[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4816 Introduced in House (IH)]
103d CONGRESS
2d Session
H. R. 4816
To amend the Social Security Act and the Internal Revenue Code of 1986
to provide improved access to quality long-term care services, to
obtain cost savings through provider incentives and removal of
regulatory and legislative barriers, to encourage greater private
sector participation and personal responsibility in financing such
services, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 22, 1994
Mr. Talent introduced the following bill; which was referred jointly to
the Committees on Energy and Commerce and Ways and Means
_______________________________________________________________________
A BILL
To amend the Social Security Act and the Internal Revenue Code of 1986
to provide improved access to quality long-term care services, to
obtain cost savings through provider incentives and removal of
regulatory and legislative barriers, to encourage greater private
sector participation and personal responsibility in financing such
services, 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 ``Quality Care For
Life Act of 1994''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
TITLE I--PROSPECTIVE PAYMENT SYSTEM FOR NURSING FACILITIES
Sec. 100. Short title.
Sec. 101. Definitions.
Sec. 102. Payment objectives.
Sec. 103. Powers and duties of the Secretary.
Sec. 104. Relationship to title XVIII of the Social Security Act.
Sec. 105. Establishment of resident classification system.
Sec. 106. Cost centers for nursing facility payment.
Sec. 107. Resident assessment.
Sec. 108. The per diem rate for nursing service costs.
Sec. 109. The per diem rate for administrative and general costs.
Sec. 110. Payment for fee-for-service ancillary services.
Sec. 111. Reimbursement of selected ancillary services and other costs.
Sec. 112. The per diem rate for property costs.
Sec. 113. Mid-year rate adjustments.
Sec. 114. Exception to payment methods for new and low-volume nursing
facilities.
Sec. 115. Appeal procedures.
Sec. 116. Effective date.
TITLE II--SUBACUTE CARE CONTINUUM AMENDMENTS OF 1994
Sec. 200. Short title.
Sec. 201. Findings and purposes.
Sec. 202. Creation of a ``level playing field'' to encourage the
development of subacute care providers.
Sec. 203. Exception process from medicare routine cost limits.
Sec. 204. Physician visits and consultations for medicare patients in
skilled nursing facilities.
Sec. 205. Coverage of respiratory therapy services in skilled nursing
facilities under the medicare program.
Sec. 206. DRGS appropriate for subacute care in skilled nursing
facilities.
Sec. 207. Subacute care services under title XIX.
Sec. 208. Effective date.
TITLE III--LONG-TERM CARE TAX CLARIFICATION
Sec. 301. Short title.
Sec. 302. Treatment of long-term care insurance or plans.
Sec. 303. Qualified long-term services treated as medical care.
Sec. 304. Qualified long-term care insurance contracts permitted to be
offered in cafeteria plans.
Sec. 305. Inclusion in income of excessive long-term care benefits.
Sec. 306. Tax reserves for qualified long-term care insurance
contracts.
Sec. 307. Effective date.
TITLE IV--LONG-TERM CARE INSURANCE STANDARDS
Sec. 400. Short title.
Sec. 401. National Long-Term Care Insurance Advisory Council.
Sec. 402. Policy requirements.
Sec. 403. Additional requirements for issuers of long-term care
insurance policies.
Sec. 404. Relation to State law.
Sec. 405. Uniform language and definitions.
Sec. 406. Effective dates.
TITLE V--FINANCIAL ELIGIBILITY STANDARDS
Sec. 501. Revisions to financial eligibility provisions.
Sec. 502. Effective date.
TITLE VI--ESTABLISHMENT OF PROGRAM FOR HOME AND COMMUNITY-BASED
SERVICES FOR CERTAIN INDIVIDUALS WITH DISABILITIES
Sec. 600. Short title.
Sec. 601. Establishment of program.
Sec. 602. Increased resource disregards for nursing facility residents.
TITLE VII--ASSET TRANSFERS
Sec. 701. Transfers of assets.
Sec. 702. Treatment of certain trusts.
Sec. 703. Effective date.
SEC. 2. PURPOSES.
The purposes of this Act are to--
(1) enact a prospective payment system for nursing facility
services under all Federal health care programs that promotes
quality care, assures equal access for all residents regardless
of level of service needed, maintains adequate capital
formation, provides for efficiency incentives for providers,
and contains costs;
(2) encourage the use of cost-effective subacute care in
nursing facilities by providing equitable reimbursement under
all appropriate Federal health care programs and by eliminating
regulatory and legislative barriers to providing such care;
(3) amend the Internal Revenue Code of 1986 to clarify the
Federal tax treatment of long term care insurance policies to
promote the purchase of such policies;
(4) amend the Internal Revenue Code of 1986 to develop
reasonable Federal standards for long term care insurance that
promote consumer protection;
(5) modify financial eligibility standards under the
medicaid program to ensure an inclusive accounting of
individual assets and promote personal responsibility for long
term care expenses;
(6) establish a program for home and community-based
services for individuals with disabilities under the medicaid
program to provide beneficiaries, whose needs would be
determined by functional eligibility standards, with expanded
choice of services within a continuum of care, and contain
costs by encouraging the use of appropriate levels of care; and
(7) revise the transfer of asset prohibitions under the
medicaid program to make the 60-month look-back period in the
case of trusts applicable to all transfers of assets, to
require ``income cap trusts'' and ``nonprofit association
trusts'' to be irrevocable, to include the conversion of
personal or real property into annuities as an unlawful
transfer, and to direct the Secretary, by regulation, to close
such other loopholes not covered by the Omnibus Budget
Reconciliation Act of 1993 (Public Law 103-66).
TITLE I--PROSPECTIVE PAYMENT SYSTEM FOR NURSING FACILITIES
SEC. 100. SHORT TITLE.
This title may be cited as the ``Prospective Payment System for
Nursing Facilities Amendments of 1994''.
SEC. 101. DEFINITIONS.
For purposes of this title:
(1) ``Acuity payment'' means a fixed amount that will be
added to the facility-specific prices for certain resident
classes designated by the Secretary as requiring heavy care.
(2) ``Aggregated resident invoice'' means a compilation of
the per resident invoices of a nursing facility which contain
the number of resident days for each resident and the resident
class of each resident at the nursing facility during a
particular month.
(3) ``Allowable costs'' means costs which HCFA has
determined to be necessary for a nursing facility to incur
according to the Provider Reimbursement Manual (hereinafter
referred to as ``HCFA-Pub. 15'').
(4) ``Base year'' means the most recent cost reporting
period (consisting of a period which is 12 months in length,
except for facilities with new owners, in which case the period
is not less than 4 months nor more than 13 months) for which
cost data of nursing facilities is available to be used for the
determination of a prospective rate.
(5) ``Case mix weight'' means the total case mix score of a
facility calculated by multiplying the resident days in each
resident class by the relative weight assigned to each resident
class, and summing the resulting products across all resident
classes.
(6) ``Complex medical equipment'' means items such as
ventilators, intermittent positive pressure breathing (IPPB)
machines, nebulizers, suction pumps, continuous positive airway
pressure (CPAP) devices, and bead beds such as air fluidized
beds.
(7) ``Distinct part nursing facility'' means an institution
which has a distinct part that is certified under title XVIII
of the Social Security Act and meets the requirements of
section 201.1 of the Skilled Nursing Facility Manual published
by HCFA (hereinafter referred to as ``HCFA-Pub. 12'').
