[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2122 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 2122

 To improve the public and private financing of long-term care and to 
 strengthen the public safety net for elderly and non-elderly disabled 
    individuals who lack adequate protection against long-term care 
                   expenses, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                 May 17 (legislative day, May 16), 1994

 Mr. Cohen introduced the following bill; which was read the first time

_______________________________________________________________________

                                 A BILL


 
 To improve the public and private financing of long-term care and to 
 strengthen the public safety net for elderly and non-elderly disabled 
    individuals who lack adequate protection against long-term care 
                   expenses, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Public/Private 
Long-Term Care Partnership Act of 1994''.
    (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title; table of contents.
           TITLE I--TAX TREATMENT OF LONG-TERM CARE INSURANCE

Sec. 101. Qualified long-term care services treated as medical care.
Sec. 102. Treatment of long-term care insurance.
Sec. 103. Treatment of benefits under qualified long-term care 
                            policies.
Sec. 104. Tax reserves for qualified long-term care insurance policies.
Sec. 105. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 106. Tax treatment of companies issuing qualified accelerated 
                            death benefit riders.
            TITLE II--STANDARDS FOR LONG-TERM CARE INSURANCE

Sec. 201. Policy requirements.
Sec. 202. Additional requirements for issuers of long-term care 
                            insurance policies.
Sec. 203. Coordination with State requirements.
Sec. 204. Uniform language and definitions.
Sec. 205. Effective dates.
  TITLE III--INCENTIVES TO ENCOURAGE THE PURCHASE OF PRIVATE INSURANCE

Sec. 301. Public information and education program.
Sec. 302. Assets or resources disregarded under the medicaid program.
Sec. 303. Distributions from individual retirement accounts for the 
                            purchase of long-term care insurance 
                            coverage.
        TITLE IV--IMPROVED PUBLIC SAFETY NET FOR LONG-TERM CARE

Sec. 401. References in title.
Sec. 402. Spenddown eligibility for nursing facility residents.
Sec. 403. Increase in personal needs allowance for institutionalized 
                            individuals.
Sec. 404. Increased resource disregard for nursing facility residents.
Sec. 405. Informing nursing home residents about availability of 
                            assistance for home and community-based 
                            services.
Sec. 406. Establishment of State programs furnishing home and 
                            community-based services to certain 
                            individuals with disabilities.
Sec. 407. Reports by the Secretary on certain issues relating to long-
                            term care.
Sec. 408. Report by the Secretary on long-term care services for 
                            chronically ill individuals.
Sec. 409. Chronic Care Commission.
Sec. 410. Demonstration projects on acute and long-term care 
                            integration.

           TITLE I--TAX TREATMENT OF LONG-TERM CARE INSURANCE

SEC. 101. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by striking subparagraph (C), and by inserting after subparagraph 
(B) the following new subparagraphs:
                    ``(C) for qualified long-term care services (as 
                defined in subsection (f)),
                    ``(D) for insurance covering medical care referred 
                to in--
                            ``(i) subparagraphs (A) and (B), or
                            ``(ii) subparagraph (C), but only if such 
                        insurance is provided under a qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b)) and the deduction under this 
                        section for amounts paid for such insurance is 
                        not disallowed under section 7702B(d)(4), or
                    ``(E) for premiums under part B of title XVIII of 
                the Social Security Act, relating to supplementary 
                medical insurance for the aged.''
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to the deduction for medical, dental, etc., expenses) is 
amended by adding at the end the following new subsection:
    ``(f) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, curing, mitigating, 
        treating, preventive, therapeutic, and rehabilitative services, 
        and maintenance and personal care services (whether performed 
        in a residential or nonresidential setting), which--
                    ``(A) are required by an individual during any 
                period the individual is an incapacitated individual 
                (as defined in paragraph (2)),
                    ``(B) have as their primary purpose--
                            ``(i) the provision of needed assistance 
                        with 1 or more activities of daily living (as 
                        defined in paragraph (3)), or
                            ``(ii) protection from threats to health 
                        and safety due to severe cognitive impairment, 
                        and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed professional (as defined 
                in paragraph (4)).
            ``(2) Incapacitated individual.--The term `incapacitated 
        individual' means any individual who has been certified by a 
        licensed professional as--
                    ``(A) being unable to perform, without substantial 
                assistance from another individual, at least 2 
                activities of daily living (as defined in paragraph 
                (3)),
                    ``(B) having moderate cognitive impairment as 
                defined by the Secretary in consultation with the 
                Secretary of Health and Human Services, or
                    ``(C) having a level of disability similar (as 
                determined by the Secretary in consultation with the 
                Secretary of Health and Human Services) to the level of 
                disability described in subparagraph (A).
            ``(3) Activities of daily living.--Each of the following is 
        an activity of daily living:
                    ``(A) Eating.
                    ``(B) Toileting.
                    ``(C) Transferring.
                    ``(D) Bathing.
                    ``(E) Dressing.
                    ``(F) Continence.
            ``(4) Licensed professional.--
                    ``(A) In general.--The term `licensed professional' 
                means--
                            ``(i) a physician or registered 
                        professional nurse,
                            ``(ii) a qualified community care case 
                        manager (as defined in subparagraph (B)), or
                            ``(iii) any other individual who meets such 
                        requirements as may be prescribed by the 
                        Secretary after consultation with the Secretary 
                        of Health and Human Services.
                    ``(B) Qualified community care case manager.--The 
                term `qualified community care case manager' means an 
                individual or entity which--
                            ``(i) has experience or has been trained in 
                        providing case management services and in 
                        preparing individual care plans;
                            ``(ii) has experience in assessing 
                        individuals to determine their functional and 
                        cognitive impairment; and
                            ``(iii) meets such requirements as may be 
                        prescribed by the Secretary after consultation 
                        with the Secretary of Health and Human 
                        Services.
            ``(5) Certain services not included.--The term `qualified 
        long-term care services' shall not include any services 
        provided to an individual--
                    ``(A) by a relative (directly or through a 
                partnership, corporation, or other entity) unless the 
                relative is a licensed professional with respect to 
                such services, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in paragraphs (1) through (8) of section 152(a).''.
    (c) Technical Amendments.--Paragraph (6) of section 213(d) is 
amended--
            (1) by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)'', and
            (2) by striking ``paragraph (1)(C) applies'' in 
        subparagraph (A) and inserting ``subparagraphs (C) and (D) of 
        paragraph (1) apply''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 102. TREATMENT OF LONG-TERM CARE INSURANCE.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE.

