuries or 
        sickness.
            ``(2) Expenses for which reimbursement provided under 
        qualified long-term care insurance treated as incurred for 
        medical care or functional loss.--Expenses incurred by an 
        individual to the extent of benefits paid under qualified long-
        term care insurance (as defined in section 818(g)) shall be 
        treated for purposes of subsection (b) as incurred for medical 
        care (as defined in section 213(d)) and for purposes of 
        subsection (c) as payment for the permanent loss or loss of use 
        of a member or function of the body or the permanent 
        disfigurement of the taxpayer, his spouse, any dependent of the 
        taxpayer, or any parent of the taxpayer of his spouse.
            ``(3) References to accident and health plans.--Any 
        reference to an accident or health plan shall be treated as 
        including a reference to a plan providing qualified long-term 
        care insurance (as defined in section 818(g)).''
    (b) Current Deduction for Employer Premiums for Long-Term Care 
Policies.--Subparagraph (B) of section 404(b)(2) of such Code (relating 
to plans providing certain deferred benefits) is amended by striking 
``or'' at the end of clause (i), by striking the period at the end of 
clause (ii) and inserting ``, or'', and by adding at the end thereof 
the following new clause:
                            ``(iii) any benefit provided under a policy 
                        of qualified long-term care insurance (as 
                        defined in section 818(g)) through the payment 
                        (in whole or in part) of premiums by an 
                        employer pursuant to a plan for its active or 
                        retired employees, but only if any refund of 
                        premiums is applied to reduce the future costs 
                        of the plan or increase benefits under the 
                        plan.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 303. EARLY DISTRIBUTION PENALTY TAX NOT TO APPLY TO AMOUNTS 
              WITHDRAWN FROM QUALIFIED PLANS, INDIVIDUAL RETIREMENT 
              PLANS, ETC. FOR QUALIFIED LONG-TERM INSURANCE.

    (a) In General.--Paragraph (1) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to 10-percent additional tax on early 
distributions from qualified retirement plans) is amended by adding at 
the end thereof the following new subparagraph:
                    ``(D) Distributions for qualified long-term care 
                insurance premiums.--Any distribution to the extent 
                used during the taxable year to pay premiums for any 
                policy of qualified long-term care insurance (as 
                defined in section 818(g)) or to pay for services 
                described in section 818(g)(2)(A)(iii) (relating to 
                services provided under long-term care insurance) for 
                the benefit of the payee or distributee, the spouse of 
                the payee or distributee, any dependent of the payee or 
                distributee, or any parent of the payee or distributee 
                or such spouse.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1993.

SEC. 304. DEDUCTION OF EXPENSES RELATING TO QUALIFIED LONG-TERM CARE.

    (a) In General.--Paragraph (1) of section 213(d) of the Internal 
Revenue Code of 1986 (relating to the definition of medical care) is 
amended--
            (1) by striking ``or'' at the end of subparagraph (B), and
            (2) by redesignating subparagraph (C) as subparagraph (D) 
        and by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) for those services described in section 
                818(g)(2)(A)(iii) (relating to services provided under 
                qualified long-term care insurance), or''.
    (b) 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) 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)'' 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)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 305. TREATMENT OF PREFUNDED LONG-TERM CARE BENEFITS.

    (a) In General.--
            (1) Paragraph (2) of section 419A(c) of the Internal 
        Revenue Code of 1986 (relating to additional reserve for post-
        retirement medical and life insurance benefits) is amended by 
        striking ``or'' at the end of subparagraph (A), by striking the 
        period at the end of subparagraph (B) and inserting ``, or'', 
        and by adding at the end thereof the following new 
        subparagraph:
                    ``(C) post-retirement long-term care benefits (as 
                defined in section 818(g)) to be provided to covered 
                employees.''
            (2) The paragraph heading for such paragraph (2) is amended 
        by inserting ``, long-term care,'' after ``medical''.
    (b) Reserve for Long-term Care Benefits Must Be 
Nondiscriminatory.--
            (1) Paragraph (1) of section 419A(e) of such Code (relating 
        to special limitations on reserves for medical benefits or life 
        insurance benefits provided to retired employees) is amended by 
        inserting ``, long-term care benefits,'' after ``medical 
        benefits'' each place it appears.
            (2) The subsection heading for section 419A(e) of such Code 
        is amended by inserting ``, long-term care benefits,'' after 
        ``medical benefits''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 306. QUALIFIED LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED IN 
              CAFETERIA PLANS.

    (a) In General.--Paragraph (2) of section 125(c) of the Internal 
Revenue 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.--For 
                purposes of subparagraph (A), a plan shall not be 
                treated as providing deferred compensation by reason of 
                providing qualified long-term care insurance (as 
                defined in section 818(g)) if--
                            ``(i) the employee may not surrender such 
                        insurance for cash, and
                            ``(ii) the terms of the plan permits, the 
                        employee may elect to continue the insurance 
                        upon cessation of participation in the plan.''
    (b) Long-term Care Insurance Included as Qualified Benefit.--
Paragraph (2) of section 125(e) of such Code (defining qualified 
benefits) is amended by striking ``and'' at the end of subparagraph 
(A), by striking the period at the end of subparagraph (B) and 
inserting ``, and'', and by adding at the end thereof the following new 
subparagraph:
                    ``(C) qualified long-term care insurance (as 
                defined in section 818(g)).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

                                 <all>

HR 2407 IH----2