[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1602 Introduced in Senate (IS)]


109th CONGRESS
  1st Session
                                S. 1602

  To amend title XIX of the Social Security Act to require States to 
disregard benefits paid under long-term care insurance for purposes of 
 determining medicaid eligibility, to expand long-term care insurance 
partnerships between States and insurers, to amend the Internal Revenue 
 Code of 1986 to allow individuals a deduction for qualified long-term 
  care insurance premiums, the use of such insurance under cafeteria 
plans and flexible spending arrangements, and a credit for individuals 
   with long-term care needs, to establish home and community-based 
   services as an optional medicaid benefit, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 29, 2005

 Mr. Grassley (for himself, Mr. Bayh, and Mrs. Clinton) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
  To amend title XIX of the Social Security Act to require States to 
disregard benefits paid under long-term care insurance for purposes of 
 determining medicaid eligibility, to expand long-term care insurance 
partnerships between States and insurers, to amend the Internal Revenue 
 Code of 1986 to allow individuals a deduction for qualified long-term 
  care insurance premiums, the use of such insurance under cafeteria 
plans and flexible spending arrangements, and a credit for individuals 
   with long-term care needs, to establish home and community-based 
   services as an optional medicaid benefit, 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 ``Improving Long-
Term Care Choices Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
                   TITLE I--LONG-TERM CARE INSURANCE

                    Subtitle A--Consumer Protections

Sec. 101. Disregard of benefits paid under long-term care insurance for 
                            purposes of determining medicaid 
                            eligibility.
Sec. 102. Additional consumer protections for long-term care insurance.
Sec. 103. Expansion of State long-term care partnerships.
Sec. 104. National clearinghouse for long-term care information.
      Subtitle B--Amendments to the Internal Revenue Code of 1986

Sec. 121. Treatment of premiums on qualified long-term care insurance 
                            contracts.
Sec. 122. Credit for taxpayers with long-term care needs.
Sec. 123. Treatment of exchanges of long-term care insurance contracts.
 TITLE II--MEDICAID HOME AND COMMUNITY-BASED SERVICES OPTIONAL BENEFIT

Sec. 201. Medicaid home and community-based services optional benefit.
  TITLE III--INTEGRATED ACUTE AND LONG-TERM CARE SERVICES FOR DUALLY 
                         ELIGIBLE INDIVIDUALS.

Sec. 301. Removal of barriers to integrated acute and long-term care 
                            services for dually eligible individuals.
                        TITLE IV--EFFECTIVE DATE

Sec. 401. Effective date.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) The Medicaid program is designed to assist low-income 
        individuals with few resources obtain health care, including 
        long-term care.
            (2) The average daily cost of a private room in a nursing 
        home in the United States is more than $70,000 per year, with 
        an average length of stay of 2.4 years.
            (3) Many individuals deplete their savings and resources 
        paying for long-term care or qualifying for Medicaid in order 
        to receive that care.
            (4) Encouraging individuals to purchase private long-term 
        care insurance that meets minimum Federal standards would help 
        ensure that Medicaid is able to continue to offer long-term 
        care to low-income individuals who cannot afford that 
        insurance.
            (5) Requiring consumer protections and standards for long-
        term care insurance will help ensure that Federal, State, and 
        individual resources are used to purchase high-quality long-
        term care coverage that meets individual needs.
            (6) In 1999, the United States Supreme Court, in Olmstead 
        v. L.C. (527 U.S. 581) held that the medically unnecessary 
        institutionalization of individuals with disabilities 
        constitutes discrimination in violation of the provisions of 
        the Americans with Disabilities Act of 1990 (ADA).
            (7) The Olmstead decision has had the effect of broadening 
        State efforts to revise their Medicaid plans to develop 
        alternatives to institutional care, but certain limitations in 
        Medicaid's structure constrain these efforts, in particular, 
        the lack of certain coverage and benefit options related to 
        community care, which in turn force States to rely on a more 
        cumbersome Federal waiver process.
            (8) Based on preliminary 2002 data, total Medicaid 
        expenditures for that year for long-term care services were 
        $92,800,000,000 ($66,100,000,000 for services in institutions 
        and $26,700,000,000 for services provided in home and 
        community-based settings).
            (9) Nationally, only 33 percent of public long-term care 
        spending is spent for home and community-based services and 
        supports. Among the elderly, over 84 percent of long-term care 
        funding is spent for nursing facility and other institutional 
        care.
            (10) In order to live independently, individuals with 
        disabilities need access to home and community-based services 
        and supports.
            (11) Most Americans would prefer to receive long-term care 
        services in their homes and communities.
            (12) States are currently operating a complicated system of 
        over 261 different home and community-based waivers.
            (13) There is a need to build upon the progress made by the 
        New Freedom Initiative, which was announced in 2001, and is a 
        continuing nationwide effort to remove barriers to community 
        living for people of all ages with disabilities and long-term 
        illnesses.

                   TITLE I--LONG-TERM CARE INSURANCE

                    Subtitle A--Consumer Protections

SEC. 101. DISREGARD OF BENEFITS PAID UNDER LONG-TERM CARE INSURANCE FOR 
              PURPOSES OF DETERMINING MEDICAID ELIGIBILITY.

    (a) Medicaid State Plan Requirement.--Section 1902(a) of the Social 
Security Act (42 U.S.C. 1396a(a)) is amended--
            (1) in paragraph (66), by striking ``and'' at the end;
            (2) in paragraph (67), by striking the period at the end 
        and inserting ``; and''; and
            (3) by inserting after paragraph (67), the following:
            ``(68) provide that, with respect to benefits (including 
        assigned benefits) paid under any insurance contract for 
        coverage of qualified long-term care services (as defined in in 
        section 7702B(c) of the Internal Revenue Code of 1986), the 
        State does not treat such benefits as income for purposes of 
        determining an individual's eligibility for medical assistance 
        under the State plan.''.
    (b) Consumer Education.--Not later than January 1, 2009, the 
Secretary of Health and Human Services shall establish a program for 
educating consumers regarding--
            (1) the advisability of obtaining a qualified long-term 
        care insurance contract (as defined in section 7702B(b) of the 
        Internal Revenue Code of 1986); and
            (2) the potential interaction between coverage under such 
        an insurance contract and coverage of long-term care under 
        Federal and State health insurance programs, (including under a 
        long-term care partnership under section 1917(b)(1)(C)(ii) of 
        the Social Security Act (42 U.S.C. 1396p(b)(1)(C)(ii)).