    ``(a) In General.--For purposes of this title--
            ``(1) a qualified long-term care insurance policy (as 
        defined in subsection (b)) shall be treated as an accident and 
        health insurance contract,
            ``(2) any plan of an employer providing coverage under a 
        qualified long-term care insurance policy shall be treated as 
        an accident and health plan with respect to such coverage,
            ``(3) amounts (other than policyholder dividends (as 
        defined in section 808) or premium refunds) received under a 
        qualified long-term care insurance policy (including 
        nonreimbursement payments described in subsection (b)(6)) shall 
        be treated--
                    ``(A) as amounts received for personal injuries and 
                sickness, and
                    ``(B) as amounts received for the permanent loss of 
                a function of the body and as amounts computed with 
                reference to the nature of injury under section 105(c) 
                to the extent that such amounts do not exceed the 
                dollar amount in effect under subsection (g) for the 
                taxable year,
            ``(4) amounts paid for a qualified long-term care insurance 
        policy described in subsection (b)(6) shall be treated as 
        payments made for insurance for purposes of section 
        213(d)(1)(D), and
            ``(5) a qualified long-term care insurance policy shall be 
        treated as a guaranteed renewable contract subject to the rules 
        of section 816(e).
    ``(b) Qualified Long-Term Care Insurance Policy.--For purposes of 
this title--
            ``(1) In general.--The term `qualified long-term care 
        insurance policy' means any long-term care insurance policy 
        that--
                    ``(A) limits benefits under such policy to 
                incapacitated individuals (as defined in section 
                213(f)(2)), and
                    ``(B) satisfies the requirements of paragraphs (2), 
                (3), (4), and (5).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a policy if such policy 
        provides that premium payments may not be made earlier than the 
        date such payments would have been made if the policy provided 
        for level annual payments over the life expectancy of the 
        insured or 20 years, whichever is shorter. A policy shall not 
        be treated as failing to meet the requirements of the preceding 
        sentence solely by reason of a provision in the policy 
        providing for a waiver of premiums if the insured becomes an 
        incapacitated individual (as defined in section 219(f)(2)).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met if the policy does not provide for a cash 
        value or other money that can be paid, assigned, pledged as 
        collateral for a loan, or borrowed, other than as provided in 
        paragraph (4).
            ``(4) Refunds of premiums and dividends.--The requirements 
        of this paragraph are met with respect to a policy if such 
        policy provides that--
                    ``(A) policyholder dividends are required to be 
                applied as a reduction in future premiums or to 
                increase benefits described in subsection (a)(2),
                    ``(B) refunds of premiums upon a partial surrender 
                or a partial cancellation are required to be applied as 
                a reduction in future premiums, and
                    ``(C) any refund on the death of the insured, or on 
                a complete surrender or cancellation of the policy, 
                cannot exceed the aggregate premiums paid under the 
                policy.
        Any refund on a complete surrender or cancellation of the 
        policy shall be includable in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
            ``(5) Coordination with other entitlements.--The 
        requirements of this paragraph are met with respect to a policy 
        if such policy does not cover expenses incurred to the extent 
        that such expenses are also covered under title XVIII of the 
        Social Security Act.
            ``(6) Nonreimbursement payments permitted.--For purposes of 
        subsection (a)(4), a policy is described in this paragraph if, 
        under the policy, payments are made to (or on behalf of) an 
        insured individual on a per diem or other periodic basis 
        without regard to the expenses incurred or services rendered 
        during the period to which the payments relate.
    ``(c) Treatment of Long-Term Care Insurance Policies.--For purposes 
of this title, any amount received or coverage provided under a long-
term care insurance policy that is not a qualified long-term care 
insurance policy shall not be treated as an amount received for 
personal injuries or sickness or provided under an accident and health 
plan and shall not be treated as excludable from gross income under any 
provision of this title.
    ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations, in the case of 
any long-term care insurance coverage (whether or not qualified) 
provided by rider on a life insurance contract, the following rules 
shall apply:
            ``(1) In general.--This section shall apply as if the 
        portion of the contract providing such coverage is a separate 
        contract or policy.
            ``(2) Premiums and charges for long-term care coverage.--
        Premium payments for long-term care insurance policy coverage 
        and charges against the life insurance contract's cash 
        surrender value (within the meaning of section 7702(f)(2)(A)) 
        for such coverage, shall be treated as premiums for purposes of 
        subsection (b)(2).
            ``(3) Application of 7702.--Section 7702(c)(2) (relating to 
        the guideline premium limitation) shall be applied by 
        increasing, as of any date, the guideline premium limitation 
        with respect to a life insurance contract by an amount equal 
        to--
                    ``(A) the sum of any charges (but not premium 
                payments) described in paragraph (2) made to that date 
                under the contract, reduced by
                    ``(B) any such charges the imposition of which 
                reduces the premiums paid for the contract (within the 
                meaning of section 7702(f)(1)).
            ``(4) Application of section 213.--No deduction shall be 
        allowed under section 213(a) for charges against the life 
        insurance contract's cash surrender value described in 
        paragraph (2), unless such charges are includable in income as 
        a result of the application of section 72(e)(10) and the 
        coverage provided by the rider is a qualified long-term care 
        insurance policy under subsection (b).
For purposes of this subsection, the term `portion' means only the 
terms and benefits under a life insurance contract that are in addition 
to the terms and benefits under the contract without regard to the 
coverage under a long-term care insurance policy.
    ``(e) Prohibition of Discrimination.--
            ``(1) In general.--Notwithstanding subsection (a)(3), any 
        plan of an employer providing coverage under a qualified long-
        term care insurance policy shall qualify as an accident and 
        health plan with respect to such coverage only if--
                    ``(A) except as provided in paragraph (2), the plan 
                allows all employees to participate, and
                    ``(B) the benefits provided under the plan are 
                identical for all employees that choose to participate.
            ``(2) Exclusion of certain employees.--For purposes of 
        paragraph (1), there may be excluded from consideration--
                    ``(A) employees who have not completed 3 years of 
                service;
                    ``(B) employees who have not attained age 25;
                    ``(C) part-time or seasonal employees; and
                    ``(D) employees who are nonresident aliens and who 
                receive no earned income (within the meaning of section 
                911(d)(2)) from the employer which constitutes income 
                from sources within the United States (within the 
                meaning of section 861(a)(3)).
            ``(3) Applicability.--The provisions of this subsection 
        shall not apply to any plan of an employer providing coverage 
        under a qualified long-term care insurance policy until the 
        Secretary of Health and Human Services certifies to the 
        Secretary that provisions that are substantially similar to the 
        provisions of this subsection apply to all health benefit 
        plans.
    ``(f) Employer Plans Not Treated as Deferred Compensation Plans.--
For purposes of this title, a plan of an employer providing coverage 
under a qualified long-term care insurance policy shall not be treated 
as a plan which provides for deferred compensation by reason of 
providing such coverage.
    ``(g) Dollar Amount for Purposes of Gross Income Exclusion.--
            ``(1) Dollar amount.--
                    ``(A) In general.--The dollar amount in effect 
                under this subsection shall be $150 per day.
                    ``(B) Inflation adjustments.--In the case of any 
                taxable year beginning in a calendar year after 1996, 
                the dollar amount contained in subparagraph (A) shall 
                be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        by substituting `calendar year 1995' for 
                        `calendar year 1992' in subparagraph (B) 
                        thereof.
            ``(2) Aggregation rule.--For purposes of this subsection, 
        all policies issued with respect to the same taxpayer shall be 
        treated as one policy.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing long-term care insurance coverage under a life insurance 
contract and to provide for the proper allocation of amounts between 
the long-term care and life insurance portions of a contract.''.
    (b) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

                              ``Sec. 7702B. Treatment of long-term care 
                                        insurance.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to policies issued after December 31, 1995. Solely for 
        purposes of the preceding sentence, a policy issued prior to 
        January 1, 1996, that satisfies the requirements of a qualified 
        long-term care insurance policy as set forth in section 
        7702B(b) shall, on and after January 1, 1996, be treated as 
        having been issued after December 31, 1995.
            (2) Transition rule.--If, after the date of enactment of 
        this Act and before January 1, 1996, a policy providing for 
        long-term care insurance coverage is exchanged solely for a 
        qualified long-term care insurance policy (as defined in 
        section 7702B(b)), no gain or loss shall be recognized on the 
        exchange. If, in addition to a qualified long-term care 
        insurance policy, money or other property is received in the 
        exchange, then any gain shall be recognized to the extent of 
        the sum of the money and the fair market value of the other 
        property received. For purposes of this paragraph, the 
        cancellation of a policy providing for long-term care insurance 
        coverage and reinvestment of the cancellation proceeds in a 
        qualified long-term care insurance policy within 60 days 
        thereafter shall be treated as an exchange.
            (3) Issuance of certain riders permitted.--For purposes of 
        determining whether section 7702 or 7702A of the Internal 
        Revenue Code of 1986 applies to any contract, the issuance, 
        whether before, on, or after December 31, 1995, of a rider on a 
        life insurance contract providing long-term care insurance 
        coverage shall not be treated as a modification or material 
        change of such contract.

SEC. 103. TREATMENT OF BENEFITS UNDER QUALIFIED LONG-TERM CARE 
              POLICIES.

    (a) Exclusion from COBRA Continuation Requirements.--Subparagraph 
(A) of section 4980B(f)(2) of the Internal Revenue Code of 1986 
(defining continuation coverage) is amended by adding at the end the 
following new sentence: ``The coverage shall not include coverage for 
qualified long-term care services (as defined in section 213(f)).''.
    (b) Benefits Included in Cafeteria Plans.--Section 125(f) of the 
Internal Revenue Code of 1986 (defining qualified benefits) is amended 
by adding at the end the following new sentence: ``Such term includes 
coverage under a qualified long-term care insurance policy (as defined 
in section 7702B(b)) which is includible in gross income only because 
it exceeds the dollar limitation of section 105(c)(2).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 104. TAX RESERVES FOR QUALIFIED LONG-TERM CARE INSURANCE POLICIES.

