[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 707 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 707

To shift financial responsibility for providing welfare assistance and 
 medical care to welfare-related medicaid individuals to the States in 
 exchange for the Federal Government assuming financial responsibility 
  for providing certain elderly low-income individuals and nonelderly 
   low-income disabled individuals with benefits under the medicare 
program under title XVIII of the Social Security Act and long-term care 
  benefits under a new Federal program established under title XIX of 
                   such Act, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                April 6 (legislative day, April 5), 1995

  Mrs. Kassebaum (for herself and Mr. Brown) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To shift financial responsibility for providing welfare assistance and 
 medical care to welfare-related medicaid individuals to the States in 
 exchange for the Federal Government assuming financial responsibility 
  for providing certain elderly low-income individuals and nonelderly 
   low-income disabled individuals with benefits under the medicare 
program under title XVIII of the Social Security Act and long-term care 
  benefits under a new Federal program established under title XIX of 
                   such Act, 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 ``Welfare and 
Medicaid Responsibility Exchange Act of 1995''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purpose.
Sec. 3. Definitions.
    DIVISION A--EXCHANGE OF RESPONSIBILITIES FOR PROVIDING WELFARE 
                      ASSISTANCE AND MEDICAL CARE

   TITLE I--FEDERAL AND STATE RESPONSIBILITIES DURING AND AFTER THE 
                           TRANSITION PERIOD

                     Subtitle A--Transition Period

Sec. 101. Exchange of financial responsibilities for certain welfare 
                            programs and part of the medicaid program.
Sec. 102. Payments to States.
Sec. 103. State responsibility for providing medical care during the 
                            transition period for welfare-related 
                            medicaid individuals.
Sec. 104. Waiver of medicaid requirements during the transition period.
Sec. 105. Termination of certain Federal welfare programs.
Sec. 106. Conforming amendments to the medicaid program.
                   Subtitle B--Post-Transition Period

               Part 1--Federal and State Responsibilities

Sec. 111. Assumption of Federal responsibility for providing acute and 
                            long-term care to nonwelfare-related 
                            medicaid individuals.
Sec. 112. State responsibility for providing medical care to welfare-
                            related medicaid individuals.
        Part 2--Grant Program to Compensate Disadvantaged States

Sec. 121. Grant program.
                   Subtitle C--Legislative Proposals

Sec. 131. Legislative proposals.
Sec. 132. Congressional consideration of implementing bills.
          Subtitle D--Health Benefits and Coverage Commission

Sec. 141. Creation of Health Benefits and Coverage Commission; 
                            membership; termination.
Sec. 142. Qualifications of Commission members.
Sec. 143. Powers.
Sec. 144. Funding.
 TITLE II--ACUTE CARE BENEFITS UNDER THE MEDICARE PROGRAM FOR ELDERLY 
       LOW-INCOME AND NONELDERLY LOW-INCOME DISABLED INDIVIDUALS

 Subtitle A--Eligibility Criteria and Acute Care Benefits for Elderly 
                         Low-Income Individuals

Sec. 201. Establishing a category of elderly low-income individuals.
Sec. 202. Medicare benefits for elderly low-income individuals.
Subtitle B--Eligibility Criteria and Acute Care Benefits for Nonelderly 
                    Low-Income Disabled Individuals

Sec. 211. Establishing a category of nonelderly low-income disabled 
                            individuals.
Sec. 212. Medicare benefits for nonelderly low-income disabled 
                            individuals.
Subtitle C--Premiums, Coinsurance, and Deductibles Established Without 
                       Regard to Additional Costs

Sec. 221. Establishment of premiums, coinsurance and deductibles.
         TITLE III--ESTABLISHMENT OF THE LONG-TERM CARE PROGRAM

                       Subtitle A--Establishment

Sec. 301. Establishment of program.
                  Subtitle B--Providing Long-Term Care

Sec. 311. Eligibility determinations.
Sec. 312. Authority to contract.
Sec. 313. No contracts in an area.
Sec. 314. Contract terms; powers and duties of the Secretary.
        Subtitle C--Requirements for Long-Term Care Contractors

Sec. 321. Other general requirements for long-term care contractors.
Sec. 322. Needs assessment and plan of care.
Sec. 323. Quality assurance.
Sec. 324. Grievance procedures.
Sec. 325. Monitoring and compliance.
     Subtitle D--Establishing Long-Term Care Benefits for Certain 
                              Individuals

               Part 1--Eligibility Criteria and Benefits

Sec. 331. Eligibility criteria for the long-term care program.
Sec. 332. Long-term care benefits under the long-term care program.
            Part 2--Financing for the Long-term Care Program

Sec. 341. Authorization of appropriations.
   TITLE IV--ENSURING FINANCING FOR FEDERAL HEALTH CARE FOR CERTAIN 
   ELDERLY LOW-INCOME AND NONELDERLY LOW-INCOME DISABLED INDIVIDUALS

Sec. 401. Ensuring financing for acute care benefits for elderly low-
                            income individuals and nonelderly low-
                            income disabled individuals and for the 
                            long-term care program.
                   TITLE V--MISCELLANEOUS PROVISIONS

Sec. 501. Separate eligibility requirements.
Sec. 502. Encouraging integration of managed care and private health 
                            plans.
Sec. 503. Reform of the supplemental security income program.
Sec. 504. Annual report.
Sec. 505. Study and report on integration of acute and long-term care.
Sec. 506. Secretarial submission of legislative proposal for technical 
                            and conforming amendments.
 DIVISION B--TAX INCENTIVES AND STANDARDS FOR LONG-TERM CARE INSURANCE

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

Sec. 1001. Amendment of 1986 Code.
Sec. 1002. Qualified long-term care services treated as medical care.
Sec. 1003. Treatment of long-term care insurance.
Sec. 1004. Treatment of qualified long-term care plans.
Sec. 1005. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 1006. Tax treatment of companies issuing qualified accelerated 
                            death benefit riders.
            TITLE II--STANDARDS FOR LONG-TERM CARE INSURANCE

Sec. 2001. Additional requirements for issuers of long-term care 
                            insurance policies.
Sec. 2002. Coordination with State requirements.
Sec. 2003. Uniform language and definitions.
  TITLE III--INCENTIVES TO ENCOURAGE THE PURCHASE OF PRIVATE INSURANCE

Sec. 3001. Public information and education program.

SEC. 2. PURPOSE.

    The purpose of this Act is--
            (1) to shift financial responsibility for providing welfare 
        assistance and medical care to welfare-related medicaid 
        individuals to the States in exchange for the Federal 
        Government assuming financial responsibility for providing 
        certain elderly low-income individuals and nonelderly low-
        income disabled individuals with benefits under the medicare 
        program under title XVIII of the Social Security Act and long-
        term care benefits under a new Federal program established 
        under title XIX of such Act; and
            (2) to establish the procedures by which--
                    (A) total financial responsibility for providing 
                health care to certain elderly low-income and 
                nonelderly low-income disabled individuals shall be 
                assumed by the Federal Government by repealing the 
                medicaid program under title XIX of the Social Security 
                Act (42 U.S.C. 1396 et seq.) and replacing it through--
                            (i) amendments to the medicare program that 
                        provide that such individuals may be eligible 
                        for acute care benefits under that program; and
                            (ii) the establishment of a long-term care 
                        program under which long-term care benefits may 
                        be provided to individuals who meet the 
                        eligibility criteria established for such 
                        program;
                    (B) the States can better coordinate and more 
                effectively deliver health and welfare services for 
                low-income individuals;
                    (C) the Federal Government can simplify the 
                eligibility standards and better coordinate the 
                provision of acute and long-term health care for low-
                income elderly and disabled individuals;
                    (D) the Federal Government can modify the criteria 
                for determining the eligibility of children, 
                alcoholics, and drug addicts for benefits under title 
                XVI of the Social Security Act (42 U.S.C. 1381 et 
                seq.); and
                    (E) the financial burden to both the States and the 
                Federal Government is reduced by creating incentives 
                for individuals to purchase and enroll in private 
                health plans.

SEC. 3. DEFINITIONS.

    For purposes of this Act:
            (1) Acute care benefits.--The term ``acute care benefits'' 
        means a health care service other than the following:
                    (A) Nursing facility services.
                    (B) Intermediate care facility for the mentally 
                retarded services.
                    (C) Personal care services.
                    (D) Homemaker and chore assistance.
                    (E) Respite services.
                    (F) Assistive devices.
                    (G) Adult day services.
                    (H) Habilitation and rehabilitation.
                    (I) Home health services.
                    (J) Home or community-based services.
                    (K) Case-management services that are furnished to 
                an individual who has a condition or disability that 
                qualifies the individual to receive any of the services 
                described in any other subparagraph of this paragraph.
                    (L) Services furnished in an institution for mental 
                diseases.
                    (M) Any other care or assistive services (approved 
                by the Secretary) that the Secretary determines will 
                help individuals with disabilities to remain in their 
                homes and communities.
            (2) Commission.--The term ``Commission'' means the Health 
        Benefits and Coverage Commission established under section 141.
            (3) Disabled individual.--The term ``disabled individual'' 
        means an individual determined to be disabled under section 
        1614(a)(3) of the Social Security Act (42 U.S.C. 1382c(a)(3)).
            (4) Elderly.--The term ``elderly'' means an individual who 
        is 65 years of age or older.
            (5) Long-term care benefits.--The term ``long-term care 
        benefits'' means the long-term care health benefits and 
        services (as recommended by the Commission under section 332 
        and established in an implementing bill enacted under section 
        132) provided under the long-term care program and may include 
        the following:
                    (A) Nursing facility services.
                    (B) Intermediate care facility for the mentally 
                retarded services.
                    (C) Personal care services.
                    (D) Homemaker and chore assistance.
                    (E) Respite services.
                    (F) Assistive devices.
                    (G) Adult day services.
                    (H) Habilitation and rehabilitation.
                    (I) Home health services.
                    (J) Home or community-based services.
                    (K) Case-management services that are furnished to 
                an individual who has a condition or disability that 
                qualifies the individual to receive any of the services 
                described in any other subparagraph of this paragraph.
                    (L) Services furnished in an institution for mental 
                diseases.
                    (M) Any other care or assistive services (approved 
                by the Secretary) that the Secretary determines will 
                help individuals with disabilities to remain in their 
                homes and communities.
            (6) Long-term care program.--The term ``long-term care 
        program'' means the program established in accordance with the 
        provisions of title III.
            (7) Medicare cost-sharing.--The term ``medicare cost-
        sharing'' includes all or any portion of the following costs 
        incurred with respect to individuals meeting the categories of 
        elderly low-income individuals and nonelderly low-income 
        disabled individuals recommended by the Commission in 
        accordance with sections 201 and 211 and established in an 
        implementing bill enacted under section 132:
                    (A) Premiums under section--
                            (i) 1818 or 1818A of the Social Security 
                        Act (42 U.S.C. 1395i-2, 1395i-2a); and
                            (ii) 1839 of such Act (42 U.S.C. 1395r).
                    (B) Coinsurance under title XVIII of such Act 
                (including coinsurance described in section 1813 of 
                such Act (42 U.S.C. 1395e)).
                    (C) Deductibles established under title XVIII of 
                such Act (including those described in sections 1813 
                and 1833(b) of such Act (42 U.S.C. 1395e, 1395l(b)).
                    (D) The amount that would be payable by an 
                individual under section 1833(a) of such Act (42 U.S.C. 
                1395l(a)).
                    (E) Premiums for the enrollment of an individual 
                with an eligible organization under section 1876 of 
                such Act (42 U.S.C. 1395mm).
            (8) Medicare program.--The term ``medicare program'' means 
        the health insurance program under title XVIII of the Social 
        Security Act (42 U.S.C. 1395 et seq.).
            (9) Poverty line.--The term ``poverty line'' means 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) that is applicable to a family of the size involved.
            (10) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (11) State.--The term ``State'' means any of the 50 States, 
        the District of Columbia, the Commonwealth of Puerto Rico, the 
        Virgin Islands, Guam, American Samoa, and the Commonwealth of 
        the Northern Mariana Islands.
            (12) Transition period.--The term ``transition period'' 
        means the period beginning with fiscal year 1997, and ending 
        with the fiscal year immediately before the fiscal year 
        described in section 121(b)(5)(A).
            (13) Welfare-related medicaid individual.--The term 
        ``welfare-related medicaid individual'' means an individual 
        who--
                    (A) would have been eligible for medical assistance 
                under the State plan for medical assistance under title 
                XIX of the Social Security Act (42 U.S.C. 1396 et seq.) 
                (as in effect on the day before the date of the 
                enactment of this Act) solely by reason of the 
                individual's receipt of or eligibility for aid or 
                assistance under the State plan approved under part A 
                or E of title IV of such Act (as so in effect), 
                including individuals eligible for such medical 
                assistance by reason of--
                            (i) section 402(a)(37), 406(h), or 473(b) 
                        of such Act (42 U.S.C. 602(a)(37), 606(h), or 
                        673(b)); or
                            (ii) the fact that the individual was 
                        considered by a State to be receiving such aid 
                        as authorized under section 482(e)(6) of such 
                        Act (42 U.S.C. 682(e)(6));
                    (B) is a qualified pregnant woman or child, as 
                defined in section 1905(n) of such Act (42 U.S.C. 
                1396d(n));
                    (C) is a qualified family member, as defined in 
                section 1905(m)(1) of such Act (42 U.S.C. 1396d(m)(1));
                    (D) is described in subparagraph (A) or (B) of 
                section 1902(l)(1) of such Act (42 U.S.C. 1396a(l)(1)) 
                and whose family income does not exceed the minimum 
                income level the State is required to establish under 
                section 1902(l)(2)(A) of such Act (42 U.S.C. 
                1396a(l)(2)(A)) for such a family;
                    (E) is described in section 1902(l)(1)(C) of such 
                Act (42 U.S.C. 1396a(l)(1)(C)) and whose family income 
                does not exceed the minimum income level the State is 
                required to establish under section 1902(l)(2)(B) of 
                such Act (42 U.S.C. 1396a(l)(2)(B)) for such a family;
                    (F) is--
                            (i) described in section 1902(l)(1)(D) of 
                        such Act (42 U.S.C. 1396a(l)(1)(D));
                            (ii) between the ages of 6 and 12 years of 
                        age; and
                            (iii) whose family income does not exceed 
                        the minimum income level the State is required 
                        to establish under section 1902(l)(2)(C) of 
                        such Act (42 U.S.C. 1396a(l)(2)(C)) for such a 
                        family; or
                    (G) if such an individual were covered under the 
                State plan for medical assistance under title XIX of 
                the Social Security Act (42 U.S.C. 1396 et seq.) on the 
                day before the date of the enactment of this Act, is an 
                individual described in the optional group of 
                individuals described in section 1902(a)(10)(A)(ii) of 
                such Act (42 U.S.C. 1396a(a)(10)(A)(ii)), other than an 
                individual who would be eligible for such medical 
                assistance by reason of such individual's meeting, or 
                being deemed to have met, the eligibility requirements 
                for aid or assistance under the supplemental security 
                income program under title XVI of such Act (42 U.S.C. 
                1381 et seq.), or under an agreement between the 
                Commissioner of Social Security and the State to 
                provide State supplementary payments under section 1616 
                of such Act (42 U.S.C. 1382e).