SEC. 102. ADDITIONAL CONSUMER PROTECTIONS FOR LONG-TERM CARE INSURANCE.

    (a) Additional Protections Applicable to Long-Term Care 
Insurance.--Subparagraphs (A) and (B) of section 7702B(g)(2) of the 
Internal Revenue Code of 1986 (relating to requirements of model 
regulation and Act) are amended to read as follows:
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any contract if such 
                contract meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 6A (relating to 
                                guaranteed renewal or 
                                noncancellability), other than 
                                paragraph (5) thereof, and the 
                                requirements of section 6B of the model 
                                Act relating to such section 6A.
                                    ``(II) Section 6B (relating to 
                                prohibitions on limitations and 
                                exclusions) other than paragraph (7) 
                                thereof.
                                    ``(III) Section 6C (relating to 
                                extension of benefits).
                                    ``(IV) Section 6D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 6E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 7 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 8 (relating to 
                                disclosure), other than sections 8F, 
                                8G, 8H, and 8I thereof.
                                    ``(VIII) Section 11 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 12 (relating to 
                                minimum standards).
                                    ``(X) Section 13 (relating to 
                                requirement to offer inflation 
                                protection).
                                    ``(XI) Section 25 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                                    ``(XII) The provisions of section 
                                26 relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                                    ``(III) The provisions of section 8 
                                relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                    ``(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 as of 
                        October 2000).
                            ``(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.
                            ``(iii) Determination.--For purposes of 
                        this section and section 4980C, the 
                        determination of whether any requirement of a 
                        model regulation or the model Act has been met 
                        shall be made by the Secretary.''.
    (b) Excise Tax.--Paragraph (1) of section 4980C(c) of the Internal 
Revenue Code of 1986 (relating to requirements of model provisions) is 
amended to read as follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation must be met:
                            ``(i) Section 9 (relating to required 
                        disclosure of rating practices to consumer).
                            ``(ii) Section 14 (relating to application 
                        forms and replacement coverage).
                            ``(iii) Section 15 (relating to reporting 
                        requirements).
                            ``(iv) Section 22 (relating to filing 
                        requirements for marketing).
                            ``(v) Section 23 (relating to standards for 
                        marketing), including inaccurate completion of 
                        medical histories, other than paragraphs (1), 
                        (6), and (9) of section 23C.
                            ``(vi) Section 24 (relating to 
                        suitability).
                            ``(vii) Section 29 (relating to standard 
                        format outline of coverage).
                            ``(viii) Section 30 (relating to 
                        requirement to deliver shopper's guide).
                The requirements referred to in clause (vi) shall not 
                include those portions of the personal worksheet 
                described in Appendix B relating to consumer protection 
                requirements not imposed by section 4980C or 7702B.
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return).
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6J (relating to policy 
                        summary).
                            ``(v) Section 6K (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(g)(2)(B).''.
    (C) Effective Date.--The amendments made by this section shall 
apply to policies issued more than 1 year after the date of enactment 
of this Act.

SEC. 103. EXPANSION OF STATE LONG-TERM CARE PARTNERSHIPS.