(8) ``Efficiency incentive'' means a payment made to a
nursing facility in recognition of incurring costs below a
prespecified level.
(9) ``Fixed equipment'' means equipment which meets the
definition of building equipment in section 104.3 of HCFA-Pub.
15. ``Fixed equipment'' includes, but is not limited to,
attachments to buildings such as wiring, electrical fixtures,
plumbing, elevators, heating systems, and air conditioning
systems.
(10) ``Geographic ceiling'' means a limitation on payments
in any given cost center for nursing facilities in one of no
fewer than 8 geographic regions, further subdivided into rural
and urban areas, as designated by the Secretary.
(11) ``Heavy care'' means an exceptionally high level of
care which the Secretary has determined is required for
residents in certain resident classes.
(12) ``HCFA'' means the Health Care Financing
Administration of the Department of Health and Human Services.
(13) ``Indexed forward'' means an adjustment made to a per
diem rate to account for cost increases due to inflation or
other factors during an intervening period following the base
year and projecting such cost increases for a future period in
which the rate applies. Indexing forward under this title shall
be determined from the midpoint of the base year to the
midpoint of the rate year.
(14) ``Marshall Swift segmented cost method'' means an
appraisal method published by the Marshall Swift Valuation
Service.
(15) ``Minimum Data Set (hereinafter referred to as
`MDS')'' means a resident assessment instrument, currently
recognized by HCFA, in addition to any extensions to MDS, such
as MDSs, as well as any extensions to accommodate subacute care
which contain an appropriate core of assessment items with
definitions and coding categories needed to comprehensively
assess a nursing facility resident.
(16) ``Major movable equipment'' means equipment which
meets the definition of major movable equipment in section
104.4 of HCFA-Pub. 15. ``Major movable equipment'' includes,
but is not limited to, accounting machines, beds, wheelchairs,
desks, vehicles, and X-ray machines.
(17) ``Nursing facility'' means an institution which meets
the requirements of a ``skilled nursing facility'' under
section 1819(a) of the Social Security Act (42 U.S.C. 1395i-
3(a)) and a ``nursing facility'' under section 1919(a) of the
Social Security Act (42 U.S.C. 1396r(a)).
(18) ``Per bed limit'' means a per bed ceiling on the fair
asset value of a nursing facility for one of the geographic
regions designated by the Secretary.
(19) ``Per diem rate'' means a rate of payment for the
costs of covered services for a resident day.
(20) ``Relative weight'' means the index of the value of
the resources required for a given resident class relative to
the value of resources of either a base resident class or the
average of all the resident classes.
(21) ``R. S. Means Index'' means the index of the R. S.
Means Company, Inc., specific to commercial/industrial
institutionalized nursing facilities, which is based upon a
survey of prices of common building materials and wage rates
for nursing facility construction.
(22) ``Rebase'' means the process of updating nursing
facility cost data for a subsequent rate year using a more
recent base year.
(23) ``Rental rate'' means a percentage that will be
multiplied by the fair asset value of property to determine the
total annual rental payment in lieu of property costs.
(24) ``Resident classification system'' means a system
which categorizes residents into different resident classes
according to similarity of the assessed condition and required
services of such residents.
(25) ``Resident day'' means the period of services for one
resident, regardless of payment source, for one continuous 24
hours of services. The day of admission of the resident
constitutes a resident day but the day of discharge does not
constitute a resident day. Bed hold days are not to be
considered resident days, and bed hold day revenues are not to
be offset.
(26) ``Resource Utilization Groups, Version III
(hereinafter referred to as `RUG-III')'' means a category-based
resident classification system used to classify nursing
facility residents into mutually exclusive RUG-III groups.
Residents in each RUG-III group utilize similar quantities and
patterns of resources.
(27) ``Secretary'' means the Secretary of Health and Human
Services.
SEC. 102. PAYMENT OBJECTIVES.
(a) Payment rates under the Prospective Payment System for Nursing
Facilities shall reflect the following objectives:
(1) To maintain an equitable and fair balance between cost
containment and quality of care in nursing facilities.
(2) To encourage nursing facilities to admit residents
without regard to such residents' source of payment.
(3) To provide an incentive to nursing facilities to admit
and provide care to persons in need of comparatively greater
care.
(4) To maintain administrative simplicity, for both nursing
facilities and the Secretary.
(5) To encourage investment in buildings and improvements
to nursing facilities (capital formation) as necessary to
maintain quality and access.
SEC. 103. POWERS AND DUTIES OF THE SECRETARY.
(a) The Secretary shall establish by regulation the implementation
of this title. The rates determined under this title shall reflect the
objectives in section 102.
(b) The Secretary may require that each nursing facility file such
data, statistics, schedules, or information as required to enable the
Secretary to implement this title.
SEC. 104. RELATIONSHIP TO TITLE XVIII OF THE SOCIAL SECURITY ACT.
(a) No provision in this title shall replace, or otherwise affect,
the skilled nursing facility benefit under title XVIII of the Social
Security Act.
(b) The provisions of HCFA-Pub. 15 shall apply to the determination
of allowable costs under this title except to the extent that such
provisions conflict with any other provision in this title.
SEC. 105. ESTABLISHMENT OF RESIDENT CLASSIFICATION SYSTEM.
(a)(1) The Secretary shall establish a resident classification
system which shall group residents into classes according to similarity
of the assessed condition and required services of such residents.
(2) The resident classification system shall be modelled after the
RUG-III system and all updated versions of that system.
(3) The resident classification system shall be reflective of the
necessary professional and paraprofessional nursing staff time and
costs required to address the care needs of nursing facility residents.
(b)(1) The Secretary shall assign a relative weight for each
resident class based on the relative value of the resources required
for each resident class. The assignment of relative weights for
resident classes shall be performed for each geographic region as
determined in accordance with subsection (c).
(2) In assigning the relative weights of the resident classes in a
geographic region, the Secretary shall utilize information derived from
the most recent MDSs of all of the nursing facilities in a geographic
region.
(3) The relative weights of the resident classes in each geographic
region shall be recalibrated every 3 years based on any changes in the
cost or amount of resources required for the care of a resident in the
resident class.
(c)(1) The Secretary shall designate no fewer than 8 geographic
regions for the total United States. Within each geographic region, the
Secretary shall take appropriate account of variations in cost between
urban and rural areas.
(2) There shall be no peer grouping of nursing facilities (e.g.,
based on whether the nursing facilities are hospital-based or not)
other than peer-grouping by geographic region.
SEC. 106. COST CENTERS FOR NURSING FACILITY PAYMENT.
(a) Consistent with the objectives established in section 102, the
Secretary shall determine payment rates for nursing facilities using
the following cost-service groupings:
(1) The nursing service cost center shall include salaries
and wages for the Director of Nursing, Quality Assurance
Nurses, registered nurses, licensed practical nurses, nurse
aides (including wages related to initial and on-going nurse
aide training and other on-going or periodic training costs
incurred by nursing personnel), contract nursing, fringe
benefits and payroll taxes associated therewith, medical
records, and nursing supplies.
(2) The administrative and general cost center shall
include all expenses (including salaries, benefits, and other
costs) related to administration, plant operation, maintenance
and repair, housekeeping, dietary (excluding raw food), central
services and supply (excluding medical supplies), laundry, and
social services.