    DIVISION A--EXCHANGE OF RESPONSIBILITIES FOR PROVIDING WELFARE 
                      ASSISTANCE AND MEDICAL CARE

   TITLE I--FEDERAL AND STATE RESPONSIBILITIES DURING AND AFTER THE 
                           TRANSITION PERIOD

                     Subtitle A--Transition Period

SEC. 101. EXCHANGE OF FINANCIAL RESPONSIBILITIES FOR CERTAIN WELFARE 
              PROGRAMS AND PART OF THE MEDICAID PROGRAM.

    (a) In General.--In exchange for the Federal funds received by a 
State under section 102 during the transition period, such State shall 
provide cash and noncash assistance to low-income individuals in 
accordance with subsection (b).
    (b) Requirement To Provide a Certain Level of Low Income 
Assistance.--
            (1) In general.--Except as provided in paragraph (4), the 
        amount of cash and noncash assistance provided to low-income 
        individuals by a State for any fiscal year quarter during the 
        transition period shall not be less than the sum of--
                    (A) the amount determined under paragraph (2); and
                    (B) the amount determined under paragraph (3).
            (2) Maintenance of effort with respect to federal programs 
        terminated.--
                    (A) In general.--The amount determined under this 
                paragraph is an amount equal to one-quarter of the base 
                expenditures determined under subparagraph (B) for the 
                State.
                    (B) Determination of base amount.--The Secretary, 
                in cooperation with the Secretary of Agriculture, shall 
                calculate for each State an amount equal to the total 
                State expenditures for administering and providing--
                            (i) aid to families with dependent children 
                        under a State plan under parts A and F of title 
                        IV of the Social Security Act (42 U.S.C. 601 et 
                        seq.);
                            (ii) benefits under the food stamp program 
                        under the Food Stamp Act of 1977 (7 U.S.C. 2011 
                        et seq.), including benefits provided under 
section 19 of such Act (7 U.S.C. 2028); and
                            (iii) benefits under the special 
                        supplemental program for women, infants, and 
                        children established under section 17 of the 
                        Child Nutrition Act of 1966 (42 U.S.C. 1786),
                for the State during the 12-month period beginning on 
                July 1, 1995.
            (3) Maintenance of effort with respect to medical 
        assistance for welfare-related medicaid individuals.--
                    (A) In general.--The amount determined under this 
                paragraph is an amount equal to one-quarter of the base 
                expenditures determined under subparagraph (B) for the 
                State.
                    (B) Determination of base amount.--The Secretary 
                shall calculate for each State an amount equal to the 
                total State expenditures for administering and 
                providing medical assistance to welfare-related 
                medicaid individuals under the State plan for medical 
                assistance under title XIX of the Social Security Act 
                (42 U.S.C. 1396 et seq.) (as in effect on the day 
                before the date of the enactment of this Act) in each 
                State during the 12-month period beginning on July 1, 
                1995.
            (4) State option to reduce maintenance of effort with 
        respect to state share of federal programs terminated.--During 
        any fiscal year occurring during the transition period, a State 
        may reduce the total amount of State expenditures for cash and 
        noncash assistance to low-income individuals determined under 
        paragraph (2) by not more than 15 percent in any such fiscal 
        year, and may use the funds resulting from such reduction for 
        any purpose.

SEC. 102. PAYMENTS TO STATES.

    (a) In General.--The Secretary shall make quarterly payments to 
each State during each fiscal year occurring during the transition 
period in an amount equal to one-quarter of the amount determined under 
subsection (b) for the applicable fiscal year and such amount shall be 
used for the purposes described in subsection (c).
    (b) Payment Equivalent to Federal Welfare Savings.--
            (1) In general.--The amount available to be paid to a State 
        for a fiscal year shall be an amount equal to the sum of the 
        amounts calculated under paragraphs (2) and (3) for the State.
            (2) Amount based on federal share of terminated welfare 
        programs.--
                    (A) Fiscal year 1997.--In fiscal year 1997, the 
                amount available under this paragraph for a State is 
                equal to the sum of--
                            (i) the base amount determined under 
                        subparagraph (C) for the State;
                            (ii) the product of the amount determined 
                        under clause (i) and the increase in the 
                        Consumer Price Index (for all urban consumers, 
                        United States city average) for the 12-month 
                        period described in subparagraph (C); and
                            (iii) the amount that the Federal 
                        Government and the State would have expended in 
                        the State in fiscal year 1997 under the 
                        programs terminated under section 105 solely by 
                        reason of the increase in recipients which the 
                        Secretary and the Secretary of Agriculture 
                        estimate would have occurred if such programs 
                        had not been terminated.
                    (B) Succeeding fiscal years.--In any succeeding 
                fiscal year during the transition period, the amount 
                available under this paragraph for a State is equal to 
                the sum of--
                            (i) the amount determined under this 
                        paragraph for the State in the previous fiscal 
                        year;
                            (ii) the product of the amount determined 
                        under clause (i) and the estimated increase in 
                        the Consumer Price Index (for all urban 
                        consumers, United States city average) during 
                        the previous fiscal year; and
                            (iii) the amount that the Federal 
                        Government and the State would have expended in 
                        the State in the fiscal year under the programs 
                        terminated under section 105 solely by reason 
                        of the increase in recipients which the 
                        Secretary and the Secretary of Agriculture 
                        estimate would have occurred if such programs 
                        had not been terminated.
                    (C) Determination of base amount.--The Secretary, 
                in cooperation with the Secretary of Agriculture, shall 
                calculate the amount that the Federal Government 
                expended for administering and providing--
                            (i) aid to families with dependent children 
                        under a State plan under parts A and F of title 
                        IV of the Social Security Act (42 U.S.C. 601 et 
                        seq.);
                            (ii) benefits under the food stamp program 
                        under the Food Stamp Act of 1977 (7 U.S.C. 2011 
                        et seq.), including benefits provided under 
                        section 19 of such Act (7 U.S.C. 2028); and
                            (iii) benefits under the special 
                        supplemental program for women, infants, and 
                        children established under section 17 of the 
                        Child Nutrition Act of 1966 (42 U.S.C. 1786),
                in each State during the 12-month period beginning on 
                July 1, 1995.
            (3) Amount based on federal share of welfare-related 
        medicaid.--
                    (A) Fiscal year 1997.--In fiscal year 1997, the 
                amount available under this paragraph for a State is 
                equal to the sum of--
                            (i) the base amount determined under 
                        subparagraph (C) for the State;
                            (ii) the product of the amount determined 
                        under clause (i) and 5 percent; and
                            (iii) the amount that the Federal 
                        Government and the State would have expended in 
                        the State in fiscal year 1997 to provide 
                        medical assistance to welfare-related medicaid 
                        individuals under title XIX of the Social 
                        Security Act (42 U.S.C. 1396 et seq.) (as in 
                        effect on the day before the date of the 
                        enactment of this Act) solely by reason of the 
                        increase in such recipients which the Secretary 
                        estimates would have occurred if total 
                        financial and administrative responsibility for 
                        providing medical assistance to such 
                        individuals had not been shifted to the State 
                        as a result of this Act.
                    (B) Succeeding fiscal years.--In any succeeding 
                fiscal year, the amount available under this paragraph 
                for a State is equal to the sum of--
                            (i) the amount determined under this 
                        paragraph for the State in the previous fiscal 
                        year;
                            (ii) the product of the amount determined 
                        under clause (i) and 5 percent; and
                            (iii) the amount that the Federal 
                        Government and the State would have expended in 
                        the State in the fiscal year to provide medical 
                        assistance to welfare-related medicaid 
                        individuals under title XIX of the Social 
                        Security Act (42 U.S.C. 1396 et seq.) (as in 
                        effect on the day before the date of the 
                        enactment of this Act) solely by reason of the 
                        increase in recipients which the Secretary 
                        estimates would have occurred if total 
                        financial and administrative responsibility for 
                        providing medical assistance to such 
                        individuals had not been shifted to the State 
                        as a result of this Act.
                    (C) Determination of base amount.--The Secretary 
                shall calculate the amount that the Federal Government 
                expended for administering and providing medical 
                assistance to welfare-related medicaid individuals 
                under the State plan for medical assistance under title 
                XIX of the Social Security Act (as in effect on the day 
                before the date of the enactment of this Act) in each 
                State during the 12-month period beginning on July 1, 
                1995.
    (c) Amounts To Be Expended To Provide Medical Assistance to 
Nonwelfare-Related Medicaid Individuals.--Notwithstanding any other 
provision of law, during the transition period, a State shall--
            (1) provide medical assistance under title XIX of the 
        Social Security Act (42 U.S.C. 1396 et seq.) to individuals 
        who--
                    (A) meet the eligibility criteria for receiving 
                medical assistance in accordance with the terms of the 
                State's plan under title XIX of such Act (as in effect 
                on the day before the date of the enactment of this 
                Act); and
                    (B) are not welfare-related medicaid individuals; 
                and
            (2) use the funds it receives under this section toward the 
        State's financial participation for expenditures made under 
        such State plan in order to provide medical assistance to such 
        individuals.
    (d) Excess.--A State that receives funds under this section that 
are in excess of the State's financial participation for expenditures 
required to be made under subsection (c) under the State plan for 
medical assistance under title XIX of the Social Security Act shall use 
such excess funds to provide cash and noncash assistance for low-income 
families.
    (e) Denial of Payments for Failure To Maintain Effort.--No payment 
shall be made under subsection (a) for a fiscal year quarter if a State 
fails to comply with the requirements of section 101(b) for the 
preceding quarter of such fiscal year.
    (f) Entitlement.--This section constitutes budget authority in 
advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide the payments described in subsection (a).

SEC. 103. STATE RESPONSIBILITY FOR PROVIDING MEDICAL CARE DURING THE 
              TRANSITION PERIOD FOR WELFARE-RELATED MEDICAID 
              INDIVIDUALS.

    (a) In General.--Subject to subsection (b), during the transition 
period, a State may provide medical care to any welfare-related 
medicaid individual in any manner that the State deems appropriate, 
including--
            (1) providing a voucher to such an individual for the 
        purchase of private insurance;
            (2) enrolling such an individual in a health plan licensed, 
        operated, or under contract with the State;
            (3) modifying the benefits provided to such an individual 
        by the State;
            (4) modifying the payment rates for providers of medical 
        services to such an individual; and
            (5) modifying the eligibility requirements with respect to 
        such an individual.
    (b) Special Rules for Children.--During the transition period, a 
State shall continue to provide at least the care and services listed 
in paragraphs (1) through (5), (17), and (21) of section 1905(a) of the 
Social Security Act (42 U.S.C. 1396d(a)), as in effect on the day 
before the date of the enactment of this Act, to any child residing in 
the State--
            (1) who is a welfare-related medicaid individual; and
            (2) who is--
                    (A) under the age of 6 and has a family income 
                which does not exceed 133 percent of the poverty line; 
                or
                    (B) between the ages of 6 and 12 and has a family 
                income which does not exceed 100 percent of the poverty 
                line.

SEC. 104. WAIVER OF MEDICAID REQUIREMENTS DURING THE TRANSITION PERIOD.