    (a) In General.--Subparagraph (A) of section 807(d)(3) of the 
Internal Revenue Code of 1986 (relating to tax reserve methods) is 
amended by redesignating clause (iv) as clause (v) and by inserting 
after clause (iii) the following new clause:
                            ``(iv) Qualified long-term care insurance 
                        policies.--In the case of any qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b))--
                                    ``(I) the reserve method prescribed 
                                by the National Association of 
                                Insurance Commissioners which covers 
                                such policy (as of the date of 
                                issuance); or
                                    ``(II) if no reserve method has 
                                been prescribed by the National 
                                Association of Insurance Commissioners 
                                which covers such policy, a 1-year full 
                                preliminary term method.''.
    (b) Conforming Amendment.--Clause (v) of section 807(d)(3)(A) of 
the Internal Revenue Code of 1986 (relating to tax reserve methods) is 
amended in the matter preceding subclause (I) by striking ``(ii) or 
(iii)'' and inserting ``(ii), (iii), or (iv)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 105. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) General Rule.--Section 101 (relating to certain death benefits) 
is amended by adding at the end the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        distributed to an individual under a life insurance contract on 
        the life of an insured who is a terminally ill individual (as 
        defined in paragraph (3)) shall be treated as an amount paid by 
        reason of the death of such insured.
            ``(2) Necessary conditions.--
                    ``(A) Paragraph (1) shall not apply to any 
                distribution unless--
                            ``(i) the distribution is not less than the 
                        present value (determined under subparagraph 
                        (B)) of the reduction in the death benefit 
                        otherwise payable in the event of the death of 
                        the insured, and
                            ``(ii) the percentage derived by dividing 
                        the cash surrender value of the contract, if 
                        any, immediately after the distribution by the 
                        cash surrender value of the contract 
                        immediately before the distribution is equal to 
                        or greater than the percentage derived by 
                        dividing the death benefit immediately after 
                        the distribution by the death benefit 
                        immediately before the distribution.
                    ``(B) The present value of the reduction in the 
                death benefit occurring by reason of the distribution 
                shall be determined by--
                            ``(i) using as the discount rate a rate not 
                        in excess of the highest rate set forth in 
                        subparagraph (C), and
                            ``(ii) assuming that the death benefit (or 
                        the portion thereof) would have been paid at 
                        the end of a period that is no more than the 
                        insured's life expectancy from the date of the 
                        distribution or 12 months, whichever is 
                        shorter.
                    ``(C) Rates.--The rates set forth in this 
                subparagraph are the following:
                            ``(i) the 90-day Treasury bill yield,
                            ``(ii) the rate described as Moody's 
                        Corporate Bond Yield Average-Monthly Average 
                        Corporates as published by Moody's Investors 
                        Service, Inc., or any successor thereto, for 
                        the calendar month ending 2 months before the 
                        date on which the rate is determined,
                            ``(iii) the rate used to compute the cash 
                        surrender values under the contract during the 
                        applicable period plus 1 percent per annum, and
                            ``(iv) the maximum permissible interest 
                        rate applicable to policy loans under the 
                        contract.
            ``(3) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who, as determined by the insurer on the basis of an 
        acceptable certification by a licensed physician, has an 
        illness or physical condition which can reasonably be expected 
        to result in death within 12 months of the date of 
        certification.
            ``(4) Application of section 72(e)(10).--For purposes of 
        section 72(e)(10) (relating to the treatment of modified 
        endowment contracts), section 72(e)(4)(A)(i) shall not apply to 
        distributions described in paragraph (1).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1995.

SEC. 106. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider on a life insurance 
        contract which provides for a distribution to an individual 
        upon the insured becoming a terminally ill individual (as 
        defined in section 101(g)(3)).''.
    (b) Definitions of Life Insurance and Modified Endowment 
Contracts.--Paragraph (5)(A) of section 7702(f) is amended by striking 
``or'' at the end of clause (iv), by redesignating clause (v) as clause 
(vi), and by inserting after clause (iv) the following new clause:
                            ``(v) any qualified accelerated death 
                        benefit rider (as defined in section 818(g)), 
                        or''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to contracts issued after December 31, 1995.
            (2) Transitional rule.--For purposes of determining whether 
        section 7702 or 7702A of the Internal Revenue Code of 1986 
        applies to any contract, the issuance, whether before, on, or 
        after December 31, 1995, of a rider on a life insurance 
        contract permitting the acceleration of death benefits (as 
        described in section 101(g) of such Code) shall not be treated 
        as a modification or material change of such contract.

            TITLE II--STANDARDS FOR LONG-TERM CARE INSURANCE

SEC. 201. POLICY REQUIREMENTS.

    (a) Application of Consumer Protection Provisions to Qualified 
Policies.--Section 7702B(b)(1)(B) (as added by section 102) is amended 
by inserting ``and of subsection (f)'' after ``and (5)''.
    (b) Consumer Protection Provisions.--Section 7702B (as added by 
section 102) is amended by redesignating subsection (f) as subsection 
(h) and by inserting after subsection (e) the following new 
subsections:
    ``(f) Consumer Protection Provisions.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to any long-term care insurance policy if the 
        policy meets--
                    ``(A) the requirements of the model regulation and 
                model Act described in paragraph (2),
                    ``(B) the disclosure requirement of paragraph (3),
                    ``(C) the requirements relating to 
                nonforfeitability under paragraph (4), and
                    ``(D) the requirements relating to rate 
                stabilization under paragraph (5).
            ``(2) Requirements of model regulation and act.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any long-term care 
                insurance policy if such policy meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 7A (relating to 
                                guaranteed renewal or 
                                noncancellability), and the 
                                requirements of section 6B of the model 
                                Act relating to such section 7A.
                                    ``(II) Section 7B (relating to 
                                prohibitions on limitations and 
                                exclusions).
                                    ``(III) Section 7C (relating to 
                                extension of benefits).
                                    ``(IV) Section 7D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 7E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 8 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 9 (relating to 
                                disclosure), other than section 9F 
                                thereof.
                                    ``(VIII) Section 10 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 11 (relating to 
                                minimum standards).
                                    ``(X) Section 12 (relating to 
                                requirement to offer inflation 
                                protection), 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 separate form.
                                    ``(XI) Section 23 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting 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 regulation, 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 necessary to implement 
                        the provision.
            ``(3) Tax disclosure requirement.--The requirement of this 
        paragraph is met with respect to any long-term care insurance 
        policy if such policy meets the requirements of section 
        4980C(d)(1).
            ``(4) Nonforfeiture requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any 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 subparagraph (A) shall meet 
                the following requirements:
                            ``(i) The nonforfeiture provision shall be 
                        appropriately captioned.
                            ``(ii) The nonforfeiture provision shall 
                        provide for a benefit available in the event of 
                        a default in the payment of any premiums 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 premium paying policies 
                        approved by the Secretary for the same policy 
                        form.
                            ``(iii) The nonforfeiture provision shall 
                        provide at least one of the following:
                                    ``(I) Reduced paid-up insurance.
                                    ``(II) Extended term insurance.
                                    ``(III) Shortened benefit period.
                                    ``(IV) Other similar offerings 
                                approved by the Secretary.
            ``(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 subparagraph 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 increases under such policy shall not 
                        exceed 10 percent in any 12-month period.
                    ``(C) Increases in premiums.--The requirements 
                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 individual 
                        policyholder under such policy the option to 
                        remain insured under the policy at a reduced 
                        level of benefits which maintains the premium 
                        rate at the rate in effect on the day before 
                        the effective date of the rate increase.
                            ``(ii) Increases of more than 50 percent.--
                        If an issuer of any long-term care insurance 
                        policy, including any group master policy, 
                        increases premium rates for a policy by more 
                        than 50 percent in any 3-year period--
                                    ``(I) in the case of a group master 
                                long-term care insurance policy, the 
                                issuer shall discontinue 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
                                    ``(II) in the case of an individual 
                                long-term care insurance policy, the 
                                issuer shall discontinue 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.
                        This clause shall apply to any issuer of long-
                        term care insurance policies or any other 
                        person that purchases or otherwise acquires any 
                        long-term care insurance policies from another 
                        issuer or person.
                    ``(D) Modifications or waivers of requirements.--
                The Secretary may modify or waive any of the 
                requirements under this paragraph if--
                            ``(i) such requirements will adversely 
                        affect an issuer's solvency;
                            ``(ii) such modification or waiver is 
                        required for the issuer to meet other State or 
                        Federal requirements;
                            ``(iii) medical developments, new disabling 
                        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 assumptions;
                            ``(iv) judicial interpretation of a 
                        policy'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 
                        insurance policies by the purchasing issuer or 
                        person is in the best interests of individual 
                        consumers.
    ``(g) Long-Term Care Insurance Policy Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `long-term care insurance policy' means any product which is 
        advertised, marketed, or offered as long-term care insurance 
        (as defined in paragraph (2)).
            ``(2) Long-term care insurance.--
                    ``(A) In general.--The term `long-term care 
                insurance' means any insurance policy or rider--
                            ``(i) advertised, marketed, offered, or 
                        designed to provide coverage 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 or 
                        medically necessary diagnostic, preventive, 
                        therapeutic, rehabilitative, maintenance, or 
                        personal care services provided in a setting 
                        other than an acute care unit of a hospital; 
                        and
                            ``(ii) issued by insurers, fraternal 
                        benefit societies, nonprofit health, hospital, 
                        and medical service corporations, prepaid 
                        health plans, health maintenance organizations 
                        or any similar organization to the extent such 
                        organizations are otherwise authorized to issue 
                        life or health insurance.
                Such term includes group and individual annuities and 
                life insurance policies or riders which provide 
                directly or which supplement long-term care insurance 
                and includes a policy or rider which provides for 
                payment of benefits based on cognitive impairment or 
                the loss of functional capacity.
                    ``(B) Exclusions.--The term `long-term care 
                insurance' shall not include--
                            ``(i) any insurance policy which is offered 
                        primarily to provide basic coverage to 
                        supplement coverage under the medicare program 
                        under title XVIII of the Social Security Act, 
                        basic hospital expense coverage, basic medical-
                        surgical expense coverage, hospital confinement 
                        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; or
                            ``(ii) life insurance policies--
                                    ``(I) which accelerate the death 
                                benefit specifically for one or more of 
                                the qualifying events of terminal 
                                illness or medical conditions requiring 
                                extraordinary medical intervention or 
                                permanent institutional confinement;
                                    ``(II) which provide the option of 
                                a lump-sum payment for such benefits; 
                                and
                                    ``(III) under which neither such 
                                benefits nor the eligibility for the 
                                benefits is conditioned upon the 
                                receipt of long-term care.''.