(3) Ancillary services to be paid on a fee-for-service
basis shall include physical therapy, occupational therapy,
speech therapy, respiratory therapy, hyperalimentation, and
complex medical equipment (CME). These fee-for-service
ancillary service payments under Part A of title XVIII of the
Social Security Act shall not affect the reimbursement of
ancillary services under part B of title XVIII of the Social
Security Act.
(4) The cost center for selected ancillary services and
other costs shall include drugs, raw food, medical supplies, IV
therapy, X-ray services, laboratory services, property tax,
property insurance, minor equipment, and all other costs not
included in the other 4 cost/service groupings.
(5) The property cost center shall include depreciation on
the buildings and fixed equipment, major movable equipment,
motor vehicles, land improvements, amortization of leasehold
improvements, lease acquisition costs, and capital leases;
interest on capital indebtedness; mortgage interest; lease
costs; and equipment rental expense.
(b) Nursing facilities shall be paid a prospective, facility-
specific, per diem rate based on the sum of the per diem rates
established for the nursing service, administrative and general, and
property cost centers as determined in accordance with sections 108,
109, and 112.
(c) Nursing facilities shall be paid a facility-specific
prospective rate for each unit of the fee-for-service ancillary
services as determined in accordance with section 110.
(d) Nursing facilities shall be reimbursed for selected ancillary
services and other costs on a retrospective basis in accordance with
section 111.
SEC. 107. RESIDENT ASSESSMENT.
(a) The nursing facility shall perform a resident assessment in
accordance with section 1819(b)(3) of the Social Security Act (42
U.S.C. 1395i-3(a)) within 14 days of admission of the resident and at
such other times as required by that section.
(b) The resident assessment shall be used to determine the resident
class of each resident in the nursing facility for purposes of
determining the per diem rate for the nursing service cost center in
accordance with section 108.
SEC. 108. THE PER DIEM RATE FOR NURSING SERVICE COSTS.
(a)(1) The nursing service cost center rate shall be calculated
using a prospective, facility-specific per diem rate based on the
nursing facility's case-mix weight and nursing service costs during the
base year.
(2) The case-mix weight of a nursing facility shall be obtained by
multiplying the number of resident days in each resident class at a
nursing facility during the base year by the relative weight assigned
to each resident class in the appropriate geographic region. Once this
calculation is performed for each resident class in the nursing
facility, the sum of these products shall constitute the case-mix
weight for the nursing facility.
(3) A facility nursing unit value for the nursing facility for the
base year shall be obtained by dividing the nursing service costs for
the base year, which shall be indexed forward from the midpoint of the
base period to the midpoint of the rate period using the DRI McGraw-
Hill HCFA Nursing Home Without Capital Market Basket, by the case-mix
weight of the nursing facility for the base year.
(4) A facility-specific nursing services price for each resident
class shall be obtained by multiplying the lower of the indexed
facility unit value of the nursing facility during the base year or the
geographic ceiling, as determined in accordance with subsection (b), by
the relative weight of the resident class.
(5) The Secretary shall designate certain resident classes as
requiring heavy care. An acuity payment of 3 percent of the facility-
specific nursing services price shall be added on to the facility-
specific price for each resident class which the Secretary has
designated as requiring heavy care. The acuity payment is intended to
provide an incentive to nursing facilities to admit residents requiring
heavy care.
(6) The per diem rate for the nursing service cost center for each
resident in a resident class shall constitute the facility-specific
price, plus the acuity payment where appropriate.
(7) The per diem rate for the nursing service cost center,
including the facility-specific price and the acuity payment, shall be
rebased annually.
(8) To determine the payment amount to a nursing facility for the
nursing service cost center, the Secretary shall multiply the per diem
rate (including the acuity payment) for a resident class by the number
of resident days for each resident class based on aggregated resident
invoices which each nursing facility shall submit on a monthly basis.
(b)(1) The facility unit value identified in subsection (a)(3)
shall be subjected to geographic ceilings established for the
geographic regions designated by the Secretary in section 105(c).
(2) The geographic ceiling shall be determined by first creating an
array of indexed facility unit values in a geographic region from
lowest to highest. Based on this array, the Secretary shall identify a
fixed proportion between the indexed facility unit value of the nursing
facility which contained the medianth resident day in the array (except
as provided in subsection (b)(4)) and the indexed facility unit value
of the nursing facility which contained the 95th percentile resident
day in that array during the first year of operation of the Prospective
Payment System For Nursing Facilities. The fixed proportion (e.g., 1.1
times the median or 110 percent of the median) shall remain the same in
subsequent years.
(3) To obtain the geographic ceiling on the indexed facility unit
value for nursing facilities in a geographic region in each subsequent
year, the fixed proportion identified pursuant to subsection (b)(2)
shall be multiplied by the indexed facility unit value of the nursing
facility which contained the medianth resident day in the array of
facility unit values for the geographic region during the base year.
(4) The Secretary shall exclude low-volume and new nursing
facilities, as defined in subsections (a) and (b) of section 113,
respectively, for purposes of determining the geographic ceiling for
the nursing service cost center.
(c) The Secretary shall establish by regulation, procedures for
allowing exceptions to the geographic ceiling imposed on the nursing
service cost center. The procedure shall permit exceptions based on the
following factors:
(1) Local supply and/or labor shortages which substantially
increase costs to specific nursing facilities.
(2) Higher per resident day usage of contract nursing
personnel, if utilization of contract nursing personnel is
warranted by local circumstances, and the provider has taken
all reasonable measures to minimize contract personnel expense.
(3) Extraordinarily low proportion of distinct part nursing
facilities in a geographic region resulting in a geographic
ceiling which unfairly restricts the reimbursement of distinct
part facilities.
(4) Regulatory changes that increase costs to only a subset
of the nursing facility industry.
(5) The offering of a new institutional health service or
treatment program by a nursing facility (in order to account
for initial start-up costs).
(6) Disproportionate usage of part-time employees, where
adequate numbers of full-time employees cannot reasonably be
obtained.
(7) Other cost producing factors, to be specified by the
Secretary in regulations that are specific to a subset of
facilities in a geographic region (except case-mix variation).
SEC. 109. THE PER DIEM RATE FOR ADMINISTRATIVE AND GENERAL COSTS.
(a)(1) Payment relative to the administrative and general cost
center shall be a facility-specific, prospective, per diem rate.
(2) The Secretary shall assign a per diem rate to a nursing
facility by applying 2 standards which shall be calculated as follows:
(A) Standard A shall be derived for each geographic region
by first creating an array of indexed nursing facility
administrative and general per diem costs from lowest to
highest. The Secretary shall then identify a fixed proportion
by dividing the indexed administrative and general per diem
costs of the nursing facility which contained the medianth
resident day of the array (except as provided in subsection
(a)(4)) into the indexed administrative and general per diem
costs of the nursing facility which contained the 75th
percentile resident day in that array. Standard A for each base
year shall constitute the product of this fixed proportion
(e.g., 1.1 times the median or 110 percent of the median) and
the administrative and general indexed per diem costs of the
nursing facility which contained the medianth resident day in
the array of such costs during the base year.
(B) Standard B shall be derived using the same calculation
as in subparagraph (A) except that the fixed proportion shall
use the indexed administrative and general costs of the nursing
facility containing the 85th percentile, rather than the 75th
percentile, resident day in the array of such costs.
(3) The Secretary shall use the geographic regions identified in
section 105(c) for purposes of determining Standard A and Standard B.
