[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2237 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2237

     To amend the Internal Revenue Code of 1986 to provide for the 
     deductibility of premiums for any medigap insurance policy or 
  Medicare+Choice plan which contains an outpatient prescription drug 
benefit, and to amend title XVIII of the Social Security Act to provide 
        authority to expand existing medigap insurance policies.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 9, 2000

   Mr. Craig introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
     To amend the Internal Revenue Code of 1986 to provide for the 
     deductibility of premiums for any medigap insurance policy or 
  Medicare+Choice plan which contains an outpatient prescription drug 
benefit, and to amend title XVIII of the Social Security Act to provide 
        authority to expand existing medigap insurance policies.

    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 ``Seniors' Security 
Act of 2000''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Deduction for premiums for medigap insurance policies and 
                            Medicare+Choice plans containing outpatient 
                            prescription drug benefits and for long-
                            term care insurance.
Sec. 3. Determination of annual actuarial value of drug benefits 
                            covered under a Medicare+Choice plan and a 
                            medigap policy.
Sec. 4. Inclusion of qualified long-term care insurance contracts in 
                            cafeteria plans and flexible spending 
                            arrangements.
Sec. 5. Authority to provide for additional medigap insurance policies.

SEC. 2. DEDUCTION FOR PREMIUMS FOR MEDIGAP INSURANCE POLICIES AND 
              MEDICARE+CHOICE PLANS CONTAINING OUTPATIENT PRESCRIPTION 
              DRUG BENEFITS AND FOR LONG-TERM CARE INSURANCE.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions) is amended by redesignating section 222 as section 223 and 
by inserting after section 221 the following:

``SEC. 222. PREMIUMS FOR MEDIGAP INSURANCE POLICIES AND MEDICARE+CHOICE 
              PLANS CONTAINING OUTPATIENT PRESCRIPTION DRUG BENEFITS 
              AND FOR LONG-TERM CARE INSURANCE.