    (a) For Welfare-Related Medicaid Children.--The Secretary may grant 
a waiver of the requirements under section 103(b), in accordance with 
section 1115 or 1915(b) of the Social Security Act (42 U.S.C. 1315, 
1396n(b)), or any other applicable law, if a State makes an adequate 
showing of need in a waiver application submitted in such manner as the 
Secretary determines appropriate.
    (b) For Nonwelfare-Related Medicaid Individuals.--The Secretary may 
grant a waiver of the requirements under section 102(c) in accordance 
with the requirements of section 1115 or 1915(b) of the Social Security 
Act (42 U.S.C. 1315, 1396n(b)) or any other applicable law.
    (c) Approval.--Notwithstanding any other provision of law, if not 
later than 90 days after the receipt of a completed waiver request 
submitted in accordance with subsection (a) or (b), the Secretary has 
not notified the State that submitted the request that the request has 
been approved or denied, such request shall be deemed approved.

SEC. 105. TERMINATION OF CERTAIN FEDERAL WELFARE PROGRAMS.

    (a) Termination.--
            (1) AFDC.--Part A of title IV of the Social Security Act 
        (42 U.S.C. 601 et seq.) is amended by adding at the end the 
        following new section:

                       ``termination of authority

    ``Sec. 418. The authority provided by this part shall terminate on 
October 1, 1996.''.
            (2) JOBS.--Part F of title IV of the Social Security Act 
        (42 U.S.C. 681 et seq.) is amended by adding at the end the 
        following new section:

                       ``termination of authority

    ``Sec. 488. The authority provided by this part shall terminate on 
October 1, 1996.''.
            (3) Special supplemental food program for women, infants, 
        and children (wic).--Section 17 of the Child Nutrition Act of 
        1966 (42 U.S.C. 1786) is amended by adding at the end the 
        following new subsection:
    ``(q) The authority provided by this section shall terminate on 
October 1, 1996.''.
            (4) Food stamp program.--The Food Stamp Act of 1977 (7 
        U.S.C. 2011 et seq.) is amended by adding at the end the 
        following new section:

``SEC. 24. TERMINATION OF AUTHORITY.

    ``The authority provided by this Act shall terminate on October 1, 
1996.''.
    (b) References in Other Laws.--
            (1) In general.--Any reference in any law, regulation, 
        document, paper, or other record of the United States to any 
        provision that has been terminated by reason of the amendments 
        made in subsection (a) shall, unless the context otherwise 
        requires, be considered to be a reference to such provision, as 
        in effect immediately before the date of the enactment of this 
        Act.
            (2) State plans.--Any reference in any law, regulation, 
        document, paper, or other record of the United States to a 
        State plan that has been terminated by reason of the amendments 
        made in subsection (a), shall, unless the context otherwise 
        requires, be considered to be a reference to such plan as in 
        effect immediately before the date of the enactment of this 
        Act.

SEC. 106. CONFORMING AMENDMENTS TO THE MEDICAID PROGRAM.

    (a) Removal of Welfare-Related Medicaid Individuals From State Plan 
Requirements.--
            (1) In general.--Section 1902(a)(10)(A) of the Social 
        Security Act (42 U.S.C. 1396a(a)(10)(A)) is amended--
                    (A) in clause (i)--
                            (i) in subclause (I), by striking ``or part 
                        A'' and all that follows through 
                        ``482(e)(6))''; and
                            (ii) by striking subclauses (III) through 
                        (VII); and
                    (B) in clause (ii), striking subclauses (VIII) and 
                (IX).
            (2) Effective date.--The amendments made by paragraph (1) 
        shall become effective on October 1, 1996.
    (b) Termination of Program.--Title XIX of the Social Security Act 
(42 U.S.C. 1396 et seq.) is amended by adding at the end the following 
new section:

                       ``termination of authority

    ``Sec. 1932. The authority provided by this title shall terminate 
on the date described in section 121(b)(5)(A) of the Welfare and 
Medicaid Responsibility Exchange Act of 1995.''.

                   Subtitle B--Post-Transition Period

               PART 1--FEDERAL AND STATE RESPONSIBILITIES

SEC. 111. ASSUMPTION OF FEDERAL RESPONSIBILITY FOR PROVIDING ACUTE AND 
              LONG-TERM CARE TO NONWELFARE-RELATED MEDICAID 
              INDIVIDUALS.

    (a) Assumption of Federal Responsibility.--In the case of any 
fiscal year beginning after the transition period--
            (1) the Federal Government shall assume responsibility for 
        providing--
                    (A) acute care benefits under the medicare program 
                under title XVIII of the Social Security Act (42 U.S.C. 
                1395 et seq.) to elderly low-income individuals and 
                nonelderly low-income disabled individuals in 
                accordance with an implementing bill enacted by 
                Congress pursuant to section 132; and
                    (B) long-term care benefits under the long-term 
                care program to individuals meeting the eligibility 
                criteria for such program established in an 
                implementing bill enacted by Congress pursuant to 
                section 132; and
            (2) no Federal funds shall be available for providing 
        medical assistance under any State plan for medical assistance 
        approved under title XIX of the Social Security Act (42 U.S.C. 
        1396 et seq.).

SEC. 112. STATE RESPONSIBILITY FOR PROVIDING MEDICAL CARE TO WELFARE-
              RELATED MEDICAID INDIVIDUALS.

    In the case of any fiscal year beginning after the transition 
period, each State may provide medical care to a welfare-related 
medicaid individual in any manner that the State deems appropriate.

        PART 2--GRANT PROGRAM TO COMPENSATE DISADVANTAGED STATES

SEC. 121. GRANT PROGRAM.

    (a) In General.--The Commission established under section 141 shall 
develop a legislative proposal recommending the grant program described 
in subsection (b).
    (b) Grant Program Described.--
            (1) In general.--The grant program described in this 
        subsection shall be designed to ensure that grant funds are 
        awarded to States that--
                    (A) are among those States that experience the 
                greatest loss of Federal funds as a result of the 
                programs terminated in section 105 and the amendments 
                made by section 106(a); and
                    (B) contain cities or counties that--
                            (i) are among the least affluent (as 
                        determined by the Commission) of all cities or 
                        counties in the United States; and
                            (ii) have the greatest need (as determined 
                        by the Commission) for public services for low-
                        income and disadvantaged individuals.
            (2) Use of funds.--The grant program shall provide that 
        grant funds shall only be used to provide cash and noncash 
        assistance to low-income individuals (as determined by a State 
        awarded a grant under the program).
            (3) Administration of program.--The grant program shall 
        provide that the Secretary shall--
                    (A) award grants on not less than an annual basis; 
                and
                    (B) administer the program.
            (4) Financing.--
                    (A) Authorization of appropriations.--The grant 
                program shall provide that there are to be authorized 
                to be appropriated an amount equal to the estimated 
                amount determined under subparagraph (B) for carrying 
                out the program.
                    (B) Estimate of savings.--The grant program shall 
                provide that the Secretary shall estimate for each 
                fiscal year that the grant program is in effect the 
                amount of total Federal funds that would have been 
                spent in such fiscal year but for the enactment of this 
                Act and the legislative proposals described in 
                paragraphs (1), (2), and (3) of section 131(a).
            (5) Commencement and termination.--
                    (A) Commencement.--The grant program shall become 
                effective on the later of--
                            (i) October 1, 2001; or
                            (ii) October 1 of the first fiscal year 
                        beginning after the date of the enactment of 
                        the implementing bill described in section 
                        131(b)(2) and enacted in accordance with 
                        section 132.
                    (B) Termination.--The grant program shall terminate 
                on the date that is 5 years after the date the program 
                becomes effective under subparagraph (A).

                   Subtitle C--Legislative Proposals

SEC. 131. LEGISLATIVE PROPOSALS.

    (a) Proposals Described.--The Commission shall develop the 
following legislative proposals:
            (1) A legislative proposal recommending the eligibility 
        criteria and acute care benefits to be provided under the 
        medicare program for elderly low-income individuals and 
        nonelderly low-income disabled individuals in accordance with 
        title II.
            (2) A legislative proposal recommending, in accordance with 
        subtitle D of title III, the eligibility criteria and long-term 
        care benefits to be provided under the long-term care program 
        established under subtitles A, B, and C of title III.
            (3) A legislative proposal recommending, in accordance with 
        section 503, modifications to the criteria for determining the 
        eligibility of children, alcoholics, and drug addicts for 
        benefits under title XVI of the Social Security Act (42 U.S.C. 
        1381 et seq.).
            (4) A legislative proposal recommending, in accordance with 
        section 121, a grant program to compensate States which are 
        financially disadvantaged as a result of the enactment and 
        implementation of this Act.
    (b) Form and Submission of Proposals.--
            (1) Addition to medicare; eligibility criteria and benefits 
        for the long-term care; supplemental security income program 
        reforms.--Not later than 2 years after the date of the 
        enactment of this Act, the Commission shall--
                    (A) submit the legislative proposals described in 
                paragraphs (1) through (3) of subsection (a) to 
                Congress in the form of implementing bills which 
                contain the statutory provisions necessary or 
                appropriate to implement the proposals; and
                    (B) submit a report accompanying each such 
                legislative proposal which describes alternative 
                provisions for each proposal.
            (2) Grant program.--Not later than 4 years after the date 
        of the enactment of this Act, the Commission shall submit the 
        legislative proposal described in subsection (a)(4) to Congress 
        in the form of an implementing bill which contain the statutory 
        provisions necessary or appropriate to implement the proposal.
    (c) Consideration by Congress.--Any implementing bill submitted 
under subsection (b) shall be considered by Congress in accordance with 
the provisions of section 132.

SEC. 132. CONGRESSIONAL CONSIDERATION OF IMPLEMENTING BILLS.