SEC. 202. ADDITIONAL REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
              INSURANCE POLICIES.

    (a) In General.--Chapter 43 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 the issuer of any 
long-term care insurance policy with respect to which any requirement 
of subsection (c) or (d) is not met a tax in the amount determined 
under subsection (b).
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be $100 per policy for each day any 
        requirement of subsection (c) or (d) is not met with respect to 
        the policy.
            ``(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 imposed by subsection (a) to the 
        extent that payment of the tax would be excessive relative to 
        the failure involved.
    ``(c) Additional Responsibilities.--The requirements of this 
subsection with respect to any long-term care insurance policy 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 waiting period 
                        or because of any applicable pre-existing 
                        condition.
                            ``(iii) Section 20 (relating to filing 
                        requirements for marketing).
                            ``(iv) Section 21 (relating to standards 
                        for marketing), including inaccurate completion 
                        of medical histories, other than section 21C(1) 
                        and 21C(6) thereof, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a long-term 
                                care insurance policy, misrepresent a 
                                material fact; and
                                    ``(II) no such requirements shall 
                                include a requirement to inquire or 
                                identify whether a prospective 
                                applicant or enrollee for long-term 
                                care insurance has accident and 
                                sickness insurance.
                            ``(v) Section 22 (relating to 
                        appropriateness of recommended purchase).
                            ``(vi) Section 24 (relating to standard 
                        format outline of coverage).
                            ``(vii) Section 25 (relating to requirement 
                        to deliver shopper's guide).
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return), except that such section shall also 
                        apply to denials of applications and any refund 
                        shall be made within 30 days of the return or 
                        denial.
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6I (relating to policy 
                        summary).
                            ``(v) Section 6J (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(f)(2)(B).
            ``(2) Delivery of policy.--If an application for a long-
        term care insurance policy (or for a certificate under a group 
        long-term care insurance policy) is approved, the issuer shall 
        deliver to the applicant (or policyholder or certificate-
        holder) the policy (or certificate) of insurance not later than 
        30 days after the date of the approval.
            ``(3) Information on denials of claims.--If a claim under a 
        long-term care insurance policy is denied, the issuer shall, 
        within 60 days of the date of a written request by the 
        policyholder or certificate-holder (or representative)--
                    ``(A) provide a written explanation of the reasons 
                for the denial, and
                    ``(B) make available all information directly 
                relating to such denial.
    ``(d) Disclosure.--The requirements of this subsection are met with 
respect to any long-term care insurance policy if either of the 
following statements, whichever is applicable, is prominently displayed 
on the front page of the policy and in the outline of coverage required 
under subsection (c)(1)(B)(ii):
            ``(1) A statement that: `This policy is intended to be a 
        qualified long-term care insurance contract under section 
        7702B(b) of the Internal Revenue Code of 1986.'.
            ``(2) A statement that: `This policy is not intended 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 Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `long-term care insurance policy' means any product which is 
        advertised, marketed, or offered as long-term care insurance 
        (as defined in paragraph (2)).
            ``(2) Long-term care insurance.--
                    ``(A) In general.--The term `long-term care 
                insurance' means any insurance policy or rider--
                            ``(i) advertised, marketed, offered, or 
                        designed to provide coverage 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 or 
                        medically necessary diagnostic, preventive, 
                        therapeutic, rehabilitative, maintenance, or 
                        personal care services provided in a setting 
                        other than an acute care unit of a hospital; 
                        and
                            ``(ii) issued by insurers, fraternal 
                        benefit societies, nonprofit health, hospital, 
                        and medical service corporations, prepaid 
                        health plans, health maintenance organizations 
                        or any similar organization to the extent such 
                        organizations are otherwise authorized to issue 
                        life or health insurance.
                Such term includes group and individual annuities and 
                life insurance policies or riders which provide 
                directly or which supplement long-term care insurance 
                and includes a policy or rider which provides for 
                payment of benefits based on cognitive impairment or 
                the loss of functional capacity.
                    ``(B) Exclusions.--The term `long-term care 
                insurance' shall not include--
                            ``(i) any insurance policy which is offered 
                        primarily to provide basic coverage to 
                        supplement coverage under the medicare program 
                        under title XVIII of the Social Security Act, 
                        basic hospital expense coverage, basic medical-
                        surgical expense coverage, hospital confinement 
                        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; or
                            ``(ii) life insurance policies--
                                    ``(I) which accelerate the death 
                                benefit specifically for one or more of 
                                the qualifying events of terminal 
                                illness or medical conditions requiring 
                                extraordinary medical intervention or 
                                permanent institutional confinement;
                                    ``(II) which provide the option of 
                                a lump-sum payment for such benefits; 
                                and
                                    ``(III) under which neither such 
                                benefits nor the eligibility for the 
                                benefits is conditioned upon the 
                                receipt of long-term care.''.
    (b) Conforming Amendment.--The table of sections for chapter 43 is 
amended by adding at the end the following new item:

                              ``Sec. 4980C. Failure to meet 
                                        requirements for long-term care 
                                        insurance policies.''.

SEC. 203. COORDINATION WITH STATE REQUIREMENTS.

    Nothing in this subtitle shall be construed as preventing a State 
from applying standards that provide greater protection of 
policyholders of long-term care insurance policies (as defined in 
section 7702B(g) of the Internal Revenue Code of 1986).

SEC. 204. UNIFORM LANGUAGE AND DEFINITIONS.

    (a) In General.--The National Association of Insurance 
Commissioners shall not later than January 1, 1995, promulgate 
standards for the use of uniform language and definitions in long-term 
care insurance policies (as defined in section 7702B(g) of the Internal 
Revenue Code of 1986).
    (b) Variations.--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. 205. EFFECTIVE DATES.

    (a) Section 201.--The amendments made by section 201 shall apply to 
contracts issued after December 31, 1995.
    (b) Section 202.--The amendments made by section 202 shall apply to 
actions taken after December 31, 1995.

  TITLE III--INCENTIVES TO ENCOURAGE THE PURCHASE OF PRIVATE INSURANCE

SEC. 301. PUBLIC INFORMATION AND EDUCATION PROGRAM.

    (a) In General.--The Secretary of Health and Human Services shall 
establish a program designed to educate individuals regarding--
            (1) the risk of incurring catastrophic long-term care 
        costs;
            (2) the coverage or lack of coverage of such costs through 
        Federal programs;
            (3) the importance of planning for such costs; and
            (4) the benefits of securing long-term care insurance 
        coverage.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.

SEC. 302. ASSETS OR RESOURCES DISREGARDED UNDER THE MEDICAID PROGRAM.

    (a) Medicaid Estate Recoveries.--
            (1) In general.--Section 1917(b) of the Social Security Act 
        (42 U.S.C. 1396p(b)) is amended--
                    (A) in paragraph (1), by striking subparagraph (C);
                    (B) in paragraph (3), by striking ``(other than 
                paragraph (1)(C))''; and
                    (C) in paragraph (4)(B), by striking ``(and shall 
                include, in the case of an individual to whom paragraph 
                (1)(C)(i) applies)''.
            (2) Effective date.--Section 1917(b) of the Social Security 
        Act (42 U.S.C. 1396p(b)) shall be applied and administered as 
        if the provisions stricken by paragraph (1) had not been 
        enacted.
    (b) Reporting Requirements for Certain Asset Protection Programs.--
Section 1902 of the Social Security Act (42 U.S.C. 1396a) is amended by 
adding at the end the following new subsection:
    ``(aa)(1) The Secretary shall not approve any State plan amendment 
providing for an asset protection program (as described in paragraph 
(2)) unless the State requires all insurers participating in such 
program to submit reports to the State and the Secretary at such times, 
and containing such information, as the Secretary determines 
appropriate. The information included in the reports required to be 
submitted under the preceding sentence shall be submitted in accordance 
with the data standards established by the Secretary under paragraph 
(3).
    ``(2) An asset protection program described in this paragraph is a 
program under which an individual's assets and resources are 
disregarded for purposes of the program under this title--
            ``(A) to the extent that payments are made under a long-
        term care insurance policy; or
            ``(B) because an individual has received (or is entitled to 
        receive) benefits under a long-term care insurance policy.
    ``(3)(A) Not later than 30 days after the date of the enactment of 
this Act, the Secretary shall select data standards for the information 
required to be included in reports submitted in accordance with 
paragraph (1). Such data standards shall be selected from the data 
standards included in the Long-term Care Insurance Uniform Data Set 
developed by the University of Maryland Center on Aging and Laguna 
Research Associates, and used by the States of California, Connecticut, 
Indiana, and New York for reports submitted by insurers under the asset 
protection programs conducted by such States.
    ``(B) The Secretary shall modify the standards selected under 
subparagraph (A) as the Secretary determines appropriate.''.