    ``(a) Deduction.--
            ``(1) In general.--There shall be allowed as a deduction an 
        amount equal to 100 percent of the amount paid during the 
        taxable year for--
                    ``(A) any medicare supplemental policy (as defined 
                in section 1882(g)(1) of the Social Security Act) which 
                contains an outpatient prescription drug benefit with 
                an annual actuarial value that is equal to or greater 
                than $500,
                    ``(B) any Medicare+Choice plan (as defined in 
                section 1859(b)(1) of such Act) which contains an 
                outpatient prescription drug benefit with an annual 
                actuarial value that is equal to or greater than $500, 
                and
                    ``(C) any coverage limited to qualified long-term 
                care services (as defined in section 7702B(c)) or any 
                qualified long-term care insurance contract (as defined 
                in section 7702B(b)).
            ``(2) Inflation adjustment.--
                    ``(A) In general.--In the case of any calendar year 
                beginning after 2000, each of the dollar amounts in 
                subparagraphs (A) and (B) of paragraph (1) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) an adjustment for changes in per 
                        capita expenditures under title XVIII of the 
                        Social Security Act for prescription drugs as 
                        determined under the most recent Health Care 
                        Financing Administration National Health 
                        Expenditure projection.
                    ``(B) Rounding.--If any dollar amount after being 
                increased under subparagraph (A) is not a multiple of 
                $10, such dollar amount shall be rounded to the nearest 
                multiple of $10.
    ``(b) Limitations.--
            ``(1) Deduction not available to individuals eligible for 
        employer-subsidized coverage.--
                    ``(A) In general.--In any taxable year--
                            ``(i) subsection (a) shall not apply with 
                        respect to any policy or coverage described in 
                        paragraph (1)(A) or (1)(B) of such subsection 
                        if in such taxable year the taxpayer is 
                        eligible to participate in any employer-
                        subsidized plan for individuals age 65 or older 
                        which contains an outpatient prescription drug 
                        benefit described in such subsection, and
                            ``(ii) subsection (a) shall not apply with 
                        respect to any policy or coverage described in 
                        paragraph (1)(C) of such subsection if in such 
                        taxable year the taxpayer is eligible to 
                        participate in any employer-subsidized plan 
                        which includes coverage for qualified long-term 
                        care services (as so defined) or any qualified 
                        long-term care insurance contract (as so 
                        defined).
                    ``(B) Employer-subsidized plan.--For purposes of 
                subparagraph (A)--
                            ``(i) In general.--The term `employer-
                        subsidized plan' means any plan described in 
                        subparagraph (A)--
                                    ``(I) which is maintained by any 
                                employer (or former employer) of the 
                                taxpayer or of the spouse of the 
                                taxpayer, and
                                    ``(II) 50 percent or more of the 
                                cost of the premium of which 
                                (determined under section 4980B) is 
                                paid or incurred by the employer.
                            ``(ii) Employer contributions to cafeteria 
                        plans, flexible spending arrangements, and 
                        medical savings accounts.--Employer 
                        contributions to a cafeteria plan, a flexible 
                        spending or similar arrangement, or a medical 
                        savings account which are excluded from gross 
                        income under section 106 shall be treated for 
                        purposes of this subparagraph as paid by the 
                        employer.
                    ``(C) Aggregation of plans of employer.--A health 
                plan which is not otherwise described in subparagraph 
                (A) shall be treated as described in such subparagraph 
                if such plan would be so described if all health plans 
                of persons treated as a single employer under 
                subsection (b), (c), (m), or (o) of section 414 were 
                treated as one health plan.
                    ``(D) Separate application to health insurance and 
                long-term care insurance.--Subparagraphs (A) and (C) 
                shall be applied separately with respect to--
                            ``(i) plans which include coverage limited 
                        to qualified long-term care services or are 
                        qualified long-term care insurance contracts, 
                        and
                            ``(ii) plans which do not include such 
                        coverage and are not such contracts.
                    ``(E) Deduction available with respect to policies 
                and plans containing outpatient prescription drug 
                coverage if disclosure requirements are met.--
                Subsection (a) shall apply in any taxable year with 
                respect to any policy or plan described in paragraph 
                (1)(A) or (1)(B) of such subsection only if the issuer 
                of such policy or the administrator of such plan 
                discloses to the taxpayer that such policy or plan is 
                intended to be a policy or plan so described.
            ``(2) Deduction not available for payment of part b 
        premiums.--Any amount paid as a premium under part B of title 
        XVIII of the Social Security Act shall not be taken into 
        account under subsection (a).
            ``(3) Limitation on long-term care premiums.--In the case 
        of a qualified long-term care insurance contract (as so 
        defined), only eligible long-term care premiums (as defined in 
        section 213(d)(10)) shall be taken into account under 
        subsection (a)(2).
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Coordination with medical deduction, etc.--Any amount 
        paid by a taxpayer for insurance to which subsection (a) 
        applies shall not be taken into account in computing the amount 
        allowable to the taxpayer as a deduction under section 213(a).
            ``(2) Deduction not allowed for self-employment tax 
        purposes.--The deduction allowable by reason of this section 
        shall not be taken into account in determining an individual's 
        net earnings from self-employment (within the meaning of 
        section 1402(a)) for purposes of chapter 2.''
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 62 of the Internal Revenue 
        Code of 1986 is amended by inserting after paragraph (17) the 
        following:
            ``(18) Medicare and long-term care insurance costs of 
        certain individuals.--The deduction allowed by section 222.''
            (2) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following:

                              ``Sec. 222. Premiums for medigap 
                                        insurance policies and 
                                        Medicare+Choice plans 
                                        containing outpatient 
                                        prescription drug benefits and 
                                        for long-term care insurance.
                              ``Sec. 223. Cross reference.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 3. DETERMINATION OF ANNUAL ACTUARIAL VALUE OF DRUG BENEFITS 
              COVERED UNDER A MEDICARE+CHOICE PLAN AND A MEDIGAP 
              POLICY.