    (a) In General.--Any implementing bill described in section 131(b) 
shall be considered by Congress under the procedures for consideration 
described in subsection (b).
    (b) Congressional Consideration.--
            (1) Rules of house of representatives and senate.--This 
        subsection is enacted by Congress--
                    (A) as an exercise of the rulemaking power of the 
                House of Representatives and the Senate, respectively, 
                and as such is deemed a part of the rules of each 
                House, respectively, but applicable only with respect 
                to the procedure to be followed in that House in the 
                case of an implementing bill described in subsection 
                (a), and supersedes other rules only to the extent that 
                such rules are inconsistent therewith; and
                    (B) with full recognition of the constitutional 
                right of either House to change the rules (so far as 
                relating to the procedure of that House) at any time, 
                in the same manner, and to the same extent as in the 
                case of any other rule of that House.
            (2) Introduction and referral.--On the day on which an 
        implementing bill described in subsection (a) is transmitted to 
        the House of Representatives and the Senate, such bill shall be 
        introduced (by request) in the House of Representatives by the 
        Majority Leader of the House, for himself or herself and the 
        Minority Leader of the House, or by Members of the House 
        designated by the Majority Leader and Minority Leader of the 
        House and shall be introduced (by request) in the Senate by the 
        Majority Leader of the Senate, for himself or herself and the 
        Minority Leader of the Senate, or by Members of the Senate 
        designated by the Majority Leader and Minority Leader of the 
        Senate. If either House is not in session on the day on which 
the implementing bill is transmitted, the bill shall be introduced in 
that House, as provided in the preceding sentence, on the first day 
thereafter on which that House is in session. If the implementing bill 
is not introduced within 5 days of its transmission, any Member of the 
House and of the Senate may introduce such bill. The implementing bill 
introduced in the House of Representatives and the Senate shall be 
referred to the appropriate committees of each House.
            (3) Period for committee consideration.--If the committee 
        or committees of either House to which an implementing bill has 
        been referred have not reported it at the close of the 45th day 
        after its introduction, such committee or committees shall be 
        automatically discharged from further consideration of the 
        implementing bill and it shall be placed on the appropriate 
        calendar. A vote on final passage of the implementing bill 
        shall be taken in each House on or before the close of the 45th 
        day after the implementing bill is reported by the committees 
        or committee of that House to which it was referred, or after 
        such committee or committees have been discharged from further 
        consideration of the implementing bill. If prior to the passage 
        by one House of an implementing bill of that House, that House 
        receives the same implementing bill from the other House then--
                    (A) the procedure in that House shall be the same 
                as if no implementing bill had been received from the 
                other House; but
                    (B) the vote on final passage shall be on the 
                implementing bill of the other House.
            (4) Floor consideration in the senate.--
                    (A) In general.--Within 5 days after the 
                implementing bill is placed on the calendar, the 
                Majority Leader, at a time to be determined by the 
                Majority Leader in consultation with the Minority 
                Leader, shall proceed to the consideration of the bill. 
                If on the 6th day after the bill is placed on the 
                calendar, the Senate has not proceeded to consideration 
                of the bill, then the presiding officer shall 
                automatically place the bill before the Senate for 
                consideration. A motion in the Senate to proceed to the 
                consideration of an implementing bill shall be 
                privileged and not debatable. An amendment to the 
                motion shall not be in order, nor shall it be in order 
                to move to reconsider the vote by which the motion is 
                agreed to or disagreed to.
                    (B) Time limitation on consideration of bill.--
                            (i) In general.--Debate in the Senate on an 
                        implementing bill, and all amendments and 
                        debatable motions and appeals in connection 
                        therewith, shall be limited to not more than 40 
                        hours. The time shall be equally divided 
                        between, and controlled by, the Majority Leader 
                        and the Minority Leader or their designees.
                            (ii) Debate of amendments, motions, points 
                        of order, and appeals.--In the Senate, no 
                        amendment which is not relevant to the bill 
                        shall be in order. Debate in the Senate on any 
                        amendment, debatable motion or appeal, or point 
                        of order in connection with an implementing 
                        bill shall be limited to--
                                    (I) not more than 2 hours for each 
                                first degree relevant amendment;
                                    (II) 1 hour for each second degree 
                                relevant amendment; and
                                    (III) 30 minutes for each debatable 
                                motion or appeal, or point of order 
                                submitted to the Senate;
                        to be equally divided between, and controlled 
                        by, the mover and the manager of the 
                        implementing bill, except that in the event the 
                        manager of the implementing bill is in favor of 
                        any such amendment, motion, appeal, or point of 
                        order, the time in opposition thereto, shall be 
                        controlled by the Minority Leader or designee 
                        of the Minority Leader. The Majority Leader and 
                        Minority Leader, or either of them, may, from 
                        time under their control on the passage of an 
                        implementing bill, allot additional time to any 
                        Senator during the consideration of any 
                        amendment, debatable motion or appeal, or point 
                        of order.
                    (C) Other motions.--A motion to recommit an 
                implementing bill is not in order.
                    (D) Final passage.--Upon the expiration of the 40 
                hours available for consideration of the implementing 
                bill, it shall not be in order to offer or vote on any 
                amendment to, or motion with respect to, such bill. 
                Immediately following the conclusion of debate in the 
                Senate on an implementing bill that was introduced in 
                the Senate, such bill shall be deemed to have been read 
                a third time and the vote on final passage of such bill 
                shall occur without any intervening action or debate.
                    (E) Debate on differences between the houses.--
                Debate in the Senate on motions and amendments 
                appropriate to resolve the differences between the 
                Houses, at any particular stage of the proceedings, 
                shall be limited to not more than 10 hours.
                    (F) Debate on conference report.--Debate in the 
                Senate on the conference report shall be limited to not 
                more than 20 hours.
            (5) Floor consideration in the house of representatives.--
                    (A)  Proceed to consideration.--On the 6th day 
                after the implementing bill is placed on the calendar, 
                it shall be privileged for any Member to move without 
                debate that the House resolve itself into the Committee 
                of the Whole House on the State of the Union, for the 
                consideration of the bill, and the first reading of the 
                bill shall be dispensed with.
                    (B) General debate.--After general debate, which 
                shall be confined to the implementing bill and which 
                shall not exceed 4 hours, to be equally divided and 
                controlled by the chairman and Ranking Minority Member 
                of the committee or committees to which the bill had 
                been referred, the bill shall be considered for 
                amendment by title under the 5-minute rule and each 
                title shall be considered as having been read. The 
                total time for considering all amendments shall be 
                limited to 40 hours of which the total time for 
                debating each amendment under the 5-minute rule shall 
                not exceed 1 hour.
                    (C) Rise and report.--At the conclusion of the 
                consideration of the implementing bill for amendment, 
                the Committee of the Whole on the State of the Union 
                shall rise and report the bill to the House with such 
                amendments as may have been adopted, and the previous 
                question shall be considered as ordered on the bill and 
                the amendments thereto, and the House shall proceed to 
                vote on final passage without intervening motion except 
                1 motion to recommit.
            (6) Computation of days.--For purposes of this subsection, 
        in computing a number of days in either House, there shall be 
        excluded--
                    (A) the days on which either House is not in 
                session because of an adjournment of more than 3 days 
                to a day certain, or an adjournment of the Congress 
                sine die; and
                    (B) any Saturday and Sunday not excluded under 
                subparagraph (A) when either House is not in session.
    (c) Resubmissions.--
            (1) In general.--If a legislative proposal described in 
        section 131 is not approved by Congress under this section or 
        is vetoed by the President (and such veto is not overridden by 
        the Congress), the Commission shall resubmit a new legislative 
        proposal (as described in paragraph (1), (2), (3), or (4) of 
        section 131(a) (as the case may be) in such form as described 
        in paragraph (1) or (2) of section 131(b) (as the case may be) 
        not later than 90 days after Congress failed to approve such 
        legislative proposal or failed to override the President's 
        veto, and such new legislative proposal shall be subject to 
        congressional consideration as provided in subsection (b).
            (2) Limitation.--Not more than 2 legislative proposals 
        described in paragraphs (1) through (4) of section 131(a) may 
        be resubmitted in accordance with paragraph (1).

          Subtitle D--Health Benefits and Coverage Commission

SEC. 141. CREATION OF HEALTH BENEFITS AND COVERAGE COMMISSION; 
              MEMBERSHIP; TERMINATION.

    (a) In General.--There is hereby established the Health Benefits 
and Coverage Commission.
    (b) Composition.--The Commission is composed of 7 members appointed 
by the President, by and with the advice and consent of the Senate. Not 
more than 4 members of the Commission may be affiliated with the same 
political party. Members shall be appointed not later than 90 days 
after the date of the enactment of this Act.
    (c) Chair.--The President shall designate one of the members of the 
Commission as chair.
    (d) Vacancies.--
            (1) In general.--If a vacancy occurs, other than by 
        expiration of term, a successor shall be appointed by the 
        President, by and with the consent of the Senate, to fill such 
        vacancy. The appointment shall be for the remainder of the term 
        of the predecessor.
            (2) No impairment of function.--A vacancy in the membership 
        of the Commission does not impair the authority of the 
        remaining members to exercise all of the powers of the 
        Commission.
            (3) Acting chair.--The Commission may designate a member to 
        act as chair during any period in which there is no chair 
        designated by the President.
    (e) Meetings; Quorum.--
            (1) Meetings.--The chair shall preside at meetings of the 
        Commission, and in the absence of the chair, the Commission 
        shall elect a member to act as chair pro tempore.
            (2) Frequency.--The Commission shall meet not less 
        frequently than 4 times each year.
            (3) Quorum.--Four members of the Commission shall 
        constitute a quorum thereof.
    (f) Sunset.--The Commission shall terminate 6 years after the date 
of the enactment of this Act.

SEC. 142. QUALIFICATIONS OF COMMISSION MEMBERS.

    (a) Citizenship.--Each member of the Commission shall be a citizen 
of the United States.
    (b) Basis of Selection.--Commission members shall be selected on 
the basis of their experience and expertise in relevant subjects, 
including the practice of medicine, nursing, or other clinical 
practices, health care financing and delivery, health insurance, State 
health systems, consumer protection, business, law, and delivery of 
care to vulnerable populations.
    (c) Pay and Travel Expenses.--
            (1) Pay.--
                    (A) Chair.--The chair of the Commission shall be 
                paid at a rate equal to the daily equivalent of the 
                minimum annual rate of basic pay payable for level II 
                of the Executive Schedule under section 5315 of title 
                5, United States Code, for each day (including travel 
                time) during which the chair is engaged in the actual 
                performance of duties vested in the Commission.
                    (B) Members.--Each member of the Commission shall 
                be paid at a rate equal to the daily equivalent of the 
                minimum annual rate of basic pay payable for level III 
                of the Executive Schedule under section 5315 of title 
                5, United States Code, for each day (including travel 
                time) during which the member is engaged in the actual 
                performance of duties vested in the Commission.
            (2) Travel expenses.--Members of the Commission shall 
        receive travel expenses, including per diem in lieu of 
        subsistence, in accordance with sections 5702 and 5703 of title 
        5, United States Code.

SEC. 143. POWERS.

    (a) Executive Director; Staff.--
            (1) Executive director.--
                    (A) In general.--The Commission shall, without 
                regard to section 5311(b) of title 5, United States 
                Code, appoint an Executive Director.
                    (B) Pay.--The Executive Director shall be paid at a 
                rate equivalent to a rate for the Senior Executive 
                Service.
            (2) Staff.--
                    (A) In general.--Subject to subparagraphs (B) and 
                (C), the Executive Director, with the approval of the 
                Commission, may appoint and fix the pay of additional 
                personnel.
                    (B) Pay.--The Executive Director may make such 
                appointments without regard to the provisions of title 
                5, United States Code, governing appointments in the 
                competitive service, and any personnel so appointed may 
                be paid without regard to the provisions of chapter 51 
                and subchapter III of chapter 53 of such title, 
                relating to classification and General Schedule pay 
                rates, except that an individual so appointed may not 
                receive pay in excess of 120 percent of the annual rate 
                of basic pay payable for GS-15 of the General Schedule.
                    (C) Detailed personnel.--Upon request of the 
                Executive Director, the head of any Federal department 
                or agency may detail any of the personnel of that 
                department or agency to the Commission to assist the 
                Commission in carrying out its duties under this Act.
    (b) Contract Authority.--To the extent provided in advance in 
appropriations Acts, the Commission may contract with any person 
(including an agency of the Federal Government) for studies, analyses, 
or other functions as required to execute its functions.
    (c) Consultations With Experts.--The Commission may consult with 
any outside expert individuals or groups that the Commission determines 
appropriate in performing its duties under this Act. The Commission may 
establish advisory committees.
    (d) Access to Information.--The Commission may secure directly from 
any department or agency of the United States information necessary to 
enable it to carry out its functions, to the extent such information is 
otherwise available to a department or agency of the United States. 
Upon request of the chair, the head of that department or agency shall 
furnish that information to the Commission.
    (e) Delegation of Authority.--Except as otherwise provided, the 
Commission may delegate any function to such officers and employees as 
the Commission may designate and may authorize such successive 
redelegations of such functions with the Commission as the Commission 
deems to be necessary or appropriate. No delegation of functions by the 
Commission shall relieve the Commission of responsibility for the 
administration of such functions.

SEC. 144. FUNDING.

    (a) Authorization of Appropriations.--There are authorized to be 
appropriated to the Commission $2,000,000 for each of fiscal years 1996 
through 2001.
    (b) Submission of Budget.--Under the procedures of chapter 11 of 
title 31, United States Code, the budget for the Commission for a 
fiscal year shall be reviewed by the Director of the Office of 
Management and Budget and submitted to Congress as part of the 
President's submission of the Budget of the United States for the 
fiscal year.

 TITLE II--ACUTE CARE BENEFITS UNDER THE MEDICARE PROGRAM FOR ELDERLY 
      LOW-INCOME AND NON- ELDERLY LOW-INCOME DISABLED INDIVIDUALS

 Subtitle A--Eligibility Criteria and Acute Care Benefits for Elderly 
                         Low-Income Individuals

SEC. 201. ESTABLISHING A CATEGORY OF ELDERLY LOW-INCOME INDIVIDUALS.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(1) shall recommend a category of 
elderly low-income individuals, in accordance with subsection (b), who 
will be eligible for benefits under the medicare program (as such 
program is amended in accordance with the amendments developed under 
section 202), subject to the availability of appropriations.
    (b) Guidelines for Developing Category.--
            (1) In general.--Subject to paragraphs (2) and (3), the 
        category of elderly low-income individuals recommended by the 
        Commission shall include only the following categories of 
        individuals:
                    (A) Elderly individuals who are eligible for 
                supplemental security income benefits under title XVI 
                of the Social Security Act (42 U.S.C. 1381 et seq.).
                    (B) Elderly individuals who meet a Federal 
                medically needy standard (determined by the Commission) 
                that may be based on--
                            (i) an individual having income (as 
                        determined under section 1612 of such Act (42 
                        U.S.C. 1382a)) that has been reduced through 
                        spending on medical care to a percentage (to be 
                        determined by the Commission) of the poverty 
                        line;
                            (ii) a sliding scale of income eligibility 
                        for premium payments and cost-sharing 
                        requirements (including a procedure by which 
                        such premiums and cost-sharing shall be 
                        collected); or
                            (iii) such other factors as the Commission 
                        deems appropriate.
                    (C) Individuals who would have been eligible to 
                receive medical assistance for medicare cost-sharing as 
                qualified medicare beneficiaries, qualified disabled 
                and working individuals, or specified low-income 
                medicare beneficiaries pursuant to section 
                1902(a)(10)(E) of the Social Security Act (42 U.S.C. 
                1396a(a)(10)(E)) (as in effect on the day before the 
                date of the enactment of this Act), except that the 
                Commission may modify the income and asset standards 
                for determining who will be eligible, subject to the 
                availability of appropriations, for benefits under the 
                medicare program (as amended in accordance with the 
                amendments developed under section 202).
            (2) Cost controls.--
                    (A) In general.--The Commission shall, to the 
                extent practicable, recommend the categories of 
                individuals under paragraph (1) such that total annual 
                Federal expenditures for such individuals under the 
                medicare program resulting from the amendments 
                developed under section 202 will not exceed the amount 
                described in subparagraph (B).
                    (B) Amount described.--The amount described in this 
                subparagraph is the estimated total annual amount that 
                would have been expended for medical assistance 
                relating to acute care benefits under all State plans 
                approved under title XIX of the Social Security Act 
(42 U.S.C. 1396 et seq.) (as in effect on the day before the date of 
the enactment of this Act) for--
                            (i) elderly individuals who received 
                        supplemental security income benefits under 
                        title XVI of such Act (42 U.S.C. 1381 et seq.);
                            (ii) elderly medically needy individuals 
                        (as described in section 1902(a)(10)(C) of such 
                        Act (42 U.S.C. 1396a(a)(10)(C))); and
                            (iii) individuals who were eligible to 
                        receive medical assistance for medicare cost-
                        sharing as qualified medicare beneficiaries, 
                        qualified disabled and working individuals, or 
                        specified low-income medicare beneficiaries 
                        pursuant to section 1902(a)(10)(E) of such Act 
                        (42 U.S.C. 1396a(a)(10)(E)).
            (3) State supplemental payments cap.--
                    (A) In general.--In developing the category of 
                individuals under paragraph (1), the Commission shall 
                not include individuals who are eligible for 
                supplemental security income benefits under title XVI 
                of the Social Security Act (42 U.S.C. 1381 et seq.) who 
                receive combined Federal supplemental security income 
                benefits and State supplemental payments under section 
                1616 of such Act (42 U.S.C. 1382e) that are in excess 
                of the national cap established under subparagraph (B).
                    (B) National cap.--
                            (i) In general.--The national cap 
                        established under this subparagraph shall be 
                        based on the median of each State's maximum 
                        allowable benefits that an individual or couple 
                        may receive under title XVI of the Social 
                        Security Act (42 U.S.C. 1381 et seq.) and a 
                        State supplemental payments program under 
                        section 1616 of such Act (42 U.S.C. 1382e) and 
                        remain eligible for medical assistance under a 
                        State plan for medical assistance under title 
                        XIX of such Act (42 U.S.C. 1396 et seq.) (as in 
                        effect on the day before the date of the 
                        enactment of this Act).
                            (ii) Adjustment.--
                                    (I) In general.--The cap 
                                established under clause (i) shall be 
                                adjusted annually by the estimated 
                                percentage change in the consumer price 
                                index (as determined by the Bureau of 
                                Labor Statistics).
                                    (II) Secretarial discretion.--The 
                                Secretary may adjust the cap 
                                established under clause (i) on a 
                                regional or State-by-State basis.
    (c) Cost Projections.--
            (1) In general.--The Commission shall include in the report 
        submitted with the legislative proposal under section 
        131(b)(1)(B) the following:
                    (A) An estimated cost and enrollment projection for 
                each category of individuals described in subsection 
                (b)(1).
                    (B) A statement explaining why the Commission 
                recommended such categories of individuals.
            (2) Form of projections.--The projections described in 
        paragraph (1) shall be--
                    (A) for a period of 10 years; and
                    (B) in such form as will enable Congress to compare 
                the projections for each category of individuals 
                described in subsection (b)(1) to the estimated cost 
                and enrollment projection of the nearest equivalent 
                population of individuals who would be eligible to 
                receive medical assistance under all State plans 
                approved under title XIX of the Social Security Act (42 
                U.S.C. 1396 et seq.) if a legislative proposal 
                described in section 131(a)(1) had not been enacted by 
                Congress through an implementing bill in accordance 
                with section 132.