(4) The Secretary shall exclude low-volume and new nursing
facilities, as defined in subsections (a) and (b) of section 113,
respectively, for purposes of determining Standard A and Standard B.
(5) To determine a nursing facility's per diem rate for the
administrative and general cost center, Standard A and Standard B shall
be applied to a nursing facility's administrative and general per diem
costs, indexed forward using the DRI McGraw-Hill HCFA Nursing Home
Without Capital Market Basket, as follows:
(A) Each nursing facility having indexed costs which fall
below the median shall be assigned a rate equal to such
facility's individual indexed costs plus an ``efficiency
incentive'' equal to one half of the difference between the
median and Standard A.
(B) Each nursing facility having indexed costs which fall
below Standard A but at or above the median shall be assigned a
per diem rate equal to such facility's individual indexed costs
plus an ``efficiency incentive'' equal to one-half of the
difference between such facility's indexed costs and Standard
A.
(C) Each nursing facility having indexed costs which fall
between Standard A and Standard B shall be assigned a rate
equal to Standard A plus one-half of the difference between
such facility's indexed costs and Standard A.
(D) Each nursing facility having indexed costs which exceed
Standard B shall be assigned a rate as if such facility's costs
equaled Standard B. These nursing facilities shall be assigned
a per diem rate equal to Standard A plus one-half of the
difference between Standard A and Standard B.
(E) For purposes of subparagraphs (A) through (D), the
median represents the indexed administrative and general per
diem costs of the nursing facility which contained the medianth
resident day in the array of such costs during the base year in
the geographic region.
(b) Rebasing of the payment rates for administrative and general
costs shall occur no less frequently than once a year.
SEC. 110. PAYMENT FOR FEE-FOR-SERVICE ANCILLARY SERVICES.
(a) Payment for each ancillary service enumerated in section
106(a)(3), such as physical therapy, shall be calculated and paid on a
prospective fee-for-service basis.
(b) The Secretary shall identify the fee for each of the fee-for-
service ancillary services for a particular nursing facility by
dividing the nursing facility's actual costs, including overhead
allocated through the cost finding process, of providing each
particular service, indexed forward using the DRI McGraw-Hill HCFA
Nursing Home Without Capital Market Basket, by the units of the
particular service provided by the nursing facility during the cost
year.
(c) The fee for each of the fee-for-service ancillary services
shall be calculated at least once a year for each facility and
ancillary service.
SEC. 111. REIMBURSEMENT OF SELECTED ANCILLARY SERVICES AND OTHER COSTS.
(a) Reimbursement of selected ancillary services and other costs
identified in section 106(a)(4), such as drugs and medical supplies,
shall be reimbursed on a retrospective basis as pass-through costs,
including overhead allocated through the cost-finding process.
(b) The Secretary shall set charge-based interim rates for selected
ancillary services and other costs for each nursing facility providing
such services. Any overpayments or underpayments resulting from the
difference between the interim and final settlement rates shall be
either refunded by the nursing facility or paid to the nursing facility
following submission of a timely filed medicare cost report.
SEC. 112. THE PER DIEM RATE FOR PROPERTY COSTS.
(a)(1) The basis for payment within the property cost center for
nursing facilities shall be calculated and paid on a prospective
(except as provided for newly constructed facilities in subsection
(d)(2)), facility-specific, per resident day rate based on the fair
asset value of the property.
(2)(A) The fair asset value of the property shall constitute the
sum of the market value of the land (including site preparation costs),
a reconstruction cost appraised value for the buildings and fixed
equipment, and the product of the number of beds in the nursing
facility and a per bed allowance for major movable equipment.
(B) The land, buildings, and fixed equipment which are included in
determining the fair asset value must be used in connection with the
care of residents.
(C) Appraisals for the buildings and fixed equipment shall be
performed using the Marshall-Swift segmented cost method. A nursing
facility shall be appraised every 4 years.
(D) The Secretary shall utilize an annual allowance of $3,500 per
bed for major movable equipment for a nursing facility. The Secretary
shall review the annual allowance for major movable equipment every 5
years to determine its accuracy.
(E) If a nursing facility has commenced a renovation to a building
and fixed equipment between appraisals the cost of which constitutes at
least 5 percent of the total value of the existing building and the
fixed equipment, such facility may submit documentation as to the cost
of the renovation during the previous year. The Secretary shall add the
reasonable costs of the major renovation for the previous year to the
fair asset value of the facility. This new asset value is to be the
base for indexing until the next full appraisal.
(F) The value of the assets is determined through appraisals,
indexing, and the application of allowances, and is, therefore,
unaffected by sales transactions, refinancing, or other changes in
financing. Accordingly, the concept of recapture of depreciation is
inapplicable to facilities whose payment is established under this
title.
(3) The value of the land, buildings, and fixed equipment shall be
indexed annually between reappraisals as follows:
(A) The land shall be indexed using Consumer Price Index
Urban.
(B) The buildings and fixed equipment shall be indexed
annually using the R. S. Means Index.
(4) The annual allowance for major movable equipment shall be
indexed annually using the hospital equipment index of the Marshall
Swift Valuation Service.
(5) The Secretary shall adjust the indexes used for the land,
buildings and fixed equipment, and major movable equipment for the
different geographic regions.
(b)(1) The Secretary shall establish a per bed limit on the fair
asset value of a nursing facility for each geographic region, as
designated in section 105(c). The per bed limit shall be equal to the
average indexed costs incurred by all recently constructed nursing
facilities in the geographic region which have been designed and
constructed in an efficient manner.
(2) The per bed limit on the fair asset value shall be indexed
annually using the R. S. Means Index.
(3) The per bed limit shall be recalculated every 5 years.
(c) The total annual rental shall constitute the product of the
lower of the indexed fair asset value or the indexed per bed limit and
a rental rate which shall be based on the average yield for 20 year
United States Treasury Bonds during the prior year plus a risk premium
of 3 percentage points.
(d)(1) The per resident day rental shall be obtained by dividing
the total annual rental by 90 percent of the annual licensed bed days.
The per resident day rental shall constitute the per diem rate
attributable to the property cost center.
(2) The per resident day rental rate for a newly-constructed
facility during such facility's first year of operation shall be based
on the total annual rental divided by the greater of 50 percent of
available resident days or actual annualized resident days up to 90
percent of annual licensed bed days during such facility's first year
of operation.
(e) Facilities in operation prior to the effective date of this
title shall receive the per resident day rental or actual costs, as
determined in accordance with HCFA-Pub. 15, whichever is greater,
except that a nursing facility shall be reimbursed the per resident day
rental on and after the earlier of--
(1) the date upon which the nursing facility changes
ownership;
(2) the date the nursing facility accepts the per resident
day rental; or
(3) the date of the renegotiation of the lease for the land
and/or buildings, not including the exercise of optional
extensions specifically included in the original lease
agreement or valid extensions thereof.
SEC. 113. MID-YEAR RATE ADJUSTMENTS.
(a)(1) The Secretary shall establish by regulation, a procedure for
granting mid-year rate adjustments for the nursing service,
administrative and general, and fee-for-service ancillary services cost
centers.
(2) The mid-year rate adjustment procedure shall require the
Secretary to grant adjustments on an industry-wide basis, without the
need for nursing facilities to apply for such adjustments, based on the
following circumstances:
(A) Statutory or regulatory changes affecting nursing
facilities (e.g., new staffing standards or expanded services).