    (a) In General.--Section 1917(b)(1)(C)(ii) of the Social Security 
Act (42 U.S.C. 1396p(b)(1)(C)(ii)) is amended to read as follows:
            ``(ii) Clause (i) shall not apply in the case of an 
        individual who received medical assistance under--
                    ``(I) a Qualified State Long-Term Care Insurance 
                Partnership (as defined in paragraph (6)); or
                    ``(II) under a State plan of a State which--
                            ``(aa) had a State plan amendment approved 
                        as of May 14, 1993, which provided for the 
                        disregard of any assets or resources to the 
                        extent that payments are made under a long-term 
                        care insurance policy or because an individual 
                        has received (or is entitled to receive) 
                        benefits under a long-term care insurance 
                        policy; and
                            ``(bb) has a State plan amendment which 
                        satisfies the requirements of subparagraphs (B) 
                        through (F) of paragraph (6).''.
    (b) Satisfaction of Minimum Federal Standards, Tax-Qualifications, 
Inflation Protection, and Other Requirements for Long-Term Care 
Insurance Partnerships.--Section 1917(e) of the Social Security Act (42 
U.S.C. 1396p(e)) is amended by inserting at the end the following:
            ``(6) The term `Qualified State Long-Term Care Insurance 
        Partnership' means a State with an approved State plan 
        amendment that provides for the following:
                    ``(A) The disregard of any assets or resources in 
                an amount equal to the amount of payments made to, or 
                on behalf of, an individual who is a beneficiary under 
                any long-term care insurance policy (including a 
                certificate issued under a group insurance contract) 
                sold under such plan amendment.
                    ``(B) A requirement that the State will treat 
                benefits paid under any long-term care insurance policy 
                (including a certificate issued under a group insurance 
                contract) sold under a plan amendment of a State that 
                maintains a Qualified Long-Term Care Insurance 
                Partnership or is described in subsection 
                (b)(1)(C)(ii)(II) the same as the State treats benefits 
                paid under such a policy sold under the State's plan 
                amendment.
                    ``(C) A requirement that any long-term care 
                insurance policy (including a certificate issued under 
                a group insurance contract) sold under such plan 
                amendment be a qualified long-term care insurance 
                contract within the meaning of section 7702B(b) of the 
                Internal Revenue Code of 1986.
                    ``(D) A requirement that any such policy sold under 
                the State plan amendment shall provide for compound 
                annual inflation protection.
                    ``(E) A requirement that any individual who sells 
                such a policy receive training, and demonstrate 
                evidence of an understanding of, the policy and how the 
                policy relates to other public and private coverage of 
                long-term care.
                    ``(F) A requirement that the issuer of any such 
                policy report--
                            ``(i) to the Secretary, such information or 
                        data as the Secretary may require; and
                            ``(ii) to the State, the information or 
                        data reported to the Secretary (if any), the 
                        information or data required under the minimum 
                        reporting requirements developed under section 
                        103(c)(1)(B) of the Improving Long-Term Care 
                        Choices Act of 2005, and such additional 
                        information or data as the State may require.
        For purposes of applying this paragraph, if a long-term care 
        insurance policy is exchanged for another such policy, the date 
        coverage became effective under the first policy shall 
        determine when coverage first becomes effective.''.
    (c) Development of Reciprocity and Uniform Data Standards.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services, in consultation with the National Association of 
        Insurance Commissioners, issuers of long-term care insurance 
        policies, States with experience with long-term care insurance 
        partnership plans, and other States shall develop the following 
        standards:
                    (A) Reciprocity.--Standards for ensuring that long-
                term care insurance policies issued under a State long-
                term care insurance partnership under section 
                1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
                1396p(b)(1)(C)(ii)) (as amended by subsection (a)) are 
                portable to other States with such a partnership.
                    (B) Minimum reporting requirements.--Standards for 
                minimum reporting requirements for issuers of long-term 
                care insurance policies under such State long-term care 
                insurance partnerships that shall specify the data and 
                information that each such issuer shall report to the 
                State with which it has such a partnership. The 
                requirements developed in accordance with this 
                subparagraph shall specify the type and format of the 
                data and information to be reported and the frequency 
                with which such reports are to be made.
            (2) State reporting requirements.--Nothing in paragraph 
        (1)(B) shall be construed as prohibiting a State from requiring 
        an issuer of a long-term care insurance policy sold in the 
        State (regardless of whether the policy is issued under a State 
        long-term care insurance partnership under section 
        1917(b)(1)(C)(ii) of the Social Security Act) to require the 
        issuer to report information or data to the State that is in 
        addition to the information or data required under the minimum 
        reporting requirements developed under that paragraph.
    (d) Annual Reports to Congress.--The Secretary of Health and Human 
Services shall annually report to Congress on the long-term care 
insurance partnerships established in accordance with section 
1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
1396p(b)(1)(C)(ii))). Such reports shall include analyses of the extent 
to which such partnerships expand or limit access of individuals to 
long-term care and the impact of such partnerships on Federal and State 
expenditures under the medicare and medicaid programs.

SEC. 104. NATIONAL CLEARINGHOUSE FOR LONG-TERM CARE INFORMATION.

    (a) Establishment.--The Secretary of Health and Human Services 
shall establish, by grant, contract, or interagency agreement, a 
National Clearinghouse for Long-Term Care Information.
    (b) Duties.--The National Clearinghouse for Long-Term Care 
Information shall--
            (1) educate consumers regarding the extent to which Federal 
        and State health insurance programs provide coverage for long-
        term care and options for financing long-term care;
            (2) establish mechanisms for assisting consumers with the 
        decisionmaking process for determining whether to purchase a 
        long-term care insurance policy or pursue other options for 
        financing long-term care; and
            (3) establish an Internet website that allows consumers to 
        compare qualified long-term care insurance contracts (as 
        defined in section 7702B(b) of the Internal Revenue Code of 
        1986) with respect to price, benefits provided, historical data 
        on premium increases, and other information that would help a 
        consumer determine whether such a policy would meet their 
        needs.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated for purposes of carrying out this section, such sums as 
may be necessary for fiscal year 2006 and each fiscal year thereafter.

      Subtitle B--Amendments to the Internal Revenue Code of 1986

SEC. 121. TREATMENT OF PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE 
              CONTRACTS.

    (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 224 as section 225 and 
by inserting after section 223 the following new section:

``SEC. 224. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
the amount of eligible long-term care premiums (as defined in section 
213(d)(10)) paid during the taxable year for coverage for the taxpayer 
and the taxpayer's spouse and dependents under a qualified long-term 
care insurance contract (as defined in section 7702B(b)).
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage shall be determined in accordance with the 
following table:

 
                                                                 The
                                                              applicable
      ``For taxable years beginning in calendar year--        percentage
                                                                 is--
 
2005, 2006, or 2007........................................           25
2008.......................................................           35
2009.......................................................           65
2010 or thereafter.........................................         100.

    ``(c) Coordination With Other Deductions.--Any amount paid by a 
taxpayer for any qualified long-term care insurance contract to which 
subsection (a) applies shall not be taken into account in computing the 
amount allowable to the taxpayer as a deduction under section 162(l) or 
213(a).''.
    (b) Long-Term Care Insurance Permitted to Be Offered Under 
Cafeteria Plans and Flexible Spending Arrangements.--
            (1) Cafeteria plans.--The last sentence of section 125(f) 
        of such Code (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''.
            (2) Flexible spending arrangements.--Section 106 of such 
        Code (relating to contributions by an employer to accident and 
        health plans) is amended by striking subsection (c) and 
        redesignating subsection (d) as subsection (c).
    (c) Conforming Amendments.--
            (1) Section 62(a) of such Code is amended by inserting 
        before the last sentence at the end the following new 
        paragraph:
            ``(21) Premiums on qualified long-term care insurance 
        contracts.--The deduction allowed by section 224.''.
            (2) Sections 223(b)(4)(B), 223(d)(4)(C), 223(f)(3)(B), 
        3231(e)(11), 3306(b)(18), 3401(a)(22), 4973(g)(1), and 
        4973(g)(2)(B)(i) of such Code are each amended by striking 
        ``section 106(d)'' and inserting ``section 106(c)''.
            (3) Section 6041 of such Code is amended--
                    (A) in subsection (f)(1) by striking ``(as defined 
                in section 106(c)(2))'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(h) Flexible Spending Arrangement Defined.--For purposes of this 
section, a flexible spending arrangement is a benefit program which 
provides employees with coverage under which--
            ``(1) specified incurred expenses may be reimbursed 
        (subject to reimbursement maximums and other reasonable 
        conditions), and
            ``(2) the maximum amount of reimbursement which is 
        reasonably available to a participant for such coverage is less 
        than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably available 
shall be determined on the basis of the underlying coverage.''.
            (4) 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 new items:

``Sec. 224. Premiums on qualified long-term care insurance contracts.
``Sec. 225. Cross reference.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2005.
            (2) Cafeteria plans and flexible spending arrangements.--
        The amendments made by subsection (b) shall apply to taxable 
        years beginning after December 31, 2007.

SEC. 122. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits), as amended by the Energy Tax Incentives Act of 2005, 
is amended by inserting after section 25D the following new section:

``SEC. 25E. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year an 
        amount equal to the applicable credit amount multiplied by the 
        number of applicable individuals with respect to whom the 
        taxpayer is an eligible caregiver for the taxable year.
            ``(2) Applicable credit amount.--For purposes of paragraph 
        (1), the applicable credit amount shall be determined in 
        accordance with the following table:

 
                                                                 The
                                                              applicable
      ``For taxable years beginning in calendar year--          credit
                                                             amount is--
 
2005.......................................................       $1,000
2006.......................................................        1,500
2007.......................................................        2,000
2008.......................................................        2,500
2009 or thereafter.........................................       3,000.

    ``(b) Limitation Based on Adjusted Gross Income.--
            ``(1) In general.--The amount of the credit allowable under 
        subsection (a) shall be reduced (but not below zero) by $100 
        for each $1,000 (or fraction thereof) by which the taxpayer's 
        modified adjusted gross income exceeds the threshold amount. 
        For purposes of the preceding sentence, the term `modified 
        adjusted gross income' means adjusted gross income increased by 
        any amount excluded from gross income under section 911, 931, 
        or 933.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        term `threshold amount' means--
                    ``(A) $150,000 in the case of a joint return, and
                    ``(B) $75,000 in any other case.
            ``(3) Indexing.--In the case of any taxable year beginning 
        in a calendar year after 2005, each dollar amount contained in 
        paragraph (2) shall be increased by an amount equal to the 
        product of--
                    ``(A) such dollar amount, and
                    ``(B) the medical care cost adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `August 2004' for `August 1996' in 
                subclause (II) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $50, such increase shall be rounded to the next 
        lowest multiple of $50.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Applicable individual.--
                    ``(A) In general.--The term `applicable individual' 
                means, with respect to any taxable year, any individual 
                who has been certified, before the due date for filing 
                the return of tax for the taxable year (without 
                extensions), by a physician (as defined in section 
                1861(r)(1) of the Social Security Act) as being an 
                individual with long-term care needs described in 
                subparagraph (B) for a period--
                            ``(i) which is at least 180 consecutive 
                        days, and
                            ``(ii) a portion of which occurs within the 
                        taxable year.
                Notwithstanding the preceding sentence, a certification 
                shall not be treated as valid unless it is made within 
                the 39\1/2\ month period ending on such due date (or 
                such other period as the Secretary prescribes).
                    ``(B) Individuals with long-term care needs.--An 
                individual is described in this subparagraph if the 
                individual meets any of the following requirements:
                            ``(i) The individual is at least 6 years of 
                        age and--
                                    ``(I) is unable to perform (without 
                                substantial assistance from another 
                                individual) at least 3 activities of 
                                daily living (as defined in section 
                                7702B(c)(2)(B)) due to a loss of 
                                functional capacity, or
                                    ``(II) requires substantial 
                                supervision to protect such individual 
                                from threats to health and safety due 
                                to severe cognitive impairment and is 
                                unable to perform, without reminding or 
                                cuing assistance, at least 1 activity 
                                of daily living (as so defined) or to 
                                the extent provided in regulations 
                                prescribed by the Secretary (in 
                                consultation with the Secretary of 
                                Health and Human Services), is unable 
                                to engage in age appropriate 
                                activities.
                            ``(ii) The individual is at least 2 but not 
                        6 years of age and is unable due to a loss of 
                        functional capacity to perform (without 
                        substantial assistance from another individual) 
                        at least 2 of the following activities: eating, 
                        transferring, or mobility.
                            ``(iii) The individual is under 2 years of 
                        age and requires specific durable medical 
                        equipment by reason of a severe health 
                        condition or requires a skilled practitioner 
                        trained to address the individual's condition 
                        to be available if the individual's parents or 
                        guardians are absent.
            ``(2) Eligible caregiver.--
                    ``(A) In general.--A taxpayer shall be treated as 
                an eligible caregiver for any taxable year with respect 
                to the following individuals:
                            ``(i) The taxpayer.
                            ``(ii) The taxpayer's spouse.
                            ``(iii) An individual with respect to whom 
                        the taxpayer is allowed a deduction under 
                        section 151(c) for the taxable year.
                            ``(iv) An individual who would be described 
                        in clause (iii) for the taxable year if section 
                        151(c) were applied by substituting for the 
                        exemption amount an amount equal to the sum of 
                        the exemption amount, the standard deduction 
                        under section 63(c)(2)(C), and any additional 
                        standard deduction under section 63(c)(3) which 
                        would be applicable to the individual if clause 
                        (iii) applied.
                            ``(v) An individual who would be described 
                        in clause (iii) for the taxable year if--
                                    ``(I) the requirements of clause 
                                (iv) are met with respect to the 
                                individual, and
                                    ``(II) the requirements of 
                                subparagraph (B) are met with respect 
                                to the individual in lieu of the 
                                support test under subsection (c)(1)(D) 
                                or (d)(1)(C) of section 152.
                    ``(B) Residency test.--The requirements of this 
                subparagraph are met if an individual has as his 
                principal place of abode the home of the taxpayer and--
                            ``(i) in the case of an individual who is 
                        an ancestor or descendant of the taxpayer or 
                        the taxpayer's spouse, is a member of the 
                        taxpayer's household for over half the taxable 
                        year, or
                            ``(ii) in the case of any other individual, 
                        is a member of the taxpayer's household for the 
                        entire taxable year.
                    ``(C) Special rules where more than 1 eligible 
                caregiver.--
                            ``(i) In general.--If more than 1 
                        individual is an eligible caregiver with 
                        respect to the same applicable individual for 
                        taxable years ending with or within the same 
                        calendar year, a taxpayer shall be treated as 
                        the eligible caregiver if each such individual 
                        (other than the taxpayer) files a written 
                        declaration (in such form and manner as the 
                        Secretary may prescribe) that such individual 
                        will not claim such applicable individual for 
                        the credit under this section.
                            ``(ii) No agreement.--If each individual 
                        required under clause (i) to file a written 
                        declaration under clause (i) does not do so, 
                        the individual with the highest adjusted gross 
                        income shall be treated as the eligible 
                        caregiver.
                            ``(iii) Married individuals filing 
                        separately.--In the case of married individuals 
                        filing separately, the determination under this 
                        subparagraph as to whether the husband or wife 
                        is the eligible caregiver shall be made under 
                        the rules of clause (ii) (whether or not one of 
                        them has filed a written declaration under 
                        clause (i)).
    ``(d) Identification Requirement.--No credit shall be allowed under 
this section to a taxpayer with respect to any applicable individual 
unless the taxpayer includes the name and taxpayer identification 
number of such individual, and the identification number of the 
physician certifying such individual, on the return of tax for the 
taxable year.
    ``(e) Taxable Year Must Be Full Taxable Year.--Except in the case 
of a taxable year closed by reason of the death of the taxpayer, no 
credit shall be allowable under this section in the case of a taxable 
year covering a period of less than 12 months.''.
    (b) Conforming Amendments.--
            (1) Section 6213(g)(2) of such Code is amended by striking 
        ``and'' at the end of subparagraph (L), by striking the period 
        at the end of subparagraph (M) and inserting ``, and'', and by 
        inserting after subparagraph (M) the following new 
        subparagraph:
                    ``(N) an omission of a correct TIN or physician 
                identification required under section 25E(d) (relating 
                to credit for taxpayers with long-term care needs) to 
                be included on a return.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25D the following new item:

``Sec. 25E. Credit for taxpayers with long-term care needs.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 123. TREATMENT OF EXCHANGES OF LONG-TERM CARE INSURANCE CONTRACTS.

    (a) In General.--Subsection (a) of section 1035 of the Internal 
Revenue Code of 1986 (relating to exchanges of insurance policies) is 
amended by striking the period at the end of paragraph (3) and 
inserting ``; or'' and by adding at the end the following new 
paragraph:
            ``(4) a qualified long-term care insurance contract for 
        another qualified long-term care insurance contract.''.
    (b) Qualified Long-Term Care Insurance Contract.--Subsection (b) of 
section 1035 of such Code (relating to definitions) is amended by 
adding at the end the following new paragraph:
            ``(4) Qualified long-term care insurance contract.--The 
        term `qualified long-term care insurance contract' means--
                    ``(A) any qualified long-term care insurance 
                contract (as defined in section 7702B), and
                    ``(B) any contract which is treated as such by 
                section 321(f)(2) of the Health Insurance Portability 
                and Accountability Act of 1996.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to exchanges after December 31, 1997.
            (2) Waiver of limitations.--If the credit or refund of any 
        overpayment of tax with respect to a taxable year ending before 
        the date of the enactment of this Act resulting from the 
        application of section 1035(a)(4) of the Internal Revenue Code 
        of 1986, as added by this section, is prevented at any time by 
        the operation of any law or rule of law (including res 
        judicata), such credit or refund may nevertheless be allowed or 
        made if the claim therefor is filed before the close of the 1-
        year period beginning on the date of the enactment of this Act.

 TITLE II--MEDICAID HOME AND COMMUNITY-BASED SERVICES OPTIONAL BENEFIT

SEC. 201. MEDICAID HOME AND COMMUNITY-BASED SERVICES OPTIONAL BENEFIT.

    (a) Home and Community-Based Services as an Optional Benefit for 
Individuals Eligible for Medical Assistance.--Title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) is amended--
            (1) in section 1905(a)--
                    (A) in paragraph (27), by striking ``and'' at the 
                end;
                    (B) by redesignating paragraph (28) as paragraph 
                (29); and
                    (C) by inserting after paragraph (27), the 
                following:
            ``(28) subject to section 1930A, such home and community-
        based services (as defined in subsections (c)(4)(B) and 
        (d)(5)(C)(i) of section 1915 (not including payment for room 
        and board but including, in the case of services described in 
        section 1915(c)(4)(B), any other services requested by a State 
        and approved by the Secretary under such section)) as the State 
        shall specify in a State plan amendment; and''; and
            (2) by inserting after section 1930, the following:

                  ``home and community-based services

    ``Sec. 1930A. (a) In General.--A State may provide through a State 
plan amendment for the provision of such home and community-based 
services under section 1905(a)(28) as the State shall specify for 
individuals eligible for medical assistance under the State plan 
(without determining that but for the provision of such services the 
individuals would require the level of care provided in a hospital or a 
nursing facility or intermediate care facility for the mentally 
retarded), but only if the State meets the following requirements:
            ``(1) Needs-based criteria for eligibility for, and receipt 
        of, home and community-based services.--The State establishes 
        needs-based criteria for determining an individual's 
        eligibility under the State plan for medical assistance for 
        such home and community-based services, and if the individual 
        is eligible for such services, the specific home and community-
        based services that the individual will receive.
            ``(2) Establishment of more stringent needs-based 
        eligibility criteria for institutionalized care.--The State 
        establishes needs-based criteria for determining whether an 
        individual requires the level of care provided in a hospital, a 
        nursing facility, or an intermediate care facility for the 
        mentally retarded under the State plan or under any waiver of 
        such plan that are more stringent than the needs-based criteria 
        established under paragraph (1) for determining eligibility for 
        home and community-based services.
            ``(3) Projection of number of individuals to be provided 
        home and community-based services.--The State submits to the 
        Secretary, in such form and manner, and upon such frequency as 
        the Secretary shall specify, the projected number of 
        individuals to be provided home and community-based services.
            ``(4) Criteria based on individual assessment.--
                    ``(A) In general.--The criteria established by the 
                State for purposes of paragraphs (1) and (2) requires 
                an assessment of an individual's support needs and 
                capabilities, and may take into account the inability 
                of the individual to perform 1 or more activities of 
                daily living (as defined in section 7702B(c)(2)(B) of 
                the Internal Revenue Code of 1986) or the need for 
                significant assistance to perform such activities, and 
                such other risk factors as the State determines to be 
                appropriate.
                    ``(B) Adjustment authority.--The State plan 
                amendment provides for modification of the criteria 
                established under paragraph (1) (without having to 
                obtain prior approval from the Secretary) in the event 
                that the enrollment of individuals eligible for home 
                and community-based services exceeds the projected 
                enrollment submitted for purposes of paragraph (3), but 
                only if--
                            ``(i) the State provides at least 60 days 
                        notice to the Secretary and the public of the 
                        proposed modification;
                            ``(ii) the State deems an individual 
                        receiving home and community-based services on 
                        the basis of the most recent version of the 
                        criteria in effect prior to the effective date 
                        of the modification to continue to be eligible 
                        for such services after the effective date of 
                        the modification and until such time as the 
                        individual no longer meets the standard for 
                        receipt of such services under such pre-
                        modified criteria; and
                            ``(iii) after the effective date of such 
                        modification, the State applies the criteria 
                        for determining whether an individual requires 
                        the level of care provided in a hospital, a 
                        nursing facility, or an intermediate care 
                        facility for the mentally retarded under the 
                        State plan or under any waiver of such plan 
                        which applied prior to the application of the 
                        more stringent criteria developed under 
                        paragraph (2).
            ``(5) Independent evaluation and assessment.--
                    ``(A) Eligibility determination.--The State uses an 
                independent evaluation for making the determinations 
                described in paragraphs (1) and (2).
                    ``(B) Assessment.--In the case of an individual who 
                is determined to be eligible for home and community-
                based services, the State uses an independent 
                assessment, based on the needs of the individual to--
                            ``(i) determine a necessary level of 
                        services and supports to be provided, 
                        consistent with an individual's physical and 
                        mental capacity,
                            ``(ii) prevent the provision of unnecessary 
                        or inappropriate care; and
                            ``(iii) establish an individualized care 
                        plan for the individual in accordance with 
                        paragraph (7).
            ``(6) Assessment.--The independent assessment required 
        under paragraph (5)(B) shall include the following:
                    ``(A) An objective evaluation of an individual's 
                inability of the individual to perform 1 or more 
                activities of daily living (as defined in section 
                7702B(c)(2)(B) of the Internal Revenue Code of 1986) or 
                the need for significant assistance to perform such 
                activities, and of the individual's ability to engage 
                in major life activities such as walking, seeing, 
                hearing, breathing, speaking, working, performing 
                manual tasks, learning, thinking, concentrating, 
                interacting with others, sleeping, and any other 
                appropriate activities.
                    ``(B) A face-to-face evaluation of the individual 
                by an individual trained in the assessment and 
                evaluation of individuals whose physical or mental 
                conditions trigger a potential need for home and 
                community-based services.
                    ``(C) Where appropriate, consultation with the 
                individual's family, spouse, guardian, or other 
                responsible individual.
                    ``(D) Consultation with appropriate treating and 
                consulting health and support professionals caring for 
                the individual.
                    ``(E) An examination of the individual's relevant 
                history, medical records, and care and support needs, 
                guided by best practices and research on effective 
                strategies that result in improved health and quality 
                of life outcomes.
                    ``(F) If the State offers individuals the option to 
                self-direct the purchase of, or control the receipt of, 
                home and community-based service, an evaluation of the 
                ability of the individual or the individual's 
                representative to self-direct the purchase of, or 
                control the receipt of, such services if the individual 
                so elects.
            ``(7) Individualized care plan.--
                    ``(A) In general.--In the case of an individual who 
                is determined to be eligible for home and community-
                based services, the State uses the independent 
                assessment required under paragraph (5)(B) to establish 
                a written individualized care plan for the individual.
                    ``(B) Plan requirements.--The State ensures that 
                the individualized care plan for an individual--
                            ``(i) is developed--
                                    ``(I) in consultation with the 
                                individual, the individual's treating 
                                physician, health care or support 
                                professional, or other appropriate 
                                individuals, as defined by the State, 
                                and, where appropriate the individual's 
                                family, caregiver, or representative; 
                                and
                                    ``(II) taking into account the 
                                extent of, and need for, any family or 
                                other supports for the individual;
                            ``(ii) identifies the necessary home and 
                        community-based services to be furnished to the 
                        individual (or, if the individual elects to 
                        self-direct the purchase of, or control the 
                        receipt of, such services, funded for the 
                        individual); and
                            ``(iii) is reviewed at least annually and 
                        as needed when there is a significant change in 
                        the individual's circumstances.
                    ``(C) State option to offer election for self-
                directed services.--
                            ``(i) Individual choice.--At the option of 
                        the State, the State may allow an individual or 
                        the individual's representative to elect to 
                        receive self-directed home and community-based 
                        services in a manner which gives them the most 
                        control over such services consistent with the 
                        individual's abilities and the requirements of 
                        clause (ii).
                            ``(ii) Self-directed services.--The term 
                        `self-directed' means, with respect to the home 
                        and community-based services offered under the 
                        State plan amendment, such services for the 
                        individual which are planned and purchased 
                        under the direction and control of such 
                        individual or the individual's authorized 
                        representative, including the amount, duration, 
                        scope, provider, and location of such services, 
                        under the State plan consistent with the 
                        following requirements:
                                    ``(I) Assessment.--There is an 
                                assessment of the needs, capabilities, 
                                and preferences of the individual with 
                                respect to such services.