SEC. 303. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR THE 
              PURCHASE OF LONG-TERM CARE INSURANCE COVERAGE.

    (a) Exclusion from Gross Income for Certain Individuals.--
Subsection (d) of section 408 of the Internal Revenue Code of 1986 
(relating to tax treatment of distributions from individual retirement 
accounts) is amended by adding at the end the following new paragraph:
            ``(8) Distributions to purchase long-term care insurance.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the applicable percentage of any amount paid or 
                distributed out of an individual retirement account or 
                individual retirement annuity to the individual for 
                whose benefit the account or annuity is maintained if--
                            ``(i) the individual has attained age 59\1/
                        2\ by the date of the payment or distribution, 
                        and
                            ``(ii) the entire amount received 
                        (including money and any other property) is 
                        used within 90 days to purchase a qualified 
                        long-term care insurance policy (as defined in 
                        section 7702B(b)) for the benefit of the 
                        individual or the spouse of the individual (if 
                        the spouse has attained age 59\1/2\ by the date 
                        of the payment or distribution).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the term `applicable percentage' 
                means 100 percent reduced (but not below zero) by the 
                number of percentage points determined by dividing--
                            ``(i) the amount by which the taxpayer's 
                        adjusted gross income exceeds the minimum 
                        amount, by
                            ``(ii) the difference between the maximum 
                        amount and the minimum amount.
                    ``(C) Minimum and maximum amounts.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), the minimum amount is $45,000 
                        and the maximum amount is $100,000.
                            ``(ii) Cost-of-living adjustment.--In the 
                        case of any taxable year beginning in any 
                        calendar year after 1996, each of the dollar 
                        amounts under clause (i) shall be increased by 
                        an amount equal to--
                                    ``(I) the dollar amount, multiplied 
                                by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, by 
                                substituting `calendar year 1995' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(iii) Rounding.--If any amount determined 
                        under clause (ii) is not a multiple of $10, the 
                        amount shall be rounded to the nearest multiple 
                        of $10 (or if the amount is a multiple of $5 
                        and not a multiple of $10, the amount shall be 
                        increased to the next multiple of $10).
                            ``(iv) Special rule.--In the case of a 
                        married individual filing a separate return, 
                        the minimum and maximum amounts with respect to 
                        such individual shall be 50 percent of the 
                        amounts otherwise in effect for the taxable 
                        year.''.
    (b) No Penalty for Distributions.--
            (1) In general.--Subparagraph (B) of section 72(t)(2) of 
        the Internal Revenue Code of 1986 (relating to distributions 
        from qualified retirement plans not subject to 10 percent 
        additional tax) is amended to read as follows:
                    ``(B) Medical expenses.--
                            ``(i) In general.--Distributions made to 
                        the employee (other than distributions 
                        described in clause (ii) or subparagraph (A) or 
                        (C)) to the extent such distributions do not 
                        exceed the amount allowable as a deduction 
                        under section 213 to the employee for amounts 
                        paid during the taxable year for medical care 
                        (determined without regard to whether the 
                        employee itemizes deductions for such taxable 
                        year).
                            ``(ii) Certain distributions to purchase 
                        long-term care insurance.--Distributions made 
                        to the taxpayer out of an individual retirement 
                        plan if the entire amount received (including 
                        money and any other property) is used within 90 
                        days to purchase a qualified long-term care 
                        insurance policy (as defined in section 
                        7702B(b)) for the benefit of the individual or 
                        the spouse of the individual.''.
            (2) Conforming amendment.--Subparagraph (A) of section 
        72(t)(3) of the Internal Revenue Code of 1986 is amended by 
        striking ``(B)'' and inserting ``(B)(i)''.
    (c) Deduction for Expenses to Purchase a Qualified Long-Term Care 
Insurance Policy.--
            (1) In general.--Paragraph (8) of section 408(d) of the 
        Internal Revenue Code of 1986 (relating to distributions from 
        individual retirement accounts to purchase long-term care 
        insurance), as added by subsection (a), is amended by adding at 
        the end the following new subparagraph:
                    ``(D) Application of section 213.--No deduction 
                shall be allowed under section 213(a) for expenses 
                incurred to purchase a qualified long-term care 
                insurance policy (as defined in section 7702B(b)) using 
                amounts paid or distributed out of an individual 
                retirement account or individual retirement annuity in 
                accordance with this paragraph.''.
            (2) Conforming amendment.--Clause (ii) of section 
        213(d)(1)(D) of the Internal Revenue Code of 1986 (relating to 
        definition of medical care), as added by section 101(a), is 
        amended by striking ``section 7702(d)(4)'' and inserting 
        ``section 408(d)(8)(D) or section 7702(d)(4)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

        TITLE IV--IMPROVED PUBLIC SAFETY NET FOR LONG-TERM CARE

SEC. 401. REFERENCES IN TITLE.

    Except as otherwise specifically provided, whenever in this title 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.

SEC. 402. SPENDDOWN ELIGIBILITY FOR NURSING FACILITY RESIDENTS.

    (a) In General.--Section 1902(a)(10)(A)(i) (42 U.S.C. 
1396a(a)(10)(A)(i)) is amended--
            (1) by striking ``or'' at the end of subclause (VI);
            (2) by striking the semicolon at the end of subclause (VII) 
        and inserting ``, or''; and
            (3) by inserting after subclause (VII) the following new 
        subclause:
                                    ``(VIII) who are individuals who 
                                would meet the income and resource 
                                requirements of the appropriate State 
                                plan described in subclause (I) or the 
                                supplemental security income program 
                                (as the case may be), if incurred 
                                expenses for medical care as recognized 
                                under State law were deducted from 
                                income;''.
    (b) Limitation to Benefits for Nursing Facility Services.--Section 
1902(a)(10) (42 U.S.C. 1396a(a)(10)) is amended in the matter following 
subparagraph (F)--
            (1) by striking ``and (XIII)'' and inserting ``(XIII)''; 
        and
            (2) by inserting before the semicolon at the end the 
        following: ``, and (XIV) the medical assistance made available 
        to an individual described in subparagraph (A)(i)(VIII) shall 
        be limited to medical assistance for nursing facility 
        services''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply with respect to a State as of January 1, 1996.

SEC. 403. INCREASE IN PERSONAL NEEDS ALLOWANCE FOR INSTITUTIONALIZED 
              INDIVIDUALS.

    (a) In General.--Section 1902(q)(2) (42 U.S.C. 1396a(q)(2)) is 
amended--
            (1) by striking ``$30'' and inserting ``$50''; and
            (2) by striking ``$60'' and inserting ``$80''.
    (b) Federal Reimbursement for Reductions in State Funds 
Attributable to Increased Personal Needs Allowance.--Section 1903(a) 
(42 U.S.C. 1396b(a)) is amended--
            (1) by striking ``plus'' at the end of paragraph (6);
            (2) by striking the period at the end of paragraph (7) and 
        inserting ``; plus''; and
            (3) by adding at the end the following new paragraph:
            ``(8) an amount equal to 100 percent of the difference 
        between the amount of expenditures made by the State for 
        nursing facility services and services in an intermediate care 
        facility for the mentally retarded during the quarter and the 
        amount of expenditures that would have been made by the State 
        for such services during the quarter based on the personal 
        needs allowance in effect in the State under section 1902(q) as 
        of April 30, 1994.''.
    (c) Conforming SSI Personal Needs Allowance.--Section 1611(e)(1)(B) 
(42 U.S.C. 1382(e)(1)(B)) is amended--
            (1) in clauses (i) and (ii)(I), by striking ``$360'' and 
        inserting ``$600''; and
            (2) in clause (iii), by striking ``$720'' and inserting 
        ``$1,200''.
    (d) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to months beginning with January 1996.