(B) Changes to the Federal minimum wage.
(C) General labor shortages with high regional wage
impacts.
(3) The midyear rate adjustment procedure shall permit specific
facilities or groups of facilities to apply for an adjustment based on
the following factors:
(A) Local labor shortages.
(B) Regulatory changes that apply to only a subset of the
nursing facility industry.
(C) Economic conditions created by natural disasters or
other events outside of the control of the provider.
(D) Other cost producing factors, except case-mix
variation, to be specified by the Secretary by regulation.
(4)(A) A nursing facility which applies for a mid-year rate
adjustment pursuant to subsection (a)(3) shall be required to show that
the adjustment will result in a greater than 2 percent deviation in the
per diem rate for any individual cost service center or a deviation of
greater than $5,000 in the total projected and indexed costs for the
rate year, whichever is less.
(B) A nursing facility application for a midyear rate adjustment
must be accompanied by recent cost experience data and/or budget
projections.
SEC. 114. EXCEPTION TO PAYMENT METHODS FOR NEW AND LOW-VOLUME NURSING
FACILITIES.
(a) A low-volume nursing facility shall constitute a nursing
facility having fewer than 2,500 medicare part A resident days per
year.
(b) A new nursing facility shall constitute a newly constructed,
licensed, and certified nursing facility and/or a nursing facility that
is in its first 3 years of operation as a medicare part A provider. A
nursing facility that has operated for more than 3 years but has a
change of ownership shall not constitute a new facility.
(c) Low-volume nursing facilities shall have the option of
submitting a cost report to receive retrospective payment for all of
the cost centers, other than the property cost center, or accepting a
per diem rate which shall be based on the sum of--
(1) the median indexed resident day facility unit value for
the appropriate geographic region for the nursing service cost
center during the base year as identified in section 108(b)(2),
(2) the median indexed resident day administrative and
general per diem costs of all nursing facilities in the
appropriate geographic region as identified in section
109(a)(5)(E),
(3) the median indexed resident day costs per unit of
service for fee-for-service ancillary services which shall be
obtained using the cost information from the nursing facilities
in the appropriate geographic region during the base year,
excluding low-volume and new nursing facilities, and which
shall be based on an array of such costs from lowest to
highest, and
(4) the median indexed resident day per diem costs for
selected ancillary services and other costs which shall be
obtained using information from the nursing facilities in the
appropriate geographic region during the base year, excluding
low-volume and new nursing facilities, and which shall be based
on an array of such costs from lowest to highest.
(d) New nursing facilities shall have the option of being paid on a
retrospective cost pass-through basis for all cost centers, or in
accordance with paragraphs (1) through (4) of subsection (c).
SEC. 115. APPEAL PROCEDURES.
(a)(1) Any person or legal entity aggrieved by a decision of the
Secretary under this title, and which results in an amount in
controversy of $10,000 or more, shall have the right to appeal such
decision directly to the Provider Reimbursement Review Board
(hereinafter referred to as the ``Board'') authorized under section
1878 of title XVIII of the Social Security Act.
(2) The $10,000 amount in controversy shall be computed in
accordance with 42 C.F.R. 405.1839.
(b) Hearings before the Board under this title, and any appeals
thereto, shall follow the procedures under section 1878 of title XVIII
of the Social Security Act and the regulations contained in 42 C.F.R.
405.1841-1889, except to the extent that such procedures conflict with,
or are inapplicable on account of, any other provision of this title.
SEC. 116. EFFECTIVE DATE.
(a) The provisions of this title shall be effective October 1,
1995.
(b) The provisions contained in this title shall supercede any
other provisions of title XVIII or title XIX of the Social Security Act
which are inconsistent with such provisions.
TITLE II--SUBACUTE CARE CONTINUUM AMENDMENTS OF 1994
SEC. 200. SHORT TITLE.
This title may be cited as the ``Subacute Care Continuum Act of
1994''.
SEC. 201. FINDINGS AND PURPOSES.
(a) This title is based on the following findings:
(1) The Federal Government currently bears excessive costs
in providing subacute care to patients for whom inpatient
hospital services are not medically necessary, in part because
of difficulties in placing such patients in nursing facilities.
(2) Nursing facilities are currently disadvantaged in
providing subacute care services because of the significant
cash flow burdens resulting from delays by the Health Care
Financing Administration in approving exceptions from the
medicare routine cost limits.
(3) Physicians are discouraged from facilitating the
placement of subacute care patients into skilled nursing
facilities because of the absence of equal reimbursement for
equivalent medically-necessary physician visits, regardless of
setting.
(4) Current restrictions on payment for respiratory therapy
provided in skilled nursing facilities discourage the admission
of subacute care patients who will require such therapy
services.
(5) The provision of subacute care by skilled nursing
facilities and nursing facilities can result in increased
efficiency and substantial cost savings to the medicare and
medicaid programs.
(b) The purposes of this title, among others, are to remove
existing and potential statutory and regulatory barriers to the
provision of quality, cost-effective subacute care by skilled nursing
facilities and nursing facilities under titles XVIII and XIX of the
Social Security Act, and to alleviate the present cash flow burdens for
skilled nursing facilities that provide such care.
SEC. 202. CREATION OF A ``LEVEL PLAYING FIELD'' TO ENCOURAGE THE
DEVELOPMENT OF SUBACUTE CARE PROVIDERS.
(a)(1) Section 1819(a) of the Social Security Act (42 U.S.C. 1395i-
3(a)) is amended by adding at the end the following new flush
sentences:
``Nothing in this title shall be construed to prohibit, or otherwise
limit, a skilled nursing facility from offering or providing subacute
care services. Any requirements relating to the provision of such
services as may be prescribed by the Secretary or the States shall not
include any term or condition forbidding, or otherwise limiting, such
facility from so qualifying based on its status as a skilled nursing
facility. As used in this subsection, a patient needing `subacute care
services' has had an acute event as a result of an illness, injury, or
exacerbation of a disease process; has a determined course of
treatment; does not require intensive diagnostic or invasive
procedures; and has a severe condition requiring an outcome-focused,
interdisciplinary approach utilizing a professional team to deliver
complex clinical interventions (medical or rehabilitative or both) and
a higher frequency of physical visits than traditional extended or
skilled nursing care.''.
(2) Section 1861(v)(1)(E) of the Social Security Act (42 U.S.C.
1395x(v) (1)(E)) is amended by inserting ``, including subacute care
services furnished by such facilities'' in the first sentence after
``services'' the second place it appears.
(3) Section 1888(c) of the Social Security Act (42 U.S.C.
1395yy(c)) is amended by inserting ``(including, but not limited to,
the provision of subacute care services by such facility)'' after
``case mix''.
(4) The amendments made by this subsection shall be effective on
the date of the enactment of this Act.
(b)(1) Section 1919(a) of the Social Security Act (42 U.S.C.
1396r(a)) is amended by inserting after the last sentence the following
new sentences: ``Nothing in this title shall be construed to prohibit,
or otherwise limit, a skilled nursing facility from offering or
providing subacute care services. Any requirements relating to the
provision of such services as may be prescribed by the Secretary or the
States shall not include any term or condition forbidding, or otherwise
limiting, such facility from so qualifying based on its status as a
skilled nursing facility. As used in this subsection, a patient needing
`subacute care services' has had an acute event as a result of an
illness, injury, or exacerbation of a disease process; has a determined
course of treatment; does not require intensive diagnostic or invasive
procedures; and has a severe condition requiring an outcome-focused,
interdisciplinary approach utilizing a professional team to deliver
complex clinical interventions (medical or rehabilitative or both) and
a higher frequency of physical visits than traditional nursing facility
care.''.