                                    ``(II) Service plan.--Based on such 
                                assessment, there is developed jointly 
                                with such individual or the 
                                individual's authorized representative 
                                a plan for such services for such 
                                individual that is approved by the 
                                State and that--
                                            ``(aa) specifies those 
                                        services which the individual 
                                        or the individual's authorized 
                                        representative would be 
                                        responsible for directing;
                                            ``(bb) identifies the 
                                        methods by which the individual 
                                        or the individual's authorized 
                                        representative will select, 
                                        manage, and dismiss providers 
                                        of such services;
                                            ``(cc) specifies the role 
                                        of family members and others 
                                        whose participation is sought 
                                        by the individual or the 
                                        individual's authorized 
                                        representative with respect to 
                                        such services;
                                            ``(dd) is developed through 
                                        a person-centered process that 
                                        is directed by the individual 
                                        or the individual's authorized 
                                        representative, builds upon the 
                                        individual's capacity to engage 
                                        in activities that promote 
                                        community life and that 
                                        respects the individual's 
                                        preferences, choices, and 
                                        abilities, and involves 
                                        families, friends, and 
                                        professionals as desired or 
                                        required by the individual or 
                                        the individual's authorized 
                                        representative;
                                            ``(ee) includes appropriate 
                                        risk management techniques that 
                                        recognize the roles and sharing 
                                        of responsibilities in 
                                        obtaining services in a self-
                                        directed manner and assure the 
                                        appropriateness of such plan 
                                        based upon the resources and 
                                        capabilities of the individual 
                                        or the individual's authorized 
                                        representative; and
                                            ``(ff) may include an 
                                        individualized budget which 
                                        identifies the dollar value of 
                                        the services and supports under 
                                        the control and direction of 
                                        the individual or the 
                                        individual's authorized 
                                        representative.
                                    ``(III) Budget process.--With 
                                respect to individualized budgets 
                                described in subclause (II)(ff), the 
                                State plan amendment--
                                            ``(aa) describes the method 
                                        for calculating the dollar 
                                        values in such budgets based on 
                                        reliable costs and service 
                                        utilization;
                                            ``(bb) defines a process 
                                        for making adjustments in such 
                                        dollar values to reflect 
                                        changes in individual 
                                        assessments and service plans; 
                                        and
                                            ``(cc) provides a procedure 
                                        to evaluate expenditures under 
                                        such budgets.
            ``(8) Quality assurance; conflict of interest standards.--
                    ``(A) Quality assurance.--The State ensures that 
                the provision of home and community-based services 
                meets Federal and State guidelines for quality 
                assurance.
                    ``(B) Conflict of interest standards.--The State 
                establishes standards for the conduct of the 
                independent evaluation and the independent assessment 
                to safeguard against conflicts of interest.
            ``(9) Redeterminations and appeals.--The State allows for 
        at least annual redeterminations of eligibility, and appeals in 
        accordance with the frequency of, and manner in which, 
        redeterminations and appeals of eligibility are made under the 
        State plan.
            ``(10) Presumptive eligibility for assessment.--
                    ``(A) In general.--The State, at its option, elects 
                to provide for a period of presumptive eligibility for 
                an individual that is limited to medical assistance for 
                carrying out the independent evaluation and assessment 
                under paragraph (5) to determine an individual's 
                eligibility for home and community-based services, and 
                if the individual is eligible for such services, the 
                specific home and community-based services that the 
                individual will receive.
                    ``(B) Application of existing rules.--In the case 
                of a State that makes such an election, the State 
                provides for a period of presumptive eligibility in the 
                same manner as the State may provide for such a period 
                under section 1920B (except that subsection (d)(2) of 
                that section is applied by substituting `section 1903' 
                for `clause (4) of the first sentence of section 
                1905(b)').
    ``(b) Definition of Individual's Representative.--In this section, 
the term `individual's representative' means, with respect to an 
individual, a parent, a family member, or a guardian of the individual, 
an advocate for the individual, or any other individual who is 
authorized to represent the individual.
    ``(c) No Effect On 1915 or 1115 Waivers.--Nothing in this section 
shall be construed as effecting the option of a State to offer home and 
community-based services under a waiver under subsections (c) or (d) of 
section 1915 or under section 1115.''.
            (2) Conforming amendment.--Section 1902(a)(10)(C)(iv) of 
        such Act (42 U.S.C. 1396a(a)(10)(C)(iv)) is amended by 
        inserting ``or (28)'' after ``(24)''.
    (b) State Option To Expand Home and Community-Based Services to 
Additional At-Risk Individuals.--
            (1) In general.--Section 1930A of the Social Security Act 
        (42 U.S.C. 1396d(y)) (as added by subsection (a)) is amended--
                    (A) by redesignating subsection (b) as subsection 
                (c); and
                    (B) by inserting after subsection (a) the 
                following:
    ``(b) Home and Community-Based Services for At-Risk Individuals.--
            ``(1) In general.--If a State elects to offer under the 
        State plan medical assistance for home and community-based 
        services in accordance with section 1905(a)(28) and subsection 
        (a), the State may elect, subject to paragraph (3), to offer 
        such services to an individual described in paragraph (2) who 
        is determined on the basis of an independent evaluation to meet 
        the criteria established under subsection (a)(1) for 
        eligibility for, and receipt of, such services.
            ``(2) Individual described.--For purposes of paragraph (1), 
        an individual described in this paragraph is an individual 
        whose income (as determined under section 1612, but without 
        regard to subsection (b) thereof) does not exceed such percent 
        of the supplemental security income benefit rate established by 
        section 1611(b)(1) as the State may establish (but not to 
        exceed 300 percent).
            ``(3) Application of rules for offering home and community-
        based services as an optional benefit.--The requirements of 
        subsection (a) shall apply to the provision of home and 
        community-based services to eligible individuals under this 
        subsection.''.
            (2) Conforming amendment.--Section 1903(f)(4) of such Act 
        (42 U.S.C. 1396b(f)(4)) is amended in the matter preceding 
        subparagraph (A), by inserting ``1930A(b)'' after 
        ``1905(p)(1)''.
    (c) Quality of Care Measures.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this subsection referred to as the ``Secretary''), acting 
        through the Director of the Agency for Healthcare Research and 
        Quality, shall consult with consumers, health and social 
        service providers and other professionals knowledgeable about 
        long-term care services and supports to develop program 
        performance indicators, client function indicators, and 
        measures of client satisfaction with respect to home and 
        community-based services offered under State medicaid programs 
        (under a waiver approved under section 1115 or 1915 of the 
        Social Security Act or under section 1930A of such Act (as 
        added by subsections (a) and (b))).
            (2) Best practices.--The Secretary shall--
                    (A) use the indicators and measures developed under 
                paragraph (1) to assess such home and community-based 
                services, the outcomes associated with the receipt of 
                such services (particularly with respect to the health 
                and welfare of the recipient of the services), and the 
                overall system for providing home and community-based 
                services under the medicaid program under title XIX of 
                the Social Security Act; and
                    (B) make publicly available the best practices 
                identified through such assessment and a comparative 
                analyses of the system features of each State.