SEC. 404. INCREASED RESOURCE DISREGARD FOR NURSING FACILITY RESIDENTS.

    (a) Increased Disregard for Resources.--Section 1902(a) (42 U.S.C. 
1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (62) the following new 
        paragraph:
            ``(63) provide that, in determining the eligibility of any 
        unmarried individual who is an inpatient in a nursing facility 
        or intermediate care facility for the mentally retarded, the 
        first $8,000 of resources may, at the option of the State, be 
        disregarded;''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to months beginning with January 1996.

SEC. 405. INFORMING NURSING HOME RESIDENTS ABOUT AVAILABILITY OF 
              ASSISTANCE FOR HOME AND COMMUNITY-BASED SERVICES.

    (a) In General.--Section 1902(a) (42 U.S.C. 1396a(a)), as amended 
by section 404(a), is amended--
            (1) by striking ``and'' at the end of paragraph (62);
            (2) by striking the period at the end of paragraph (63) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (63) the following new 
        paragraph:
            ``(64) provide that an individual who is a resident (or who 
        is applying to become a resident) of a nursing facility or 
        intermediate care facility for the mentally retarded (or a 
        designated representative of such an individual) shall receive, 
        at the time of application for medical assistance and 
        periodically thereafter, information on the range of home and 
        community-based services for which assistance is available in 
        the State either under the plan under this title or any other 
        public program.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to quarters beginning on or after January 1, 1996.

SEC. 406. ESTABLISHMENT OF STATE PROGRAMS FURNISHING HOME AND 
              COMMUNITY-BASED SERVICES TO CERTAIN INDIVIDUALS WITH 
              DISABILITIES.

    (a) State Plan Requirement.--Section 1902(a) (42 U.S.C. 1396a(a)), 
as amended by sections 404(a) and 405(a), is amended--
            (1) by striking ``and'' at the end of paragraph (63);
            (2) by striking the period at the end of paragraph (64) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(65) at the option of the State, provide for the 
        establishment of a program under which the State furnishes 
        covered home and community-based services (as defined in 
        section 1931(c)(1)) to eligible individuals with disabilities 
        (as defined in section 1931(c)(2)) in accordance with section 
        1931.''.
    (b) Establishment of Program.--Title XIX (42 U.S.C. 1936 et seq.) 
is amended by redesignating section 1931 as section 1932 and by 
inserting after section 1930 the following new section:

 ``home and community-based services for individuals with disabilities

    ``Sec. 1931. (a) Establishment of Program.--Each State with an 
approved State plan under this title may establish a program under 
which the State furnishes covered home and community-based services to 
eligible individuals with disabilities in accordance with this section 
to the extent that such services are not provided under any other 
Federal or State program.
    ``(b) Assessments.--
            ``(1) Initial assessment.--A State program under this 
        section shall provide for an initial assessment of all 
        individuals who appear to have a reasonable likelihood of being 
        an eligible individual with disabilities. Such an assessment 
        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.
            ``(2) Initial assessment described.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), an initial assessment under this 
                paragraph shall be conducted using a uniform protocol 
                specified by the Secretary and shall include an 
                assessment of an individual's--
                            ``(i) ability or inability to perform any 
                        activities of daily living;
                            ``(ii) health status;
                            ``(iii) mental status;
                            ``(iv) current living arrangement; and
                            ``(v) use of formal and informal long-term 
                        care support systems.
                    ``(B) Exception.--If a State receives advance 
                approval from the Secretary, such State may--
                            ``(i) conduct an initial assessment under 
                        this paragraph using a protocol other than a 
                        uniform protocol specified by the Secretary 
                        under subparagraph (A); and
                            ``(ii) collect information in addition to 
                        the information required under clauses (i) 
                        through (v) of subparagraph (A).
            ``(3) Periodic reassessment.--A State program under this 
        section shall provide for periodic reassessments of any 
        eligible individual with disabilities who is receiving covered 
        home and community-based services under this section. Such 
        periodic reassessments shall be conducted upon any significant 
        change in an individual's condition that may affect the 
        individual's need for such services, but at least within the 6-
        month period following each assessment of the individual (or 
        within such longer period as determined appropriate by the 
        State in the case of an individual who is unlikely to have a 
        change in condition that would affect the individual's need for 
        services).
    ``(c) Qualified Case Manager.--
            ``(1) In general.--A State program under this section shall 
        assign a qualified case manager to any eligible individual with 
        disabilities receiving covered home and community-based 
        services under this section. Such qualified case manager shall 
        perform the case management services specified in this 
        subsection.
            ``(2) Care plan.--A qualified case manager shall develop, 
        or arrange for the development of, an individualized written 
        plan of care for an eligible individual with disabilities based 
        upon the assessments conducted under subsection (b). The 
        qualified case manager shall develop the care plan in a timely 
        manner in consultation with the individual or the individual's 
        representative, the individual's family, and the individual's 
        primary medical care provider, and in accordance with any 
        criteria that may be specified by the State, in consultation 
        with the Secretary. At a minimum, the care plan shall 
        identify--
                    ``(A) the long-term problems and needs of the 
                individual;
                    ``(B) the mix of formal and informal services and 
                support systems that are available to meet the long-
                term care needs of the individual;
                    ``(C) the appropriate covered home and community-
                based services necessary to meet the long-term care 
                needs of the individual;
                    ``(D) the manner in which covered home and 
                community-based services will be provided;
                    ``(E) the manner in which covered home and 
                community-based services will be integrated with 
                services provided under any other Federal or State 
                program; and
                    ``(F) goals for the individual which, to the extent 
                practicable, shall include goals that are measurable.
            ``(3) Revisions to care plan.--A qualified case manager 
        shall revise an individual's care plan as appropriate based on 
        the assessments performed under subsection (b).
            ``(4) State guidelines with respect to care plans.--
                    ``(A) Taking into account informal care.--A State 
                may, at its option, provide guidelines permitting a 
                qualified case manager to take into account the 
                availability of informal care in determining the amount 
                and array of covered home and community-based services 
                made available to an eligible individual with 
                disabilities under such individual's care plan.
                    ``(B) Coordination.--A State shall provide 
                guidelines for qualified case managers to integrate 
                covered home and community-based services with other 
                Federal and State programs in accordance with paragraph 
                (2)(E).
            ``(5) Provision of services.--
                    ``(A) Covered services.--The qualified case 
                manager, in consultation with an eligible individual 
                with disabilities or the individual's representative, 
                such individual's family, and such individual's primary 
                medical care provider, shall--
                            ``(i) assist in the implementation of the 
                        care plan; and
                            ``(ii) in a manner that is cost-effective 
                        and consistent with obtaining quality care, 
                        provide, or arrange for the provision of, 
                        appropriate covered home and community-based 
                        services.
                To the extent possible, the case manager shall comply 
                with the choice of an individual with disabilities 
                regarding which covered home and community-based 
                services to receive and the providers who will furnish 
                such services.
                    ``(B) Noncovered services.--The State may require 
                the qualified case manager to assist an eligible 
                individual with disabilities in obtaining noncovered 
                services, at the individual's own expense or through 
                other programs that may be available.
            ``(6) Care plan monitoring.--The qualified case manager 
        shall monitor the delivery of services to an eligible 
        individual with disabilities, the quality of care provided, and 
        the status of the individual.
    ``(d) Quality Assurance and Safeguards.--
            ``(1) Quality assurance.--A State shall ensure and monitor 
        the quality of covered home and community-based services 
        furnished to eligible individuals with disabilities by--
                    ``(A) adopting standards which safeguard the health 
                and safety of such individuals;
                    ``(B) establishing minimum standards for qualified 
                case managers and providers and enforcing those 
                standards;
                    ``(C) establishing minimum competency requirements 
                for employees of qualified providers and developing 
                systems for enforcing such competency requirements;
                    ``(D) obtaining meaningful input from eligible 
                individuals with disabilities through surveys or 
                otherwise that measure the extent to which such 
                individuals receive the covered home and community-
                based services described in the care plan and the 
                extent to which such individuals are satisfied with 
                such services;
                    ``(E) participating in quality assurance 
                activities; and
                    ``(F) specifying the role of the State Long-Term 
                Care Ombudsman (under the Older Americans Act of 1965) 
                and the protection and advocacy system (established 
                under section 142 of the Developmental Disabilities 
                Assistance and Bill of Rights Act) of the State 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 disclosure of 
                information concerning individuals applying for or 
                receiving covered home and community-based services 
                under this section 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 
                case management services and covered home and 
                community-based services.
    ``(e) Individual Choice.--The acceptance of benefits under this 
section is a voluntary choice of the eligible individual with 
disabilities or the individual's representative. Nothing in this 
section shall be construed to require such an individual to accept the 
services available under this section, or to accept benefits under this 
section instead of entering a nursing facility or intermediate care 
facility for the mentally retarded. An eligible individual with 
disabilities shall not be denied covered home and community-based 
services under this section solely because the individual refuses to 
accept one such service, unless the failure to accept such service 
would make other services ineffective or no alternative is available 
that is cost-effective and acceptable to the individual.
    ``(f) Payment Methods.--
            ``(1) In general.--A State shall specify the payment 
        methods and rates to be used to reimburse qualified providers 
        and qualified case managers for services furnished under the 
        State's program under this section. Methods of payment 
        specified by the State may include reimbursement on a fee-for-
        service basis, prepayment on a capitation basis, or a 
        combination of such methods. Payment rates specified by the 
        State shall be sufficient to ensure that the requirements of 
        section 1902(a)(30)(A) are satisfied. The State, at its option, 
        may permit qualified case managers to negotiate rates with 
        qualified providers.
            ``(2) Payment in full.--The State shall restrict payment 
        for covered home and community-based services to qualified 
        providers who agree to accept the payment rates specified by 
        the State under paragraph (1) as payment in full for such 
        services.
            ``(3) Cost sharing.--A State may impose nominal cost 
        sharing charges for covered home and community-based services 
        furnished to eligible individuals with disabilities whose 
        family income (as determined in accordance with section 
        1902(l)(3)(E)) exceeds 100 percent of the income official 
        poverty line (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.
    ``(g) Maintenance of Effort.--A State program under this section 
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 enactment of this section, the State will 
continue to make available (either under this title or otherwise) to 
such individual an appropriate level of assistance for home and 
community-based services, taking into account the level of assistance 
provided as of such date and the individual's need for home and 
community-based services.
    ``(h) Definitions.--For purposes of this section--
            ``(1) Covered home and community-based services.--
                    ``(A) In general.--The term `covered home and 
                community-based services' means case management 
                services and other services furnished by a qualified 
                provider, including the following:
                            ``(i) Personal assistance services.
                            ``(ii) Homemaker and chore assistance.
                            ``(iii) Respite services.
                            ``(iv) Assistive devices.
                            ``(v) Adult day services.
                            ``(vi) Habilitation and rehabilitation.
                            ``(vii) Skilled home health care services.
                    ``(B) Exclusions and limitations.--The term 
                `covered home and community-based services' shall not 
                include--
                            ``(i) room and board; 
                            ``(ii) services furnished in a hospital, 
                        nursing facility, intermediate care facility 
                        for the mentally retarded, or other 
                        institutional care setting, as specified by the 
                        Secretary;
                            ``(iii) items or services covered under a 
                        private insurance policy; or
                            ``(iv) any services specified in a care 
                        plan which are not specified in subparagraph 
                        (A).
                    ``(C) Personal assistance services.--The term 
                `personal assistance services' means services specified 
                by the State as personal assistance services, and shall 
                include at least hands-on and standby assistance, 
                supervision, and cueing with activities of daily 
                living.
            ``(2) Eligible individual with disabilities.--
                    ``(A) In general.--The term `eligible individual 
                with disabilities' means an individual with 
                disabilities--
                            ``(i)(I) whose family income (as determined 
                        in accordance with section 1902(l)(3)(E)) does 
                        not exceed the phase-in eligibility percentage 
                        (specified in subparagraph (C)) of the income 
                        official poverty line (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 (other than 
                        resources excluded pursuant to section 1613 (a) 
                        and (b)) are not more than $8,000 (or, for a 
                        couple, the amount determined under section 
                        1924 with respect to the spouses of 
                        institutionalized individuals); or
                            ``(ii) who would meet the income and 
                        resource requirements under clause (i) if 
                        incurred expenses for services described in 
                        clauses (i) through (vii) of paragraph (1)(A) 
                        were deducted from income.
                    ``(B) Individuals excluded.--Notwithstanding 
                subparagraph (A), no individual with disabilities shall 
                be an eligible individual with disabilities for 
                purposes of this section if--
                            ``(i) such individual is eligible for 
                        services in a nursing facility or an 
                        intermediate care facility for the mentally 
                        retarded; and
                            ``(ii) a qualified case manager estimates 
                        (under methods specified by the Secretary) that 
                        the cost of furnishing covered home and 
                        community-based services to the individual 
                        under this section would be higher than the 
                        cost of institutionalizing the individual.
                    ``(C) Phase-in eligibility percentage.--For 
                purposes of subparagraph (A), the phase-in eligibility 
                percentage for a calendar year shall be--
                            ``(i) for calendar year 1997, 90 percent;
                            ``(ii) for calendar year 1998, 110 percent;
                            ``(iii) for calendar year 1999, 130 
                        percent; and
                            ``(iv) for calendar year 2000 and 
                        succeeding calendar years, 150 percent.
            ``(3) Individual with disabilities.--
                    ``(A) In general.--The term `individual with 
                disabilities' means any individual who is described in 
                any of the following categories of individuals:
                            ``(i) Individuals requiring help with 
                        activities of daily living.--An individual of 
                        any age who--
                                    ``(I) requires hands-on or standby 
                                assistance, supervision, or cueing (as 
                                defined in regulations) to perform two 
                                or more activities of daily living (as 
                                defined in subparagraph (B)); and
                                    ``(II) is expected to require such 
                                assistance, supervision, or cueing over 
                                a period of at least 100 days.
                            ``(ii) Individuals with moderate cognitive 
                        or mental impairment.--An individual of any 
                        age--
                                    ``(I) whose score, on any standard 
                                mental status protocol appropriate for 
                                measuring the individual's particular 
                                condition, as specified by the 
                                Secretary, indicates either moderate 
                                cognitive impairment or moderate mental 
                                impairment, or both;
                                    ``(II) who displays symptoms of one 
                                or more serious behavioral problems, 
                                contained on a list of such problems 
                                specified by the Secretary, that create 
                                a need for supervision to prevent harm 
                                to the individual or others; and
                                    ``(III) who is expected to meet the 
                                conditions of clause (i) or (ii) over a 
                                period of at least 100 days.
                            ``(iii) Individuals with severe or profound 
                        mental retardation.--An individual of any age 
                        who has severe or profound mental retardation 
                        (as determined according to a protocol 
                        specified by the Secretary).
                            ``(iv) Severely disabled children.--An 
                        individual under 6 years of age who--
                                    ``(I) has a severe disability or 
                                chronic medical condition,
                                    ``(II) but for receiving services 
                                under this section, would require 
                                institutionalization in a hospital, 
                                nursing facility, or intermediate care 
                                facility for the mentally retarded, and
                                    ``(III) is expected to have such 
                                disability or condition and require 
                                such services over a period of at least 
                                100 days.
                    ``(B) Activity of daily living.--The term `activity 
                of daily living' means any of the following:
                            ``(i) Eating.
                            ``(ii) Toileting.
                            ``(iii) Dressing.
                            ``(iv) Bathing.
                            ``(v) Transferring.
                            ``(vi) Continence.
            ``(4) Qualified case manager.--The term `qualified case 
        manager' means a person who--
                    ``(A) provides case management services to an 
                eligible individual with disabilities;
                    ``(B) is not a relative of such individual;
                    ``(C) has experience in--
                            ``(i) assessing individuals' functional and 
                        cognitive impairment;
                            ``(ii) establishing, periodically 
                        reviewing, and revising individual care plans 
                        or has been trained in such activities; and
                            ``(iii) the provision of case management 
                        services to individuals such as eligible 
                        individuals with disabilities; and
                    ``(D) meets such other standards established by the 
                Secretary or the State which may include standards 
                which assure--
                            ``(i) the quality of case management 
                        services; and
                            ``(ii) that individuals receiving case 
                        management services are not at risk of 
                        financial exploitation.
            ``(5) Qualified provider.--The term `qualified provider' 
        means a provider who is licensed under State law or who meets 
        other criteria as the Secretary or State may specify.
            ``(6) Relative defined.--The term `relative' means an 
        individual bearing a relationship to another individual who is 
        described in paragraphs (1) through (8) of section 152(a) of 
        the Internal Revenue Code of 1986.''. 
    (c) Payment to States.--
            (1) In general.--Section 1903(a) (42 U.S.C. 1396b(a)), as 
        amended by section 403(b), is amended--
                    (A) by striking ``plus'' at the end of paragraph 
                (7);
                    (B) by striking the period at the end of paragraph 
                (8) and inserting ``; plus''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(9) an amount equal to the Federal home and community-
        based services matching percentage (as defined in section 
        1905(t)) of the total amount expended during such quarter for 
        covered home and community-based services furnished under 
        section 1931.''.
            (2) Federal home and community-based services matching 
        percentage.--Section 1905 (42 U.S.C. 1396d) is amended by 
        adding at the end the following new subsection:
    ``(t) The term `Federal home and community-based services matching 
percentage' means, with respect to a State, the State's Federal medical 
assistance percentage (as defined in subsection (b)) increased by 20 
percentage points, except that the Federal home and community-based 
services matching percentage shall in no case be less than 75 percent 
or more than 88 percent.''.
    (d) Effective Date.--The amendments made by this section shall be 
effective with respect to calendar quarters beginning on or after 
January 1, 1997.