(2) Section 1902(a)(13)(A) of the Social Security Act (42 U.S.C.
1396a(a)(13(A)) is amended--
(A) by inserting ``, subacute care services furnished by a
nursing facility'' after ``nursing facility services'' ; and
(B) by inserting ``nursing facility furnishing subacute
care services,'' after ``the filing of uniform cost reports by
each hospital, nursing facility,''.
(3) The amendments made by this subsection shall be effective on
the date of the enactment of this Act.
SEC. 203. EXCEPTION PROCESS FROM MEDICARE ROUTINE COST LIMITS.
(a) Section 1888 of the Social Security Act (42 U.S.C. 1395yy) is
amended by adding at the end the following new subsection:
``(e) Effective January 1, 1996, regardless of the issuance of
final regulations, with respect to any limits on the reasonable costs
of providing subacute care services, the Secretary shall grant any
skilled nursing facility providing subacute care services an interim
exception within 90 days of submission of a request for such exception,
subject to such procedures and accompanied by such data and such
documentation as the Secretary shall determine by regulation. The
Secretary shall finalize such interim exception based upon settled data
at the end of the applicable cost reporting period. Upon finalization
of the exception request, the Secretary shall be responsible for
reimbursement of any underpayment, and the skilled nursing facility
shall be responsible for reimbursement of any overpayment within 30
days of such finalization, subject to such guarantees as the Secretary
shall determine by regulation.''.
(b) Notwithstanding any other provision of, or amendment made by
this title, a nursing facility that has obtained an exception from the
routine cost limits for providing subacute care under section 1888(e)
of the Social Security Act (as added by subsection (a)), before the
effective date specified by section 208(b), shall have the option of
continuing to receive payments in accordance with such exception for
not more than 12 months after such date.
SEC. 204. PHYSICIAN VISITS AND CONSULTATIONS FOR MEDICARE PATIENTS IN
SKILLED NURSING FACILITIES.
Section 1848(b) of the Social Security Act (42 U.S.C. 1395w-4(b))
is amended by--
(1) redesignating paragraphs (2) and (3) as paragraphs (3)
and (4), respectively; and
(2) inserting after paragraph (1) the following new
paragraph:
``(2) Treatment of physician visits to subacute care
patient in a skilled nursing facility.--Before January 1 of
each year (beginning in 1996 and regardless of the issuance of
final regulations), the Secretary shall establish by
regulation, fee schedules that establish amounts for physician
visits to a subacute care patient in a skilled nursing facility
that shall be the same as if the physician visited such
subacute care patient in a hospital.''
SEC. 205. COVERAGE OF RESPIRATORY THERAPY SERVICES IN SKILLED NURSING
FACILITIES UNDER THE MEDICARE PROGRAM.
(a) Section 1861(h)(3) of the Social Security Act (42 U.S.C.
1395x(h)) is amended by inserting ``respiratory,'' after
``occupational,''.
(b) Section 1861(v)(5)(A) of the Social Security Act (42 U.S.C.
1395x(v)(5)(A)) is amended by inserting ``(other than respiratory
therapy services)'' after ``other therapy services''.
SEC. 206. DRGS APPROPRIATE FOR SUBACUTE CARE IN SKILLED NURSING
FACILITIES.
(a) Not later than October 1, 1995, the Secretary shall review the
provision of subacute care by skilled nursing facilities and determine
which hospital DRGs are appropriate for skilled nursing facilities that
provide such care, and the appropriate hospitalizations and co-payments
for such DRGs.
(b) Not later than October 1, 1996, the Secretary shall publish a
list of applicable DRGs with appropriate hospitalizations and co-
payments, and rebase medicare payments for such groups to reflect the
lower cost of such care provided in skilled nursing facilities.
SEC. 207. SUBACUTE CARE SERVICES UNDER TITLE XIX.
(a) It is sense of the Congress that States are encouraged to
develop payment methodologies under section 1901(a)(13) of the Social
Security Act (42 U.S.C. 1396a(a)(13)), for nursing facilities which
provide subacute care to medicaid patients.
(b) It is the sense of the Congress that Federal funding should be
available for nursing facilities which provide subacute care to
medicaid patients.
SEC. 208. EFFECTIVE DATE.
(a) Except as otherwise provided under this title and subsection
(b), the provisions of, and the amendments made by, this title shall be
effective January 1, 1996.
(b) Subacute classifications established under the provisions of,
and amendments made by, this title shall be effective not later than
October 1, 1996.
TITLE III--LONG-TERM CARE TAX CLARIFICATION
SEC. 301. SHORT TITLE.
This title may be cited as the ``Private Long-Term Care Insurance
Incentive Amendments of 1994''.
SEC. 302. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.
(a) Chapter 79 of the Internal Revenue Code of 1986 (relating to
definitions) is amended by inserting after section 7702A the following
new section:
``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.
``(a) General Rule.--For purposes of this title--
``(1) a qualified long-term care insurance contract shall
be treated as an accident or health insurance contract,
``(2) any plan of an employer providing coverage of
qualified long-term care services shall be treated as an
accident or health plan with respect to such services,
``(3) amounts received under such a contract or plan with
respect to qualified long-term care services, including
payments described in subsection (b)(2)(A), shall be treated--
``(A) as amounts received for personal injuries or
sickness, and
``(B) for purposes of section 105(c), as amounts
received for the permanent loss of a function of the
body, and as amounts computed with reference to the
nature of the injury, and
``(4) payments described in subsection (b)(2)(A) shall be
treated as payments made with respect to qualified long-term
care services.
Paragraph (3)(B) shall not apply in the case of amounts attributable to
(and not in excess of) deductions allowed under section 213 (relating
to medical etc., expenses) for any prior taxable year and also shall
not apply for purposes of section 105(f).
``(b) Qualified Long-Term Care Insurance Contract.--
``(1) In general.--For purposes of this title, the term
`qualified long-term care insurance contract' means any
insurance contract if--
``(A) the only insurance protection provided under
such contract is coverage of qualified long-term care
services and benefits incidental to such coverage,
``(B) such contract or coverage is guaranteed
renewable, or in the case of a group certificate,
provides the insured individual with a basis for
continuation or conversion of coverage,
``(C) such contract does not have any cash
surrender value, and
``(D) all refunds of premiums, and all policyholder
dividends or similar amounts, under such contract are
to be applied as a reduction in future premiums or to
increase future benefits.
``(2) Special rules.--
``(A) Per diem, etc. payments permitted.--A
contract shall not fail to be treated as described in
paragraph (1)(A) by reason of payments being made on a
per diem or other periodic basis without regard to the
expenses incurred during the period to which the
payments relate.
``(B) Refunds of premiums.--Paragraph (1)(D) shall
not apply to any refund of premiums on surrender,
cancellation of the contract, or death of the
policyholder.
``(3) Treatment of coverage provided as part of a life
insurance contract.--Except as provided in regulations, in the
case of coverage of qualified long-term care services provided
as part of a life insurance contract--
``(A) Application of general requirements.--The
requirements of this section shall apply as if the
portion of the contract providing such coverage was a
separate contract.