  TITLE III--INTEGRATED ACUTE AND LONG-TERM CARE SERVICES FOR DUALLY 
                         ELIGIBLE INDIVIDUALS.

SEC. 301. REMOVAL OF BARRIERS TO INTEGRATED ACUTE AND LONG-TERM CARE 
              SERVICES FOR DUALLY ELIGIBLE INDIVIDUALS.

    (a) Regulations and Legislative Recommendations.--Not later than 
January 1, 2007, the Secretary of Health and Human Services, in 
consultation with directors of State medicaid programs under title XIX 
of the Social Security Act, health care insurers, managed care entities 
(as defined in section 1932(a)(1)(B) of the Social Security Act (42 
U.S.C. 1396u-2(a)(1)(B)), entities offering Medicare Advantage plans 
under part C of title XVIII of such Act (42 U.S.C. 1395w-21 et seq.) 
(including specialized MA plans for special needs individuals (as 
defined in section 1859(b)(6) of such Act), PACE providers (as defined 
in section 1934(a)(3) of the Social Security Act (42 U.S.C. 1396u-
4(a)(3)), and representatives of individuals who are dually eligible 
for the medicare and medicaid programs, shall do the following:
            (1) Removal of administrative barriers to integrated 
        care.--Issue regulations removing administrative barriers under 
        the medicare and medicaid programs that impede the offering of 
        integrated acute and long-term care services which combine 
        acute, home and community-based, nursing facility, and mental 
        health services, and, to the extent consistent with an 
        enrollee's coverage for such services under part D of title 
        XVIII of the Social Security Act, coverage for prescribed 
        drugs, into a single model of care for individuals who are 
        dually eligible for such programs. Such regulations shall 
        address conflicting requirements under such programs for 
        managed care entities (as defined in section 1932(a)(1)(B) of 
        the Social Security Act (42 U.S.C. 1396u-2(a)(1)(B)), entities 
        offering Medicare Advantage plans under part C of title XVIII 
        of such Act (42 U.S.C. 1395w-21 et seq.) (including specialized 
        MA plans for special needs individuals (as defined in section 
        1859(b)(6) of such Act), and PACE providers (as defined in 
        section 1934(a)(3) of the Social Security Act (42 U.S.C. 1396u-
        4(a)(3)) with respect to identification cards, marketing 
        requirements, and such other requirements as the Secretary 
        shall identify.
            (2) Submission of recommendations for removal of statutory 
        barriers to integrated care.--Submit to Congress 
        recommendations for removal of such statutory barriers to the 
        offering of such integrated services to individuals dually 
        eligible under the medicare and medicaid programs as the 
        Secretary shall identify.
    (b) MEDPAC Comments.--Not later than February 1, 2007, the Medicare 
Payment Advisory Commission shall submit to Congress comments on the 
recommendations submitted by the Secretary of Health and Human Services 
under subsection (a)(2).

                        TITLE IV--EFFECTIVE DATE

SEC. 401. EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided in this Act, this Act 
and the amendments made by this Act take effect on October 1, 2005.
    (b) Extension of Effective Date for State Law Amendment.--In the 
case of a State plan under title XIX of the Social Security Act which 
the Secretary of Health and Human Services determines requires State 
legislation in order for the plan to meet the additional requirements 
imposed by the amendments made by a provision of this Act, the State 
plan shall not be regarded as failing to comply with the requirements 
of this Act solely on the basis of its failure to meet these additional 
requirements before the first day of the first calendar quarter 
beginning after the close of the first regular session of the State 
legislature that begins after the date of enactment of this Act. For 
purposes of the previous sentence, in the case of a State that has a 2-
year legislative session, each year of the session shall be considered 
to be a separate regular session of the State legislature.
                                 <all>