    (a) In General.--For purposes of subparagraphs (A) and (B) of 
section 222(a)(1) of the Internal Revenue Code of 1986 (as added by 
section 2), the Secretary of Health and Human Services shall establish 
procedures for a Medicare+Choice organization offering a 
Medicare+Choice plan under part C of title XVIII of the Social Security 
Act (42 U.S.C. 1395w-21 et seq.) or an issuer of a medicare 
supplemental policy (as defined in section 1882(g)(1) of such Act (42 
U.S.C. 1395ss(g)(1))) to demonstrate that the annual actuarial value of 
the outpatient prescription drug benefit offered under such plan or 
policy is equal to or greater than the amount described in section 
222(a)(1) of the Internal Revenue Code of 1986 that is applicable for 
the year involved.
    (b) Requirements.--The procedures established pursuant to 
subsection (a)--
            (1) shall be based on--
                    (A) a standardized set of utilization and price 
                factors; and
                    (B) a standardized population that is 
                representative of all medicare enrollees and calculated 
                based on projected utilization if all enrollees have 
                outpatient prescription drug coverage;
            (2) shall apply the same principles and factors in 
        comparing the value of the coverage of different outpatient 
        prescription drug benefit packages; and
            (3) shall not take into account the method of delivery or 
        means of cost control or utilization used by the organization 
        offering the plan or the issuer of the policy.
    (c) Consultation.--In establishing the procedures described in 
subsection (a), the Secretary of Health and Human Services shall 
consult with an independent actuary who is a member of the American 
Academy of Actuaries.
    (d) Update.--The Secretary shall periodically update the procedures 
established under subsection (a).
    (e) Demonstration of Actuarial Value.--The actuarial value of the 
outpatient prescription drug benefit shall be set forth by the 
Medicare+Choice organization offering the Medicare+Choice plan or the 
issuer of the medicare supplemental policy in an actuarial report that 
has been prepared--
            (1) by an individual who is a member of the American 
        Academy of Actuaries;
            (2) using generally accepted actuarial principles; and
            (3) in conformance with the requirements of subsection (b).

SEC. 4. INCLUSION OF QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS IN 
              CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

    (a) Cafeteria Plans.--Section 125(f) of the Internal Revenue Code 
of 1986 (defining qualified benefits) is amended by inserting before 
the period at the end ``; except that such term shall include the 
payment of premiums for any qualified long-term care insurance contract 
(as defined in section 7702B) to the extent the amount of such payment 
does not exceed the eligible long-term care premiums (as defined in 
section 213(d)(10)) for such contract''.
    (b) Flexible Spending Arrangements.--Section 106 of the Internal 
Revenue Code of 1986 (relating to contributions by employer to accident 
and health plans) is amended by striking subsection (c).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1999.

SEC. 5. AUTHORITY TO PROVIDE FOR ADDITIONAL MEDIGAP INSURANCE POLICIES.