SEC. 202. MEDICARE BENEFITS FOR ELDERLY LOW-INCOME INDIVIDUALS.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(1) shall include the amendments to the 
medicare program described in subsection (b).
    (b) Proposed Changes Described.--The Commission shall propose the 
following amendments to the medicare program:
            (1) Amendments providing that individuals meeting the 
        categories of elderly low-income individuals recommended by the 
        Commission under section 201 who are not otherwise entitled to 
        benefits under part A of title XVIII of the Social Security Act 
        (42 U.S.C. 1395c-1395i-4) and eligible to enroll in part B of 
        such title (42 U.S.C. 1395j-1395w-4) are eligible to receive 
        such benefits under the medicare program, subject to the 
        availability of appropriations.
            (2) Subject to the provisions of paragraph (3), amendments 
        providing that payments (from the Federal Hospital Insurance 
        Trust Fund and the Federal Supplementary Medical Insurance 
        Trust Fund, as applicable) may be made for medicare cost-
        sharing for individuals meeting the categories of elderly low-
        income individuals recommended by the Commission under section 
        201.
            (3) Amendments providing for the imposition of nominal 
        copayments or other cost-sharing requirements on individuals 
        meeting the categories of elderly low-income individuals 
        recommended by the Commission under section 201.
            (4) If the Commission determines it is appropriate, and 
        subject to the availability of appropriations--
                    (A) amendments that add a supplemental category of 
                acute care benefits to the medicare program for 
                individuals meeting the categories of elderly low-
                income individuals recommended by the Commission under 
                section 201 that may include acute care benefits 
                provided under a State plan for medical assistance 
                under title XIX of the Social Security Act (42 U.S.C. 
                1396 et seq.) (as in effect on the day before the date 
                of the enactment of this Act) or under policies of 
                private health insurance; and
                    (B) amendments that specify the scope and duration 
                of any supplemental acute care benefits added pursuant 
                to subparagraph (A).
            (5) Amendments to section 1876 of the Social Security Act 
        (42 U.S.C. 1395mm) which require an eligible organization with 
        a risk-sharing contract under such section to offer acute care 
        benefits to individuals meeting the categories of elderly low-
        income individuals recommended by the Commission under section 
        201 (including any supplemental acute care benefits added 
        pursuant to paragraph (4)).
            (6) Amendments that provide that increased costs incurred 
        by the Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund as a result of the 
        amendments proposed under this subsection are authorized to be 
        appropriated to such Trust Funds (as applicable), out of any 
        moneys in the Treasury not otherwise appropriated.
    (c) Cost Limitation.--
            (1) In general.--The Commission shall, to the extent 
        practicable, develop the amendments described in subsection (b) 
        such that annual Federal expenditures as a result of such 
        amendments will not result in expenditures that are greater 
        than the amount described in paragraph (2).
            (2) Amount described.--The amount described in this 
        paragraph is the estimated total annual amount that would have 
        been expended for medical assistance related to acute care 
        benefits and medicare cost-sharing under all State plans 
        approved under title XIX of the Social Security Act (42 U.S.C. 
        1396 et seq.) (as in effect on the day before the date of the 
        enactment of this Act) for individuals meeting the categories 
        of elderly low-income individuals recommended by the Commission 
        under section 201 (to the extent such individuals were eligible 
        for such medical assistance).

Subtitle B--Eligibility Criteria and Acute Care Benefits for Nonelderly 
                    Low-Income Disabled Individuals

SEC. 211. ESTABLISHING A CATEGORY OF NONELDERLY LOW-INCOME DISABLED 
              INDIVIDUALS.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(1) shall recommend a category of 
nonelderly low-income disabled individuals, in accordance with 
subsection (b), who will be eligible for benefits under the medicare 
program (as such program is amended in accordance with the amendments 
developed under section 212), subject to the availability of 
appropriations.
    (b) Guidelines for Developing Category.--
            (1) In general.--Subject to paragraphs (2) and (3), the 
        category of nonelderly low-income disabled individuals 
        recommended by the Commission shall include only the following 
        categories of individuals:
                    (A) Individuals who are blind or disabled and 
                eligible for supplemental security income benefits 
                under title XVI of the Social Security Act (42 U.S.C. 
                1381 et seq.).
                    (B) Individuals who--
                            (i) are blind or disabled and would be 
                        eligible for supplemental security income 
                        benefits under title XVI of such Act (42 U.S.C. 
                        1381 et seq.) except that such individuals have 
                        income (as determined under section 1612 of 
                        such Act (42 U.S.C. 1382a) in excess of the 
                        income allowable under such title of such Act 
                        (42 U.S.C. 1382a(b)); and
                            (ii) meet a Federal medically needy 
                        standard for the nonelderly blind or disabled 
                        (as determined by the Commission) that may 
                        require--
                                    (I) such individuals having income 
                                (as determined under section 1612 of 
                                such Act (42 U.S.C. 1382a)) that has 
                                been reduced through spending on 
                                medical care to a percentage (to be 
                                determined by the Commission) of the 
                                poverty line;
                                    (II) a sliding scale of income 
                                eligibility for premium payments and 
                                cost-sharing requirements (including a 
                                procedure by which such premiums and 
                                cost-sharing shall be collected); or
                                    (III) such other factors as the 
                                Commission deems appropriate.
            (2) Cost controls.--
                    (A) In general.--The Commission shall recommend the 
                categories of individuals under paragraph (1) such that 
                total annual Federal expenditures for such individuals 
                under the medicare program resulting from the 
                amendments developed under section 212 will not exceed 
                the amount described in subparagraph (B).
                    (B) Amount described.--The amount described in this 
                subparagraph is the estimated total annual amount that 
                would have been expended for medical assistance related 
                to acute care benefits under all State plans approved 
                under title XIX of the Social Security Act (42 U.S.C. 
                1396 et seq.) (as in effect on the day before the date 
                of the enactment of this Act) for--
                            (i) blind or disabled individuals who 
                        received supplemental security income benefits 
                        under title XVI of such Act (42 U.S.C. 1381 et 
                        seq.); and
                            (ii) blind or disabled nonelderly medically 
                        needy individuals (as described in section 
                        1902(a)(10)(C) of such Act (42 U.S.C. 
                        1396a(a)(10)(C))).
            (3) State supplemental payments cap.--In developing the 
        category of individuals under paragraph (1), the Commission 
        shall not include individuals who are eligible for supplemental 
        security income benefits under title XVI of the Social Security 
        Act (42 U.S.C. 1381 et seq.) and who receive combined Federal 
        supplemental security income benefits and State supplemental 
        payments under section 1616 of such Act (42 U.S.C. 1382e) that 
        are in excess of the national cap established under section 
        201(b)(3)(B).
    (c) Cost Projections.--
            (1) In general.--The Commission shall include in the report 
        submitted with the legislative proposal under section 
        131(b)(1)(B) the following:
                    (A) An estimated cost and enrollment projection for 
                each category of individuals described in subsection 
                (b)(1).
                    (B) A statement explaining why the Commission 
                recommended such categories of individuals.
            (2) Form of projections.--The projections described in 
        paragraph (1) shall be--
                    (A) for a period of 10 years; and
                    (B) in such form as will enable Congress to compare 
                the projections for each category of individuals 
                described in subsection (b)(1) to the estimated cost 
                and enrollment projection of the nearest equivalent 
                population of individuals who would be eligible to 
                receive medical assistance under all State plans 
                approved under title XIX of the Social Security Act (42 
U.S.C. 1396 et seq.) if a legislative proposal described in section 
131(a)(1) had not been enacted by Congress through an implementing bill 
in accordance with section 132.

SEC. 212. MEDICARE BENEFITS FOR NONELDERLY LOW-INCOME DISABLED 
              INDIVIDUALS.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(1) shall include the amendments to the 
medicare program described in subsection (b).
    (b) Proposed Changes Described.--The Commission shall propose the 
following amendments to the medicare program:
            (1) Amendments providing that individuals meeting the 
        categories of nonelderly low-income disabled individuals 
        recommended by the Commission under section 211 are eligible to 
        receive benefits under the medicare program, subject to the 
        availability of appropriations.
            (2) Subject to the provisions of paragraph (3), amendments 
        providing that payments (from the Federal Hospital Insurance 
        Trust Fund and the Federal Supplementary Medical Insurance 
        Trust Fund, as applicable) may be made for medicare cost-
        sharing for individuals meeting the categories of nonelderly 
        low-income disabled individuals recommended by the Commission 
        under section 211.
            (3) Amendments providing for the imposition of nominal 
        copayments or other cost-sharing requirements on individuals 
        meeting the categories of nonelderly low-income disabled 
        individuals recommended by the Commission under section 211.
            (4) If the Commission determines it is appropriate, and 
        subject to the availability of appropriations--
                    (A) amendments that add a supplemental category of 
                acute care benefits to the medicare program for 
                individuals meeting the categories of nonelderly low-
                income disabled individuals recommended by the 
                Commission under section 211 that may include acute 
                care benefits provided under a State plan for medical 
                assistance under title XIX of such Act (42 U.S.C. 1396 
                et seq.) (as in effect on the day before the date of 
                the enactment of this Act) or under policies of private 
                health insurance; and
                    (B) amendments that specify the scope and duration 
                of any supplemental acute care benefits added pursuant 
                to subparagraph (A).
            (5) Amendments to section 1876 of the Social Security Act 
        (42 U.S.C. 1395mm) which require an eligible organization with 
        a risk-sharing contract under such section to offer acute care 
        benefits to individuals meeting the categories of nonelderly 
        low-income disabled individuals recommended by the Commission 
        under section 211 (including any supplemental acute care 
        benefits added pursuant to paragraph (4)).
            (6) Amendments that provide that increased costs incurred 
        by the Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund as a result of the 
        amendments proposed under this subsection are authorized to be 
        appropriated to such Trust Funds (as applicable), out of any 
        moneys in the Treasury not otherwise appropriated.
    (c) Cost Limitation.--
            (1) In general.--The Commission shall, to the extent 
        practicable, develop the amendments described in subsection (b) 
        such that annual Federal expenditures as a result of such 
        amendments will not result in expenditures that are greater 
        than the amount described in paragraph (2).
            (2) Amount described.--The amount described in this 
        paragraph is the estimated total annual amount that would have 
        been expended for medical assistance relating to acute care 
        benefits and medicare cost-sharing under all State plans 
        approved under title XIX of the Social Security Act (42 U.S.C. 
        1396 et seq.) (as in effect on the day before the date of the 
        enactment of this Act) for individuals meeting the categories 
        of nonelderly low-income disabled individuals recommended by 
        the Commission under section 211 (to the extent such 
        individuals were eligible for such medical assistance).

Subtitle C--Premiums, Coinsurance, and Deductibles Established Without 
                       Regard to Additional Costs

SEC. 221. ESTABLISHMENT OF PREMIUMS, COINSURANCE AND DEDUCTIBLES.