``(B) Premiums and charges for qualified long-term
care coverage.--Premiums for coverage of qualified
long-term care services and charges against the life
insurance contract's cash surrender value (within the
meaning of section 7702(f)(2)(A)) for such coverage
shall be treated as premiums for the qualified long-
term care insurance contract.
``(C) Application of section 7702.--Subsection
(c)(2) of section 7702 (relating to the guideline
premium limitation) shall be applied by increasing the
guideline premium limitation with respect to the life
insurance contract, as of any date--
``(i) by the sum of any charges (but not
premiums) described in subparagraph (B) made to
that date under the contract, less
``(ii) any such charges the imposition of
which reduces the premiums paid for the
contract (within the meaning of section
7702(f)(1)).
``(D) Application of section 72(e)(4)(B).--
Subsection (e)(4)(B) of section 72 (relating to certain
amounts retained by the insurer) shall be applied as
including charges described in subparagraph (B).
``(E) Applicant.--No deduction shall be allowed
under subsection (a) of section 213 for premiums and
charges described in subparagraph (B).
For purposes of this paragraph, the term `portion' means only the terms
and benefits under a life insurance contract (whether provided by a
rider or addendum on, or other provision of, such contract) that are in
addition to the terms and benefits under the contract without regard to
the coverage of qualified long-term care services and benefits
incidental to such coverage.
``(c) Qualified Long-Term Care Services.--For purposes of this
section--
``(1) In general.--The term `qualified long-term care
services' means necessary diagnostic, preventive, therapeutic,
and rehabilitative services, and maintenance or personal care
services, which--
``(A) are required by an ill individual in a
qualified facility, and
``(B) are provided pursuant to a plan of care
prescribed by a licensed health care practitioner, or
``(C) are required by law or regulation.
``(2) Chronically ill individual.--
``(A) In general.--The term `chronically ill
individual' means any individual who has been certified
by a licensed health care practitioner as--
``(i)(I) being unable to perform (without
substantial assistance from another individual)
at least two activities of daily living (as
defined in subparagraph (B)), due to a loss of
functional capacity, or
``(II) having a level of disability similar
(as determined by the Secretary in consultation
with the Secretary of Health and Human
Services) to the level of disability described
in subclause (I), or
``(ii) having a similar level of disability
due to cognitive impairment.
``(B) Activities of daily living.--For purposes of
subparagraph (A), each of the following is an activity
of daily living:
``(i) Bathing.--The overall complex
behavior of getting water and cleansing the
whole body, including on the water for a bath,
shower, or sponge bath, getting to, in, and out
of a tub or shower, and washing and drying
oneself.
``(ii) Dressing.--The overall complex
behavior of getting clothes form closets and
drawers and then getting dressed.
``(iii) Toileting.--The act of going to the
toilet room for bowel and bladder function,
transferring on and off the toilet, cleaning
after elimination, and arranging clothes.
``(iv) Transfer.--The process of getting in
and out of bed or in and out of a chair or
wheelchair.
``(v) Eating.--The process of getting food
from a plate or its equivalent into the mouth.
``(vi) Continence.--The ability to
voluntarily control bowel and bladder function
and to maintain a reasonable level of personal
hygiene.
``(vii) State required.--Any other activity
of daily living as required by state law or
regulation which is not preempted by federal
law or regulation.
``(C) Number of activities of daily living.--A
qualified long-term care insurance contract may utilize
fewer than the number of activities of daily living in
paragraph (B).
``(D) Determination of additional activities of
daily living.--For purposes of subparagraph (A), the
Secretary, in consultation with the Secretary of Health
and Human Services, may determine by regulation that
additional activities constitute activities of daily
living. If the Secretary identifies additional
activities of daily living, the Secretary may also
increase the required number of activities of daily
living that an individual must be unable to perform to
satisfy the definition of `chronically ill individual'
when a contract utilizes activities of daily living
other than those specified in subparagraph (B).
Regardless of regulations issued by the Secretary,
long-term care contracts shall not fail to meet the
requirements of this paragraph if such contracts
utilize the activities of daily living specified in
subparagraph (B).
``(3) Qualified facility.--The term `qualified facility'
means--
``(A) a nursing, rehabilitative, hospice service,
or adult day care facility (including a hospital,
retirement home, nursing home, skilled nursing
facility, intermediate care facility, or similar
institution)--
``(i) which is licensed under State law, or
``(ii) which is a certified facility for
purposes of title XVIII or XIX of the Social
Security Act, or
``(B) an individual's home or other facility under
a plan of treatment developed by a licensed health care
practitioner.
``(4) Maintenance of personal care services.--The term
`maintenance or personal care services' means any care the
primary purpose of which is to provide needed assistance with
any of the activities of daily living described in paragraph
(2)(B). Such term may include such services as adult day care,
homemaker and chore services, hospice services, respite care,
and services required by law or regulation.
``(5) Licensed health care practitioner.--The term
`licensed health care practitioner' means any physician (as
defined in section 1861(r) of the Social Security Act) and any
registered professional nurse, licensed social worker, or other
individual who meets such requirements as may be prescribed by
the Secretary.
``(d) Special Rules.--
``(1) Continuation rules not to apply.--The health care
continuation rules contained in section 4980B (and contained in
part 6 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974 and in title II of the Public
Health Service Act) shall not apply to--
``(A) qualified long-term care insurance contracts,
or
``(B) plans described in subsection (a)(2).
``(2) Employer plans not treated as deferred compensation
plans.--For purposes of this title, a plan of an employer
providing coverage of qualified long-term care services shall
not be treated as a plan which provides for deferred
compensation by reason of providing such coverage.
``(3) Contracts covering parents and grandparents.--For
purposes of this title, if a qualified long-term care insurance
contract purchased by or provided to a taxpayer provides
coverage with respect to one or more of the taxpayer's parents
or grandparents (or, in the case of a joint return, of either
spouse), such coverage and all payments made pursuant to such
coverage shall be treated in the same manner as if the parents
or grandparents were dependents (as defined in section 152) of
the taxpayer. For purposes of this paragraph, the term `parent'
includes any stepmother or stepfather, the term `grandparent'
includes any stepgrandfather or stepgrandmother, and any
relationship that exists by virtue of a legal adoption shall be
recognized to the same extent as relationships by blood.
``(4) Welfare benefit rules not to apply.--For purposes of
subpart D of part I of subchapter D of chapter 1 (relating to
treatment of welfare benefit funds), qualified long-term care
services shall not be treated as a welfare benefit or a medical
benefit.
``(5) Deductibility.--For purposes of this title, no
payment of a premium for a long-term care insurance contract
shall fail to be deductible in whole or in part merely because
the contract provides for level annual payments.
``(e) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the requirements of this section,
including regulations to prevent the avoidance of this section by
providing qualified long-term care services under a life insurance
contract.''.
(b) The table of sections for chapter 79 of the Internal Revenue
Code of 1986 is amended by inserting after the item relating to section
7702A the following new item:
``Sec. 7702B. Treatment of long-term care insurance or plans.''.
SEC. 303. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL CARE.
(a) Paragraph (1) of section 213(d) of the Internal Revenue Code of
1986 (defining medical care) is amended by striking ``or'' at the end
of subparagraph (B), by redesignating subparagraph (C) as subparagraph
(D), and by inserting after subparagraph (B) the following new
subparagraph:
``(C) for qualified long-term care services (as
defined in section 7702B(c)), or''.