    (a) In General.--
            (1) Expansion of number of benefit packages.--Section 
        1882(p) of the Social Security Act (42 U.S.C. 1395ss(p)) is 
        amended--
                    (A) in paragraph (2)(B), by striking ``, and'' and 
                inserting ``other than the medicare supplemental 
                policies described in subsection (v); and''; and
                    (B) in paragraph (2)(C), by striking the period and 
                inserting ``and the policies described in subsection 
                (v).''.
            (2) Authority to provide for additional policies.--Section 
        1882 of the Social Security Act (42 U.S.C. 1395ss) is amended 
        by adding at the end the following:
    ``(v) Authority To Provide for Additional Policies.--
            ``(1) In general.--The standards under subsection (p) may 
        be modified (in the manner described in paragraph (1)(E) of 
        such subsection (applying paragraph (3)(A) of such subsection 
        as if the reference to `this subsection' were a reference to 
        `the Seniors' Security Act of 2000')) to establish additional 
        benefit packages consistent with the succeeding provisions of 
        this subsection.
            ``(2) Requirements for new packages that include 
        prescription drug coverage.--In the case of any benefit package 
        added under paragraph (1) that provides coverage for outpatient 
        prescription drugs, such benefit package--
                    ``(A) shall not provide first-dollar coverage of 
                outpatient prescription drugs;
                    ``(B) may provide a stop-loss coverage benefit for 
                outpatient prescription drugs that limits the 
                application of any beneficiary cost-sharing during a 
                year after incurring a certain amount of out-of-pocket 
                covered expenditures;
                    ``(C) shall not include benefits for prescription 
                drugs otherwise available under part A or B; and
                    ``(D) shall be consistent with the requirements of 
                this section and applicable law.
            ``(3) Use of formularies.--In the case of any benefit 
        package added under paragraph (1) that provides coverage for 
        outpatient prescription drugs, the issuer of any policy 
        containing such a benefit package may use formularies.
            ``(4) Special open enrollment.--
                    ``(A) Establishment.--If any benefit package is 
                added under paragraph (1), the Secretary shall 
                establish an applicable period in which any eligible 
                beneficiary may enroll in any medicare supplemental 
                policy containing such benefit package under the terms 
                described in subparagraph (D).
                    ``(B) Eligible beneficiary defined.--In this 
                paragraph, the term `eligible beneficiary' means a 
                beneficiary under this title who is enrolled in a 
                medicare supplemental policy as of the first day that 
                any benefit package added under paragraph (1) is 
                available in the State in which such beneficiary 
                resides.
                    ``(C) Applicable period defined.--In this 
                paragraph, the term `applicable period' means--
                            ``(i) in the case of an eligible 
                        beneficiary who is enrolled in a medicare 
                        supplemental policy which has a benefit package 
                        classified as `H', `I', or `J' under the 
                        standards established under subsection (p)(2), 
                        the 180-day period that begins on the day 
                        described in subparagraph (B); and
                            ``(ii) in the case of an eligible 
                        beneficiary who is enrolled in a medicare 
                        supplemental policy which has a benefit package 
                        classified as `A' through `G' under the 
                        standards established under subsection (p)(2), 
                        the 63-day period that begins on the day 
                        described in subparagraph (B).
                    ``(D) Terms described.--The terms described under 
                this subparagraph are terms which do not--
                            ``(i) deny or condition the issuance or 
                        effectiveness of a medicare supplemental policy 
                        described in subparagraph (A) that is offered 
                        and is available for issuance to new enrollees 
                        by such issuer;
                            ``(ii) discriminate in the pricing of such 
                        policy, because of health status, claims 
                        experience, receipt of health care, or medical 
                        condition; or
                            ``(iii) impose an exclusion of benefits 
                        based on a preexisting condition under such 
                        policy.
            ``(5) Ability for issuer to cancel certain policies.--
        Notwithstanding subsection (q)(2), an issuer of a policy 
        containing a benefit package added under paragraph (1) that 
        provides coverage for outpatient prescription drugs may 
        terminate such a policy in a market but only if--
                    ``(A) the termination is--
                            ``(i) done in accordance with State law in 
                        such market; and
                            ``(ii) applied uniformly to individuals 
                        enrolled under such policy;
                    ``(B) the issuer provides notice to each individual 
                enrolled under such policy of such termination at least 
                90 days prior to the date of the termination of 
                coverage under such policy; and
                    ``(C) the issuer offers to each individual enrolled 
                under such policy, for at least 180 days after 
                providing the notice pursuant to subparagraph (B), the 