    In administering the medicare program after the transition period, 
the Secretary shall establish premiums, coinsurance, and deductibles 
for such program without regard to the amount of additional Federal 
expenditures incurred for providing acute care benefits under such 
program to individuals meeting the categories of elderly low-income 
individuals and nonelderly low-income disabled individuals recommended 
by the Commission under sections 201 and 211 and enacted in an 
implementing bill under section 132.

         TITLE III--ESTABLISHMENT OF THE LONG-TERM CARE PROGRAM

                       Subtitle A--Establishment

SEC. 301. ESTABLISHMENT OF PROGRAM.

    The Secretary shall establish a long-term care program in 
accordance with the provisions of this title, to become effective on 
the date described in section 121(b)(5)(A).

                  Subtitle B--Providing Long-Term Care

SEC. 311. ELIGIBILITY DETERMINATIONS.

    (a) In General.--The Secretary shall establish a procedure for 
making eligibility determinations under the long-term care program and 
for periodic reassessment of an individual's financial and physical 
condition.
    (b) Timing of Reassessments.--
            (1) In general.--Except as provided in paragraph (2), a 
        reassessment of an individual's financial and physical 
        condition shall occur at intervals of not less than every 12 
        months.
            (2) Exception.--A reassessment of an individual's physical 
        condition may occur at an interval of more than 12 months if 
        the Secretary determines that it is highly unlikely that there 
        has been a significant change in the individual's condition 
        that would affect the reassessment.
    (c) Authority To Contract.--The Secretary may enter into contracts 
with entities to make eligibility determinations and reassessments in 
accordance with this section.

SEC. 312. AUTHORITY TO CONTRACT.

    (a) In General.--In the case of any fiscal year beginning after the 
transition period, the Secretary may contract on a statewide, 
marketwide, or regional basis (as determined by the Secretary) with any 
State, local government, community or civic organization, private 
entity, joint public and private partnership, or fiscal intermediary 
that meets the requirements of this subtitle and subtitle C (hereafter 
for purposes of this title referred to as a ``long-term care 
contractor'') to provide or deliver long-term care benefits under the 
long-term care program.
    (b) Requirement for the Selection of Contractors.--In contracting 
with a long-term care contractor, the Secretary shall consider--
            (1) the eligibility criteria for the long-term care program 
        enacted in an implementing bill under section 132; and
            (2) the long-term care needs of the population residing in 
        the area to be served under the contract.
    (c) Contract Provisions.--
            (1) Forms of payment.--The Secretary may make payments 
        under a contract entered into in accordance with this title 
        through the use of--
                    (A) vouchers;
                    (B) cash payments directly to individuals meeting 
                the eligibility criteria established for the long-term 
                care program;
                    (C) capitated payments; and
                    (D) payments to contractors providing long-term 
                care benefits under the long-term care program.
            (2) Flexibility.--
                    (A) In general.--A contract entered into in 
                accordance with this title shall permit sufficient 
                flexibility for contractors providing long-term care 
                benefits under the long-term care program to meet the 
                needs of individuals receiving such benefits in a cost-
                effective manner.
                    (B) Availability of informal care.--A contract 
                entered into in accordance with this title shall 
                provide that in determining the amount and array of 
                services available to individuals meeting the 
                eligibility criteria established for the long-term care 
                program, a long-term care contractor may consider the 
                availability of informal care in the area served by 
                such contractor and the existence of any private long-
                term care insurance held by an individual that would be 
                provided with long-term care benefits under the 
                contract.
            (3) Requirements for subcontractors, affiliates, and 
        related parties.--A contract entered into in accordance with 
        this title shall permit a long-term care contractor to provide 
        long-term care benefits under the contract through any 
        subcontractors, affiliates, and related parties of the 
        contractor so long as any such subcontractor, affiliate, or 
        related party meets all applicable (as determined by the 
        Secretary) requirements of this subtitle and subtitle C.
    (d) Availability of Care.--
            (1) In general.--Each individual meeting the eligibility 
        criteria established for the long-term care program in an 
        implementing bill enacted under section 132 may be eligible to 
        receive long-term care benefits from any long-term care 
        contractor with a contract under the long-term care program 
        which serves the area in which the individual resides.
            (2) Information.--
                    (A) Distribution by contractors.--
                            (i) In general.--The Secretary may 
                        prescribe the procedures and conditions under 
                        which each long-term care contractor with a 
                        contract under the long-term care program may 
                        provide individuals eligible to receive long-
                        term care benefits from such contractor with 
                        information about the long-term care benefits 
                        offered by the contractor. No brochures, 
                        application forms, or other promotional or 
                        informational material may be distributed by a 
                        long-term care contractor to (or for the use 
                        of) such individuals unless--
                                    (I) at least 45 days before its 
                                distribution, the long-term care 
                                contractor has submitted the material 
                                to the Secretary for review; and
                                    (II) the Secretary has not 
                                disapproved the distribution of the 
                                material.
                            (ii) Review by secretary.--The Secretary 
                        shall review all material submitted under this 
                        paragraph and shall disapprove such material if 
                        the Secretary determines, in the Secretary's 
                        discretion, that the material is materially 
                        inaccurate or misleading or otherwise makes a 
                        material misrepresentation.
                    (B) Distribution by the secretary.--If more than 
                one long-term care contractor in an area enters into a 
                contract under the long-term care program, the 
                Secretary shall develop and distribute comparative 
                materials to individuals eligible to receive long-term 
                care benefits from such contractors regarding available 
                long-term care benefits offered in the area by the 
                contractors.

SEC. 313. NO CONTRACTS IN AN AREA.

    (a) In General.--If at least one long-term care contractor in an 
area does not enter into a contract under the long-term care program, 
the Secretary shall provide individuals residing in the area who meet 
the eligibility criteria established for the long-term care program 
with long-term care benefits under such program through any other means 
that the Secretary deems appropriate and cost-effective.
    (b) Forms of Payment.--The Secretary may make payments to provide 
long-term care benefits under this section through the use of--
            (1) vouchers;
            (2) cash payments directly to individuals meeting the 
        eligibility criteria established for the long-term care 
        program;
            (3) capitated payments; and
            (4) any other means that the Secretary deems appropriate.

SEC. 314. CONTRACT TERMS; POWERS AND DUTIES OF THE SECRETARY.

    (a) Duration and Termination.--
            (1) In general.--Except as provided in paragraph (2), each 
        contract under the long-term care program shall be for a term 
        of at least 1 year, as determined by the Secretary, and may be 
        made automatically renewable from term to term in the absence 
        of notice by either party of intention to terminate at the end 
        of the current term.
            (2) Exception.--The Secretary may terminate a contract at 
        any time (after such reasonable notice and opportunity for 
        hearing to the long-term care contractor involved as the 
        Secretary may provide in regulations), if the Secretary finds 
        that the contractor--
                    (A) has substantially failed to carry out the 
                contract;
                    (B) is carrying out the contract in a manner 
                inconsistent with the efficient and effective 
                administration of the long-term care program;
                    (C) no longer substantially complies with the 
                requirements of this subtitle or subtitle C; or
                    (D) no longer substantially complies with any other 
                requirements of the long-term care program.
    (b) Effective Date.--The effective date of any contract executed 
pursuant to the long-term care program shall be specified in the 
contract.
    (c) Terms.--Each contract under the long-term care program--
            (1) shall provide that the Secretary, or any person or 
        organization designated by the Secretary--
                    (A) shall have the right to inspect or otherwise 
                evaluate--
                            (i) the quality, appropriateness, and 
                        timeliness of services performed under the 
                        contract; and
                            (ii) the facilities of the long-term care 
                        contractor (or of any subcontractors, 
                        affiliates, and related parties of such 
                        contractor) when there is reasonable evidence 
                        of the need for such inspection; and
                    (B) shall have the right to audit and inspect any 
                books and records of the long-term care contractor that 
                pertain--
                            (i) to the ability of the contractor to 
                        bear the risk of potential financial losses; or
                            (ii) to services performed or 
                        determinations of amounts payable under the 
                        contract;
            (2) shall require the long-term care contractor to provide 
        (and pay for) written notice in advance of the contract's 
        termination, as well as a description of alternatives for 
        obtaining long-term care benefits under the long-term care 
        program, to each individual receiving such benefits from the 
        contractor;
            (3) shall require the contractor to comply with subsections 
        (a), (c), and (h) of section 1318 of the Public Health Service 
        Act (42 U.S.C. 300e-17(a), (c), and (h)) (relating to 
        disclosure of certain financial information) and with the 
        requirement of section 1301(c)(8) of such Act (42 U.S.C. 
        300e(c)(8)) (relating to liability arrangements to protect 
        members);
            (4) shall require the contractor to notify the Secretary of 
        loans and other special financial arrangements which are made 
        between the contractor and subcontractors, affiliates, and 
        related parties of such contractor; and
            (5) shall contain such other terms and conditions as the 
        Secretary may find necessary and appropriate, including 
        requiring the long-term care contractor to provide the 
        Secretary with such information as the Secretary deems 
        appropriate.
    (d) Period of Disqualification.--The Secretary may not enter into a 
contract with a long-term care contractor if a previous contract under 
the long-term care program with that contractor was terminated for 
cause within the preceding 5-year period, except in circumstances which 
warrant special consideration, as determined by the Secretary.
    (e) Disregard of Certain Inconsistent Laws, Etc.--The authority 
vested in the Secretary in accordance with this title may be performed 
without regard to such provisions of law or regulations relating to the 
making, performance, amendment, or modification of contracts of the 
United States as the Secretary may determine to be inconsistent with 
the furtherance of the purposes of the long-term care program.
    (f) Findings of Failure.--
            (1) In general.--If the Secretary determines that a long-
        term care contractor with a contract under the long-term care 
        program--
                    (A) substantially fails to provide long-term care 
                benefits that are required under the contract to be 
                provided to an individual covered under the contract, 
                and such failure has adversely affected (or has a 
                substantial likelihood of adversely affecting) the 
                individual;
                    (B) engages in any practice that would reasonably 
                be expected to have the effect of denying or 
                discouraging (except as permitted by this title) any 
                individual eligible to receive long-term care benefits 
                from the contractor from receiving such benefits, and 
                whose medical condition or history indicates a need for 
                substantial future long-term care services; or
                    (C) misrepresents or falsifies information that is 
                furnished--
                            (i) to the Secretary under this title; or
                            (ii) to an individual or to any other 
                        entity under this title,
                the Secretary may provide, in addition to any other 
                remedies authorized by law, for any of the remedies 
                described in paragraph (2).
            (2) Remedies.--
                    (A) In general.--The remedies described in this 
                paragraph are--
                            (i) civil money penalties of not more than 
                        $10,000 for each determination under paragraph 
                        (1) or, with respect to a determination under 
                        subparagraph (B) or (C)(i) of such paragraph, 
                        of not more than $50,000 for each such 
                        determination, plus, with respect to a 
                        determination under paragraph (1)(C), $10,000 
                        for each individual not enrolled as a result of 
                        the practice involved; or
                            (ii) suspension of payment to the long-term 
                        care contractor after the date the Secretary 
                        notifies the contractor of a determination 
                        under paragraph (1) and until the Secretary is 
                        satisfied that the basis for such determination 
                        has been corrected and is not likely to recur.
                    (B) Special rule.--The provisions of section 1128A 
                (other than subsections (a) and (b)) of the Social 
                Security Act (42 U.S.C. 1320a-7a) shall apply to a 
                civil money penalty described under subparagraph (A)(i) 
                in the same manner as such provisions apply to a civil 
                money penalty or proceeding under section 1128A(a) of 
                such Act (42 U.S.C. 1320a-7a(a)).

        Subtitle C--Requirements for Long-Term Care Contractors

SEC. 321. OTHER GENERAL REQUIREMENTS FOR LONG-TERM CARE CONTRACTORS.

    Each long-term care contractor with a contract to provide long-term 
care benefits under the long-term care program, and any subcontractor, 
affiliate, or related party thereof, shall, as determined by the 
Secretary--
            (1) have a satisfactory, fiscally sound operation which 
        adequately provides against the risk of insolvency;
            (2) have satisfactory administrative and managerial 
        operations;
            (3) have the adequate capacity and resources to serve the 
        long-term care needs of the population residing in the area to 
        be served under the contract; and
            (4) not expel or refuse to enroll or re-enroll any 
        individual eligible to receive long-term care benefits under 
        the long-term care program because of such individual's health 
        status, requirement for long-term care or other health 
        services, or anticipated need for long-term care or other 
        health services.

SEC. 322. NEEDS ASSESSMENT AND PLAN OF CARE.

    (a) In General.--Each long-term care contractor, and any 
subcontractor, affiliate, or related party thereof, shall provide long-
term care benefits to an individual meeting the eligibility criteria 
established for the long-term care program only if--
            (1) a comprehensive assessment of the individual's need for 
        long-term care has been made;
            (2) an individualized plan of care based on such assessment 
        is developed in accordance with subsections (b) and (c); and
            (3) the long-term care benefits provided are consistent 
        with the individualized plan of care.
    (b) Involvement of Individuals.--The individualized plan of care 
shall be--
            (1) developed by qualified individuals (as determined by 
        the Secretary);
            (2) developed and implemented in close consultation with 
        the individual and the individual's family;
            (3) approved by the individual (or the individual's 
        representative); and
            (4) reviewed and updated not less than every 12 months.
    (c) Plan of Care.--The individualized plan of care shall--
            (1) specify which long-term care benefits specified under 
        the plan will be provided;
            (2) identify, to the extent possible, how the individual 
        will be provided the long-term care benefits specified under 
        the plan; and
            (3) specify how the provision of long-term care benefits to 
        the individual under the plan will be coordinated with the 
        provision of other health care services to the individual.
    (d) Consumer Input.--Each long-term care contractor, and any 
subcontractor, affiliate, or related party thereof, shall have 
procedures for obtaining meaningful consumer input that measures the 
extent to which an individual receives the long-term care benefits 
described in the individualized plan of care and such individual's 
satisfaction with such benefits.