SEC. 407. REPORTS BY THE SECRETARY ON CERTAIN ISSUES RELATING TO LONG-
              TERM CARE.

    The Secretary shall submit a report to Congress annually on--
            (1) the effectiveness of State programs to furnish home and 
        community-based services to individuals with disabilities under 
        section 1931 of the Social Security Act; and
            (2) the growth and development of the market for long-term 
        care insurance.

SEC. 408. REPORT BY THE SECRETARY ON LONG-TERM CARE SERVICES FOR 
              CHRONICALLY ILL INDIVIDUALS.

    (a) In General.--Not later than July 1, 1997, the Secretary shall 
submit a report to Congress on the feasibility and cost of including 
long-term care services for chronically ill individuals as a benefit 
under a standard benefit package to be offered under a reformed health 
care system.
    (b) Chronically Ill Individual.--The term ``chronically ill 
individual'' means an individual with a serious and persistent chronic 
health condition.

SEC. 409. CHRONIC CARE COMMISSION.

    (a) Establishment.--There is established a commission to be known 
as the Chronic Care Commission (hereafter referred to in this section 
as the ``Commission'').
    (b) Membership.--
            (1) In general.--The Commission shall consist of--
                    (A) the Secretary of Health and Human Services 
                (hereafter referred to in this section as the 
                ``Secretary''); and
                    (B) 10 other members to be appointed by the 
                President, in consultation with the Majority and 
                Minority Leaders of the House of Representatives and 
                the Senate, not later than 30 days after the date of 
                the enactment of this section.
            (2) Chair.--The Secretary shall serve as the Chair of the 
        Commission.
            (3) Expertise.--The members of the Commission appointed 
        under paragraph (1)(B) shall include representatives of--
                    (A) chronically ill individuals;
                    (B) health care providers who furnish--
                            (i) primary care services;
                            (ii) acute care services;
                            (iii) institutional services; and
                            (iv) home and community-based services;
                    (C) the health insurance industry; and
                    (D) Federal and State health programs.
            (4) Terms.--Members of the Commission shall be appointed 
        for the life of the Commission. A vacancy on the Commission 
        shall be filled in the manner in which the original appointment 
        was made and shall be subject to any conditions which applied 
        with respect to the original appointment.
    (c) Duties.--Not later than July 1, 1997, the Commission shall 
submit to Congress legislative recommendations to simplify and improve 
chronic care services furnished to chronically ill individuals. Such 
recommendations shall--
            (1) encourage health care providers to establish community 
        based networks which furnish chronic care services to 
        chronically ill individuals;
            (2) result in a reduction in the growth of the cumulative 
        costs of furnishing chronic care services to such individuals 
        across time and setting;
            (3) outline chronic care service delivery reform which 
        simplifies systems for administration, financing, and delivery 
        of such services to such individuals;
            (4) identify barriers to integration of chronic care 
        services as established by existing legislative, regulatory, 
        and administrative practices; and
            (5) provide for a private sector, community-based approach 
        to furnishing chronic care services to such individuals.
    (d) Consultation with Certain Entities.--In developing its 
legislative recommendations under subsection (c), the Commission shall 
consult with qualified entities participating in the demonstration 
projects on acute and long-term care integration conducted by the 
Secretary under section 410.
    (e) Meetings.--
            (1) In general.--Except as provided in paragraph (2), the 
        Commission shall meet at the call of the Chair.
            (2) Initial meeting.--Not later than 30 days after the date 
        on which all members of the Commission have been appointed, the 
        Commission shall hold its first meeting.
            (3) Quorum.--A majority of the members of the Commission 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    (f) Power of the Commission to Hold Hearings.--The Commission may 
hold such hearings, sit and act at such times and places, take such 
testimony, and receive such evidence as the Commission considers 
advisable to carry out the purposes of this section.
    (g) Commission Personnel Matters.--
            (1) Compensation of members.--Each member of the Commission 
        who is not an officer or employee of the Federal Government 
        shall be compensated at a rate equal to the daily equivalent of 
        the annual rate of basic pay prescribed for level IV of the 
        Executive Schedule under section 5315 of title 5, United States 
        Code, for each day (including travel time) during which such 
        member is engaged in the performance of the duties of the 
        Commission. All members of the Commission who are officers or 
        employees of the United States shall serve without compensation 
        in addition to that received for their services as officers or 
        employees of the United States.
            (2) Travel expenses.--The members of the Commission shall 
        be allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the Commission.
            (3) Detail of government employees.--Any Federal Government 
        employee may be detailed to the Commission without 
        reimbursement, and such detail shall be without interruption or 
        loss of civil service status or privilege.
    (h) Termination of the Commission.--The Commission shall terminate 
90 days after the date on which the Commission submits its legislative 
recommendations under subsection (c).
    (i) Definitions.--For purposes of this section--
            (1) Chronic care services.--The term ``chronic care 
        services'' means a full range of individualized services for 
        chronically ill individuals, including primary care, hospital, 
        nursing home, and community-based services which satisfy the 
        functional, psychological, environmental, social, and medical 
        needs of such individuals and which enable such individuals to 
        optimize functional independence and well being.
            (2) Chronically ill individual.--The term ``chronically ill 
        individual'' means an individual with a serious and persistent 
        chronic health condition.
    (j) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        such sums as may be necessary to carry out the purposes of this 
        section.
            (2) Availability.--Any sums appropriated under the 
        authorization contained in this subsection shall remain 
        available, without fiscal year limitation, until expended.

SEC. 410. DEMONSTRATION PROJECTS ON ACUTE AND LONG-TERM CARE 
              INTEGRATION.

    (a) Projects Authorized.--Not later than January 1, 1996, the 
Secretary of Health and Human Services (hereafter referred to in this 
section as the ``Secretary'') shall begin to conduct demonstration 
projects under which qualified entities test the effectiveness of 
various approaches to financing and providing integrated acute and 
long-term care services to chronically ill individuals (as defined in 
section 408(h)(2)) and individuals with disabilities (as defined in 
section 1931(h)(3) of the Social Security Act).
    (b) Demonstration projects described.--Demonstration projects 
conducted under this section shall establish an approach to financing 
and providing integrated acute and long-term care services to 
chronically ill individuals and individuals with disabilities which--
            (1) improves quality through--
                    (A) management of ongoing chronic conditions rather 
                than treatment of episodes;
                    (B) increasing the competency of individuals 
                furnishing care; and
                    (C) providing care which produces the best 
                outcomes;
            (2) increases the satisfaction of individuals receiving 
        care by--
                    (A) offering unified care over the duration of an 
                individual's condition;
                    (B) simplifying access and transfer procedures; and
                    (C) permitting such individuals to participate in 
                decision making regarding their care; and
            (3) contains cumulative costs by--
                    (A) managing costs as an individual's condition 
                progresses;
                    (B) allowing providers of care to have control and 
                flexibility; and
                    (C) financing and fostering prevention and 
                functional independence.
    (c) Applications.--Each qualified entity desiring to conduct a 
demonstration project under this section shall submit an application at 
such time as the Secretary determines appropriate containing--
            (1) assurances that the acute and long-term care services 
        furnished by the entity to chronically ill individuals and 
        individuals with disabilities under the demonstration project 
        will cost less than if such services were furnished to such 
        individuals other than under the demonstration project; and
            (2) such other information as the Secretary determines 
        appropriate.
    (d) Number and Duration of Demonstration Projects.--
            (1) Number.--The Secretary shall authorize not more than 7 
        demonstration projects under this section.
            (2) Duration.--A demonstration project under this section 
        shall be conducted for a period of 7 years.
    (e) Evaluation and Reports.--The Secretary shall evaluate the 
demonstration projects conducted under this section and shall submit to 
Congress--
            (1) an interim report, not later than 3 years after the 
        date on which the first demonstration project begins, 
        describing the status of the demonstration projects; and
            (2) a final report, not later than 1 year after the last of 
        the demonstration projects is completed, evaluating the 
        effectiveness of the demonstration projects.
    (f) Definition of Qualified Entity.--For purposes of this section, 
the term ``qualified entity'' means an entity meeting the eligibility 
criteria established by the Secretary.
    (g) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        such sums as may be necessary to carry out the purposes of this 
        section.
            (2) Availability.--Any sums appropriated under the 
        authorization contained in this subsection shall remain 
        available, without fiscal year limitation, until expended.

                                 <all>

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