                option to purchase all other medicare supplemental 
                policies currently being offered by the issuer under 
                the terms described in paragraph (4)(D).''.
    (b) Sale of Non-Duplicative Medigap Insurance Policies 
Authorized.--Section 1882(d)(3) of the Social Security Act (42 U.S.C. 
1395ss(d)(3)) is amended--
            (1) in subparagraph (A), by adding at the end the 
        following:
    ``(ix) Nothing in this subparagraph shall be construed as 
preventing the sale of more than 1 medicare supplemental policy to an 
individual, provided that the sale is of a medicare supplemental policy 
that does not duplicate any health benefits under a medicare 
supplemental policy owned by the individual.''; and
            (2) in subparagraph (B)--
                    (A) in clause (ii)(I), by inserting ``, unless a 
                second policy is designed to compliment the coverage 
                under the first policy'' before the comma at the end; 
                and
                    (B) in clause (iii)--
                            (i) in subclause (I), by striking ``(II) 
                        and (III)'' and inserting ``(II), (III), and 
                        (IV)'';
                            (ii) by redesignating subclause (III) as 
                        subclause (IV); and
                            (iii) by inserting after subclause (II) the 
                        following:
    ``(III) If the statement required by clause (i) is obtained and 
indicates that the individual is enrolled in 1 or more medicare 
supplemental policies, the sale of another policy is not in violation 
of clause (i) if such other policy does not duplicate health benefits 
under any policy in which the individual is enrolled.''.
    (c) NAIC to Consult With MedPAC in Revising Model Standards.--
            (1) In general.--In revising the model regulation under 
        section 1882(v) of the Social Security Act (42 U.S.C. 
        1395ss(v)) (as added by subsection (a)), the National 
        Association of Insurance Commissioners (in this section 
        referred to as the ``NAIC'') should--
                    (A) consult with the Medicare Payment Advisory 
                Commission established under section 1805 of such Act 
                (42 U.S.C. 1395b-6) (in this subsection referred to as 
                ``MedPAC''); and
                    (B) consider the MedPAC report transmitted to NAIC 
                in accordance with paragraph (2)(B)(ii).
            (2) MedPAC analysis and report.--
                    (A) Analysis.--MedPAC shall conduct an analysis of 
                the following issues:
                            (i) The conditions necessary to create a 
                        well-functioning, voluntary medicare 
                        supplemental insurance market that provides 
                        coverage for outpatient prescription drugs.
                            (ii) The scope of outpatient prescription 
                        drug coverage for medicare beneficiaries, 
                        including individuals enrolled in 
                        Medicare+Choice plans.
                            (iii) The implications of a medicare 
                        supplemental policy that would require issuers 
                        of medicare supplemental policies to provide 
                        outpatient prescription drug coverage and a 
                        stop-loss benefit instead of providing coverage 
                        for other benefits available through existing 
                        medicare supplemental policies.
                            (iv) The portion of out-of-pocket spending 
                        of medicare beneficiaries on health care 
                        expenses attributable to outpatient 
                        prescription drugs.
                            (v) The availability of private health 
                        insurance policies that cover outpatient 
                        prescription drugs to beneficiaries that are 
                        not entitled to benefits under the medicare 
                        program.
                            (vi) The scope of outpatient prescription 
                        drug coverage provided by employers to medicare 
                        beneficiaries.
                            (vii) The impact of outpatient prescription 
                        drugs on the overall health of medicare 
                        beneficiaries.
                            (viii) The effect of providing coverage for 
                        outpatient prescription drugs on the amount of 
                        funds expended by the medicare program.
                            (ix) Whether modifications of benefit 
                        packages of existing medicare supplemental 
                        policies that provide coverage for outpatient 
                        prescription drugs or the creation of new 
                        benefit packages that provide coverage for 
                        outpatient prescription drugs would allow 
                        payment for these policies to be integrated 
                        with a Federal contribution.
                            (x) Such other issues relating to 
                        outpatient prescription drugs that would assist 
                        Congress in improving the medicare program.
                    (B) Report to congress.--
                            (i) In general.--Not later than June 1, 
                        2000, MedPAC shall submit to Congress a report 
                        containing a detailed analysis of the issues 
                        described in subparagraph (A) together with 
                        recommendations for such legislation and 
                        administrative actions as MedPAC considers 
                        appropriate.
                            (ii) Transmission to naic.--At the same 
                        time MedPAC submits the report to Congress 
                        under clause (i), MedPAC shall transmit such 
                        report to the NAIC.
                                 <all>