SEC. 323. QUALITY ASSURANCE.

    (a) In General.--Each long-term care contractor, and any 
subcontractor, affiliate, or related party thereof, shall establish 
procedures to assure that long-term care benefits provided to 
individuals under the long-term care program shall be rendered under 
reasonable standards of quality of care consistent with prevailing 
professionally recognized standards of medical practice. Such 
procedures shall include mechanisms to assure availability, 
accessibility, and continuity of care.
    (b) Internal Quality Assurance.--Each long-term care contractor, 
and any subcontractor, affiliate, or related party thereof, shall have 
an ongoing internal quality assurance program to monitor and evaluate 
the long-term care benefits such contractor (or such subcontractor, 
affiliate, or related party) provides under the long-term care program.

SEC. 324. GRIEVANCE PROCEDURES.

    (a) Grievance Procedures.--Each long-term care contractor with a 
contract under the long-term care program, and any subcontractor, 
affiliate, or related party thereof, shall provide meaningful 
procedures for hearing and resolving grievances between the contractor 
(or any subcontractor, affiliate, or related party thereof) and 
individuals eligible to receive long-term care benefits from the 
contractor (or from a subcontractor, affiliate, or related party 
thereof) under the long-term care program.
    (b) Appeals.--An individual receiving long-term care benefits from 
a long-term care contractor under the long-term care program, or from 
any subcontractor, affiliate, or related party thereof, who is 
dissatisfied by reason of the individual's failure to receive any long-
term care benefit for which the individual believes the individual is 
eligible, shall, if the amount in controversy is $1,000 or more, 
receive a hearing before the Secretary to the same extent as is 
provided in section 205(b) of the Social Security Act (42 U.S.C. 
405(b)), and in any such hearing the Secretary shall make the long-term 
care contractor and the subcontractor, affiliate, or related party, as 
applicable, a party. If the amount in controversy is $10,000 or more, 
the individual or contractor (and the subcontractor, affiliate, or 
related party) shall, upon notifying the other party, be entitled to 
judicial review of the Secretary's final decision as provided in 
section 205(g) of such Act (42 U.S.C. 405(g)), and both the individual 
and the contractor (and the subcontractor, affiliate, or related party) 
shall be entitled to be parties to that judicial review.
    (c) Advance Directives.--A contract entered into under the long-
term care program shall provide that a long-term care contractor, and 
any subcontractor, affiliate, or related party thereof, shall meet the 
requirement of section 1866(f) of the Social Security Act (42 U.S.C. 
1395cc(f)) (relating to maintaining written policies and procedures 
respecting advance directives).

SEC. 325. MONITORING AND COMPLIANCE.

    (a) Access by the Secretary.--The Secretary shall have access to 
any records of a long-term care contractor, and of any subcontractor, 
affiliate, or related party thereof, that are required to be maintained 
in accordance with this title.
    (b) Periodic Reports.--The Secretary shall require each long-term 
care contractor, and any subcontractor, affiliate, or related party 
thereof, to submit periodic reports to the Secretary containing such 
information and in such form as the Secretary determines to be 
appropriate.
    (c) Additional Reports.--The Secretary may require a long-term care 
contractor, and any subcontractor, affiliate, or related party thereof, 
to provide any additional reports or information as the Secretary deems 
necessary and appropriate to carry out the provisions of this title.

     Subtitle D--Establishing Long-Term Care Benefits for Certain 
                              Individuals

               PART 1--ELIGIBILITY CRITERIA AND BENEFITS

SEC. 331. ELIGIBILITY CRITERIA FOR THE LONG-TERM CARE PROGRAM.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(2) shall recommend national eligibility 
criteria (in accordance with subsection (b)) for elderly or disabled 
individuals to receive long-term care benefits under the long-term care 
program.
    (b) Guidelines for Developing Criteria.--
            (1) In general.--In recommending the eligibility criteria 
        for elderly or disabled individuals the Commission shall, 
        subject to paragraphs (2) and (3)--
                    (A) recommend, after surveying State eligibility 
                standards for nursing facility care, institutionalized 
                care, and home and community-based care under title XIX 
                of the Social Security Act (42 U.S.C. 1396 et seq.) (as 
                in effect on the day before the date of the enactment 
                of this Act), an income and resource-based standard 
that may be based on--
                            (i) an individual having income (as 
                        determined under section 1612 of such Act (42 
                        U.S.C. 1382a)) that has been reduced through 
                        spending on medical care to a percentage (to be 
                        determined by the Commission) of the poverty 
                        line;
                            (ii) the median State eligibility standard 
                        (as determined through the survey conducted 
                        under this subparagraph); or
                            (iii) any income and resource-based 
                        standard that the Commission deems appropriate;
                    (B) recommend criteria excluding from eligibility 
                individuals enrolled in a private long-term care health 
                plan which provides items or services (to the extent 
                determined by the Commission) that are provided under 
                the long-term care program;
                    (C) recommend criteria that allows an individual or 
                the individual's spouse to retain a greater amount of 
                assets than would otherwise be allowed if the 
                individual has purchased a qualified long-term care 
                insurance policy (as defined in section 7702B(b) of the 
                Internal Revenue Code (as amended by section 1003 of 
                division B)); and
                    (D) recommend any nominal copayments or other cost-
                sharing requirements that the Commission deems 
                appropriate for individuals meeting the eligibility 
                criteria recommended for the long-term care program.
            (2) Impairment criteria.--
                    (A) In general.--The eligibility criteria for 
                elderly or disabled individuals under subsection (a) 
                shall include a requirement that an individual shall 
                not be eligible to receive long-term care benefits 
                under the long-term care program unless such individual 
                meets--
                            (i) the financial eligibility standard 
                        recommended by the Commission; and
                            (ii) impairment eligibility criteria 
                        recommended by the Commission in accordance 
                        with subparagraph (B).
                    (B) Impairment eligibility criteria.--The 
                Commission shall recommend impairment eligibility 
                criteria that includes standardized assessment tools 
                which limit eligibility to the most seriously disabled 
                individuals, including individuals, as determined by 
                the Commission--
                            (i) having a severe physical disability;
                            (ii) having a severe cognitive or mental 
                        impairment;
                            (iii) having severe or profound mental 
                        retardation; and
                            (iv) who are severely disabled children.
            (3) Cost controls.--The Commission shall, to the extent 
        practicable, recommend eligibility criteria for the long-term 
        care program such that annual expenditures for providing long-
        term care benefits to individuals meeting the criteria would 
        not exceed the total annual amounts that would have been 
        expended under all State plans for providing long-term care 
        medical assistance under title XIX of the Social Security Act 
        (42 U.S.C. 1396 et seq.) (as in effect on the day before the 
        date of the enactment of this Act) to individuals who received 
        such assistance.

SEC. 332. LONG-TERM CARE BENEFITS UNDER THE LONG-TERM CARE PROGRAM.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(2) shall include provisions which 
repeal the medicaid program under title XIX of the Social Security Act 
(42 U.S.C. 1396 et seq.) and replace such program with provisions 
requiring that individuals meeting the eligibility criteria recommended 
by the Commission are eligible to receive long-term care benefits (as 
determined by the Commission) under such program, in accordance with 
the provisions of subtitles A, B, and C of this title.
    (b) Maximum Flexibility for Contractors and Providers.--In 
recommending the long-term care benefits that an individual may receive 
under the long-term care program, the Commission shall develop such 
recommendations so as to permit long-term care contractors maximum 
flexibility to meet the needs of the individuals eligible to receive 
such benefits in a cost-effective manner.

            PART 2--FINANCING FOR THE LONG-TERM CARE PROGRAM

SEC. 341. AUTHORIZATION OF APPROPRIATIONS.

    The legislative proposal developed by the Commission under section 
131(a)(2) shall include provisions requiring that there are authorized 
to be appropriated such sums as are necessary for the purpose of 
carrying out the long-term care program.

   TITLE IV--ENSURING FINANCING FOR FEDERAL HEALTH CARE FOR CERTAIN 
  ELDERLY LOW-INCOME AND NON- ELDERLY LOW-INCOME DISABLED INDIVIDUALS

SEC. 401. ENSURING FINANCING FOR ACUTE CARE BENEFITS FOR ELDERLY LOW-
              INCOME INDIVIDUALS AND NONELDERLY LOW-INCOME DISABLED 
              INDIVIDUALS AND FOR THE LONG-TERM CARE PROGRAM.

    (a) Report to Congress.--In the case of any fiscal year beginning 
after the transition period, if the Secretary determines that the funds 
appropriated for a fiscal year for the purpose of providing acute care 
benefits under the medicare program to elderly low-income individuals 
and nonelderly low-income disabled individuals, and for providing 
benefits under the long-term care program are, or are estimated to be, 
insufficient to pay the total Federal expenditures for such purposes, 
the Secretary shall submit a report to Congress setting forth--
            (1) the actual or estimated (as the case may be) shortfall 
        in such funds; and
            (2) a legislative proposal containing--
                    (A) a request for a supplemental appropriation for 
                the fiscal year to cover such shortfall;
                    (B) proposed modifications to--
                            (i) the eligibility requirements for 
                        elderly low-income individuals and nonelderly 
                        low-income disabled individuals to receive 
                        acute care benefits under the medicare program 
                        (as amended in an implementing bill enacted 
                        under section 132);
                            (ii) the supplemental categories of acute 
                        care benefits available for such individuals 
                        under such program; and
                            (iii) the benefits and eligibility 
                        requirements under the long-term care program; 
                        or
                    (C) a combination of the options described in 
                subparagraphs (A) and (B).
    (b) Congressional Response.--
            (1) In general.--If, not later than 45 days after the date 
        Congress receives the legislative proposal described in 
        subsection (a)(2), Congress has not enacted legislation in 
        response to such proposal, the Secretary shall, in order of the 
        priorities described in paragraph (2), and only with respect to 
        the remainder of the fiscal year, modify the acute care 
        benefits provided under the medicare program (as amended in an 
        implementing bill enacted under section 132), or the long-term 
        care program, or both.
            (2) Priorities described.--The priorities described in this 
        paragraph are as follows:
                    (A) A reduction in the supplemental categories of 
                benefits for elderly low-income individuals and 
                nonelderly low-income disabled individuals under the 
                medicare program (as amended by an implementing bill 
                enacted under section 132).
                    (B) A reduction in--
                            (i) the acute care benefits provided to 
                        such individuals; and
                            (ii) the benefits provided under the long-
                        term care program.
                    (C) Increases in--
                            (i) the medicare cost-sharing requirements 
                        for elderly low-income individuals and 
                        nonelderly low-income disabled individuals 
                        under the medicare program (as amended by an 
                        implementing bill enacted under section 132); 
                        and
                            (ii) any cost-sharing requirements imposed 
                        under the long-term care program.
                    (D) A reduction, not greater than 2 percent (and 
                which shall constitute payment in full), in the 
                reimbursement rates for providers and contractors 
                providing--
                            (i) acute care benefits to elderly low-
                        income individuals and nonelderly low-income 
                        disabled individuals under the medicare program 
                        (as amended by an implementing bill enacted 
                        under section 132); and
                            (ii) benefits under the long-term care 
                        program.
                    (E) Modification of the Federal medically-needy 
                eligibility requirements established in accordance with 
                the Commission's proposals developed under sections 201 
                and 211.
                    (F) Modification of the eligibility requirements 
                for the long-term care program.

                   TITLE V--MISCELLANEOUS PROVISIONS

SEC. 501. SEPARATE ELIGIBILITY REQUIREMENTS.

    (a) In General.--In order to receive acute care benefits under the 
medicare program (as amended in an implementing bill enacted under 
section 132), or long-term care benefits under the long-term care 
program, an individual shall separately satisfy the eligibility 
criteria established for each such program.
    (b) Dual Applicability of Assets or Income.--Notwithstanding 
subsection (a), an individual may use the same assets or income (as 
such income is determined through any spenddown provisions that the 
Commission may propose) to meet the eligibility criteria recommended by 
the Commission for receiving acute care benefits under the medicare 
program (as amended in an implementing bill enacted under section 132) 
or long-term care benefits under the long-term care program.

SEC. 502. ENCOURAGING INTEGRATION OF MANAGED CARE AND PRIVATE HEALTH 
              PLANS.

    (a) Integration Encouraged.--After the transition period, the 
Secretary shall take all necessary and appropriate steps in 
administering the medicare program and the long-term care program to 
facilitate and encourage opportunities for enrollment in private health 
care plans and integrated systems of managed care plans by--
            (1) elderly low-income individuals and nonelderly low-
        income disabled individuals eligible to receive acute care 
        benefits under the medicare program (as amended in an 
        implementing bill enacted under section 132); and
            (2) individuals eligible to receive long-term care benefits 
        under the long-term care program.
    (b) Rule of Construction.--Nothing in this Act shall be construed 
as preventing the Secretary from entering into a contract under title 
III to provide long-term care benefits under the long-term care program 
with an eligible organization with a risk-sharing contract under 
section 1876 of the Social Security Act (42 U.S.C.1395mm) that 
satisfies the requirements for selection of long-term care contractors 
under such title.

SEC. 503. REFORM OF THE SUPPLEMENTAL SECURITY INCOME PROGRAM.

    (a) In General.--The legislative proposal developed by the 
Commission under section 131(a)(3) shall recommend modifications to the 
criteria for determining whether an individual described in subsection 
(b) is disabled and eligible for benefits under title XVI of the Social 
Security Act (42 U.S.C. 1381 et seq.) so that only such individuals who 
are most severely disabled (as determined by the Commission) shall be 
eligible for benefits under such title.
    (b) Individual Described.--An individual described in this 
subsection is an individual who is--
            (1) a child, as defined in section 1614(c) of the Social 
        Security Act (42 U.S.C. 1382c(c));
            (2) an alcoholic; or
            (3) a drug addict.

SEC. 504. ANNUAL REPORT.

    (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, and annually thereafter, the Secretary shall 
submit a report to Congress containing the information described in 
subsection (b).
    (b) Information Required.--
            (1) In general.--Subject to paragraph (2), the report 
        submitted in accordance with subsection (a) shall contain the 
        following information:
                    (A) A description of the progress of the 
                implementation of this Act.
                    (B) An analysis of whether and to what extent the 
                benefits and eligibility standards recommended in the 
                legislative proposals described in paragraphs (1) and 
                (2) of section 131(a) and established through the 
                enactment of implementing bills in accordance with 
                section 132, and the contracting arrangements described 
                in subtitles B and C of title III, are--
                            (i) meeting the acute care needs of 
                        individuals eligible to receive acute care 
                        benefits under the medicare program (as amended 
                        in an implementing bill enacted under section 
                        132);
                            (ii) meeting the long-term care needs of 
                        individuals eligible to receive long-term care 
                        benefits under the long-term care program; and
                            (iii) affecting the size and rate of growth 
                        of Federal health care expenditures.
            (2) Special rule for reports submitted in certain years.--A 
        report submitted in any year during the transition period need 
        only include the information required under paragraph (1)(A).

SEC. 505. STUDY AND REPORT ON INTEGRATION OF ACUTE AND LONG-TERM CARE.

    (a) Study.--The Commission shall conduct a study for the purpose of 
determining--
            (1) what measures can be taken to integrate acute and long-
        term care benefits for all elderly and disabled individuals;
            (2) the legislative and regulatory barriers (if any) to 
        integrating acute and long-term care benefits and related 
        insurance products for such individuals;
            (3) whether standards concerning the integration of acute 
        and long-term care benefits should be uniform on a national 
        basis or left to each State to establish; and
            (4) how to improve the quality and cost-effectiveness of 
        health care for all elderly and disabled individuals.
    (b) Report and Recommendations.--
            (1) In general.--Not later than 3 years after the date of 
        the enactment of this Act, the Commission shall submit a report 
        to Congress setting forth--
                    (A) the findings of the study conducted under 
                subsection (a); and
                    (B) any recommendations or proposals for 
                legislative action based on such findings.
            (2) Cost-benefit analysis.--Each recommendation or proposal 
        submitted under paragraph (1)(B) shall be accompanied by a 
        cost-benefit analysis of the recommendation or proposal.

SEC. 506. SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL FOR TECHNICAL 
              AND CONFORMING AMENDMENTS.

    Not later than 90 days after the transition period, the Secretary 
shall submit to the appropriate committees of Congress a legislative 
proposal providing for such technical and conforming amendments in the 
law as are required by the provisions of this Act.

 DIVISION B--TAX INCENTIVES AND STANDARDS FOR LONG-TERM CARE INSURANCE

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

SEC. 1001. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal 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 a section or other provision of the Internal Revenue Code of 
1986.

SEC. 1002. 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)(i) being unable to perform, without 
                substantial assistance from another individual, at 
                least 2 activities of daily living (as defined in 
                paragraph (3)), or
                    ``(ii) 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 clause (i); or
                    ``(B) having a level of disability similar to the 
                level of disability described in subparagraph (A) due 
                to cognitive impairment as defined by the Secretary in 
                consultation with the Secretary of Health and Human 
                Services.
            ``(3) Activities of daily living.--
                    ``(A) In general.--Each of the following is an 
                activity of daily living:
                            ``(i) Eating.
                            ``(ii) Toileting.
                            ``(iii) Bathing.
                            ``(iv) Transferring.
                            ``(v) Mobility.
                            ``(vi) Dressing.
                    ``(B) Definitions.--For purposes of this paragraph:
                            ``(i) Eating.--The term `eating' means the 
                        process of getting food from a plate or its 
                        equivalent into the mouth.
                            ``(ii) Toileting.--The term `toileting' 
                        means the act of going to the toilet room for 
                        bowel and bladder function, transferring on and 
                        off the toilet, cleaning after elimination, and 
                        arranging clothes or the ability to voluntarily 
                        control bowel and bladder function, or in the 
                        event of incontinence, the ability to maintain 
                        a reasonable level of personal hygiene.
                            ``(iii) Bathing.--The term `bathing' means 
                        the overall complex behavior of using water for 
                        cleansing the whole body, including cleansing 
                        as part of a bath, shower, or sponge bath, 
                        getting to, in, and out of a tub or shower, and 
                        washing and drying oneself.
                            ``(iv) Transferring.--The term 
                        `transferring' means the process of getting in 
                        and out of bed or in and out of a chair or 
                        wheelchair.
                            ``(v) Mobility.--The term `mobility' means 
                        the process of walking or wheeling on a level 
                        surface which may include the use of an 
                        assistive device such as a cane, walker, 
                        wheelchair, or brace.
                            ``(vi) Dressing.--The term `dressing' means 
                        the overall complex behavior of getting clothes 
                        from closets and drawers and then getting 
                        dressed.
                            ``(vi) Continence.--The term `continence' 
                        means the ability to voluntarily control bowel 
                        and bladder function and to maintain a 
                        reasonable level of personal hygiene.
            ``(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.''.
    (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. 1003. 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 (f) for the 
                taxable year,
            ``(4) amounts paid for a qualified long-term care insurance 
        policy described in subsection (b)(11) 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 (as 
        defined in paragraph (10)) 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) 
                through (9).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a long-term care insurance 
        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 
        213(f)(2)).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met with respect to a long-term care insurance 
        policy if such 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 long-term care 
        insurance 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 long-
        term care insurance 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. For 
        purposes of this paragraph, a long-term care insurance policy 
        which coordinates expenses incurred under such policy with 
        expenses incurred under title XVIII of such Act shall not be 
        considered to duplicate such expenses.
            ``(6) Requirements of model regulation and act.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a 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.
            ``(7) Tax disclosure requirement.--The requirement of this 
        paragraph is met with respect to a long-term care insurance 
        policy if such policy meets the requirements of section 
        4980C(d)(1).
            ``(8) Nonforfeiture requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a long-term care 
                insurance policy, if the issuer of such policy offers 
                to the policyholder, including any group policyholder, 
                a nonforfeiture provision meeting the requirements 
                specified in subparagraph (B).
                    ``(B) Requirements of provision.--The requirements 
                specified in this subparagraph are as follows:
                            ``(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 1 of the following:
                                    ``(I) Reduced paid-up insurance.
                                    ``(II) Extended term insurance.
                                    ``(III) Shortened benefit period.
                                    ``(IV) Other similar offerings 
                                approved by the Secretary.
            ``(9) Rate stabilization.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a 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 2 years 
                        from the date of issue of the policy.
                            ``(ii) After the expiration of the 2-year 
                        period required under clause (i), any rate 
                        increase shall be guaranteed for a period of at 
                        least 1 year from the effective date of such 
                        rate increase.
                    ``(C) Increases in premiums.--The requirements 
                specified in this subparagraph are as follows:
                            ``(i) In general.--If an issuer of a 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 
                        that 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 a long-term care insurance 
                        policy, including any group master policy, 
                        increases premium rates for a policy by more 
                        than 50 percent in any 2-year period--
                                    ``(I) 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, and
                                    ``(II) 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.
                        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.
            ``(10) Long-term care insurance policy defined.--
                    ``(A) 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 subparagraph 
                (B)).
                    ``(B) Long-term care insurance.--
                            ``(i) 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 1 
                                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.
                            ``(ii) 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--
                                            ``(aa) which accelerate the 
                                        death benefit specifically for 
                                        1 or more of the qualifying 
                                        events of terminal illness or 
                                        medical conditions requiring 
                                        extraordinary medical 
                                        intervention or permanent 
                                        institutional confinement,
                                            ``(bb) which provide the 
                                        option of a lump-sum payment 
                                        for such benefits, and
                                            ``(cc) under which neither 
                                        such benefits nor the 
                                        eligibility for the benefits is 
                                        conditioned upon the receipt of 
                                        long-term care.
            ``(11) 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 provided by a 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 qualified long-term care insurance policy.
    ``(e) 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.
    ``(f) Dollar Amount for Purposes of Gross Income Exclusion.--
            ``(1) Dollar amount.--
                    ``(A) In general.--The dollar amount in effect 
                under this subsection shall be $200 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 1 policy.
    ``(g) 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) of the Internal Revenue Code of 1986 (as added by this 
        section) 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 such 
        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. 1004. TREATMENT OF QUALIFIED LONG-TERM CARE PLANS.

    (a) Exclusion From COBRA Continuation Requirements.--Subparagraph 
(A) of section 4980B(f)(2) (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) (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 7705B(f).''.
    (c) Effective Date.--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) of the Internal Revenue Code of 
1986 (as added by section 1003) shall, on and after January 1, 1996, be 
treated as having been issued after December 31, 1995.

SEC. 1005. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) In General.--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) In general.--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) Reduction value.--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.--
            (1) In general.--The amendments made by this section shall 
        apply to amounts received after December 31, 1995.
            (2) Transitional rule.--For purposes of applying section 
        101(g), 7702, or 7702A of the Internal Revenue Code of 1986 to 
        any contract, the issuance, whether before, on, or after 
        January 1, 1996, of a rider on a life insurance contract 
        permitting the acceleration of death benefits (as described in 
        section 101(g) of such Code (as added by this section)) shall 
        not be treated as a modification or material change of such 
        contract.

SEC. 1006. 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) (defining qualified 
additional benefits) 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.--The amendments made by this section shall take 
effect on January 1, 1996.

            TITLE II--STANDARDS FOR LONG-TERM CARE INSURANCE

SEC. 2001. 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 QUALIFIED LONG-TERM CARE 
              INSURANCE POLICIES.

    ``(a) General Rule.--There is hereby imposed on the issuer of any 
qualified 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.--
                    ``(A) Per policy.--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.
                    ``(B) Limitations.--
                            ``(i) Per carrier.--The amount of the tax 
                        imposed under subparagraph (A) against any 
                        insurance carrier, association, or any 
                        subsidiary thereof, shall not exceed $25,000 
                        per policy.
                            ``(ii) Per agent.--The amount of the tax 
                        imposed under subparagraph (A) against any 
                        insurance agent or broker shall not exceed 
                        $15,000 per 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 qualified long-term care insurance 
policy are as follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation shall 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 preexisting 
                        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 sections 
                        21C(1) and 21C(6) thereof, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a qualified 
                                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 qualified 
                                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(b)(6)(B).
            ``(2) Delivery of policy.--If an application for a 
        qualified long-term care insurance policy (or for a certificate 
        under a group qualified 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 
        qualified 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 qualified long-term care insurance policy if the 
following statement is prominently displayed on the front page of the 
policy and in the outline of coverage required under subsection 
(c)(1)(B)(ii):
            ```This is a federally qualified long-term care insurance 
        contract. The policy meets all the Federal consumer protection 
        standards necessary to receive favorable tax treatment under 
        section 7702B(b) of the Internal Revenue Code of 1986.'.
    ``(e) Qualified Long-Term Care Insurance Policy Defined.--For 
purposes of this section, the term `qualified long-term care insurance 
policy' has the meaning given such term by section 7702B(b).''.
    (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 qualified 
                                        long-term care insurance 
                                        policies.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to actions taken after December 31, 1995.

SEC. 2002. COORDINATION WITH STATE REQUIREMENTS.

    Nothing in this title shall be construed as preventing a State from 
applying standards that provide greater protection of policyholders of 
qualified long-term care insurance policies (as defined in section 
7702B(b) of the Internal Revenue Code of 1986 (as added by section 
1003)), except that such State standards may not be inconsistent or in 
conflict with any of the requirements of this title.

SEC. 2003. UNIFORM LANGUAGE AND DEFINITIONS.

    (a) In General.--Not later than June 30, 1996, the Secretary shall 
promulgate standards for the use of uniform language and definitions in 
qualified long-term care insurance policies (as defined in section 
7702B(b) of the Internal Revenue Code of 1986 (as added by section 
1003)).
    (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.

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

SEC. 3001. PUBLIC INFORMATION AND EDUCATION PROGRAM.

    (a) In General.--The Secretary shall provide for the education of 
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.
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