(b)(1) Subparagraph (D) of section 213(d)(1) of the Internal
Revenue Code of 1986 (as redesigned by subsection (a)) is amended by
striking ``subparagraphs (A) and (B)'' and inserting ``subparagraphs
(A), (B), and (C)''.
(2) Paragraph (6) of section 213(d) of such Code is amended--
(A) by striking ``subparagraphs (A) and (B)'' and inserting
``subparagraphs (A), (B), and (C)'', and
(B) by striking ``paragraph (1)(C)'' in subparagraph (A)
and inserting ``paragraph (1)(D)''.
(3) Paragraph (7) of section 213(d) of such Code is amended by
striking ``subparagraphs (A) and (B)'' and inserting ``subparagraphs
(A), (B), and (C)''.
SEC. 304. QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS PERMITTED TO BE
OFFERED IN CAFETERIA PLANS.
Paragraph (2) of section 125(d) of the Internal Revenue Code of
1986 (relating to the exclusion of deferred compensation) is amended by
adding at the end thereof the following new subparagraph:
``(D) Exception for long-term care insurance
contracts.--For purposes of subparagraph (A), a plan
shall not be treated as providing deferred compensation
by reason of providing any long-term care insurance
contract (as defined in section 7702B(b)) if--
``(i) the employee may elect to continue
the insurance upon cessation of participation
in the plan, and
``(ii) the amount paid or incurred during
any taxable year for such insurance does not
exceed the premium which would have been
payable for such year under a level premium
structure.''.
SEC. 305. INCLUSION IN INCOME OF EXCESSIVE LONG-TERM CARE BENEFITS.
(a) Part II of subchapter B of chapter 1 of the Internal Revenue
Code of 1986 (relating to items specifically included in gross income)
is amended by adding at the end the following new section:
``SEC. 91. EXCESSIVE LONG-TERM CARE BENEFITS.
``(a) General Rule.--Gross income for the taxable year of any
individual includes excessive long-term care benefits received by or
for the benefit of such individual during the taxable year.
``(b) Excessive Long-Term Care Benefits.--
``(1) In general.--For purposes of this section, the term
`excessive long-term care benefits' means the excess (if any)
of--
``(A) the aggregate amount from all policies which
is not includible in the gross income of the individual
for the taxable year by reason of the amendments made
by the Private Long-Term Care Insurance Incentive
Amendments of 1994 (determined without regard to this
section), over
``(B) the aggregate of $250 for each day during the
taxable year that such individual--
``(i) was a chronically ill individual (as
defined in section 7702B(c)(2)), and
``(ii) was confined to a qualified facility
(as defined in section 7702B(c)(3)).
``(2) Inflation adjustment.--In the case of any taxable
year beginning after 1995, the $250 in paragraph (1)(B) shall
be equal to the sum of--
``(A) the amount in effect under paragraph (1)(B)
for the preceding calendar year (after application of
this subparagraph), plus
``(B) the product of the amount referred to in
subclause (A) multiplied by the cost-of-living
adjustment for the calendar year of the amount under
subclause (A).
``(3) Cost-of-living adjustment.--For purposes of paragraph
(2), the cost-of-living adjustment for any calendar year is the
percentage (if any) by which the cost index under paragraph (4)
for the preceding calendar year exceeds such index for the
second preceding calendar year.
``(4) Cost index.--The Secretary, in consultation with the
Secretary of Health and Human Services, shall before January 1,
1996, establish a cost index to measure increases in the cost
of nursing home and similar facilities. The Secretary may from
time to time revise such index to the extent necessary to
accurately measure increase or decreases in such costs.
``(5) Rounding.--If any dollar amount determined under this
paragraph is not a multiple of $10, such dollar amount shall be
rounded to the nearest multiple of $10 (or, if such dollar
amount is a multiple of $5, such dollar amount shall be
increased to the next higher multiple of $10).
``(6) Computation of daily amount.--For purposes of this
section, the aggregate for each day may be determined by using
an average daily amount for the month, computed by dividing the
amount of benefits for the month by the number of days in the
month.''.
(b) The table of sections for part II of subchapter B of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new item:
``Sec. 91. Excessive long-term care benefits.''.
SEC. 306. TAX RESERVES FOR QUALIFIED LONG-TERM CARE INSURANCE
CONTRACTS.
(a) Subparagraph (A) of section 807(d)(3) of the Internal Revenue
Code of 1986 (relating to tax reserve methods) is amended by
redesigning clause (iv) as clause (v) and by inserting after clause
(iii) the following new clause:
``(iv) Qualified long-term care insurance
contracts.--In the case of any qualified long-
term care insurance contract (as defined in
section 7702B(c))--
``(I) the reserve method prescribed
by the National Association of
Insurance Commissioners which covers
such contract (as of the date of
issuance), or
``(II) if no reserve method has
been prescribed by the National
Association of Insurance Commissioners
which covers such contract, a 1-year
full preliminary term method.''.
(b)(1) Clause (iii) of section 807(d)(3)(A) of the Internal Revenue
Code of 1986 is amended by striking ``noncancellable accident and
health insurance contract,'' and inserting ``noncancellable accident
and health insurance contract (other than qualified long-term care
insurance contracts (as defined in section 7702B(c)),''.
(2) Clause (v) of section 807(d)(3)(A) of such Code (as
redesignated by subsection (a)) is amended by striking ``or (iii)'' and
inserting ``(iii), or (iv)''.
SEC. 307. EFFECTIVE DATE.
(a) Except as provided in subsection (b), the amendments made by
this title shall apply to policies issued in taxable years beginning
after the date of the enactment of this Act.
(b) Policies issued prior to or during the taxable year in which
this Act is enacted that met the requirements of the National
Association of Insurance Commissioners' Model Long-Term Care Act and
Regulation when the policy was issued shall be considered qualified
long-term care insurance and the services provided under such policies
shall be considered qualified long-term care services.
TITLE IV--LONG-TERM CARE INSURANCE STANDARDS
SEC. 400. SHORT TITLE.
This title may be cited as the ``Long-Term Care Insurance Standards
Amendments of 1994''.
SEC. 401. NATIONAL LONG-TERM CARE INSURANCE ADVISORY COUNCIL.
(a) Congress shall appoint an advisory board to be known as the
National Long-Term Care Insurance Advisory Council (hereinafter
referred to as the ``Advisory Council'').
(b) The Advisory Council shall consist of 5 members, each of whom
has substantial expertise in matters relating to the provision and
regulation of long-term care insurance or long-term care financing and
delivery systems.
(c) The Advisory Council shall--
(1) provide advice, recommendations, and assistance to
Congress on matters relating to long-term care insurance as
specified in this section and as otherwise required by the
Secretary;
(2) collect, analyze, and disseminate information relating
to long-term care insurance in order to increase the
understanding of insurers, providers, consumers, and regulatory
bodies of the issues relating to, and to facilitate
improvements in, such insurance;
(3) develop for congressional consideration proposed
models, standards, requirements, and procedures relating to
long-term care insurance, as appropriate; and
(4) monitor the development of the long-term care insurance
market and advise Congress concerning the need for statutory
changes.
(d) In order to carry out its responsibilities under this section,
the Advisory Council is authorized to--
(1) consult individuals and public and private entities
with experience and expertise in matters relating to long-term
care insurance;
(2) conduct meetings and hold hearings;
(3) conduct research (either directly or under grant or
contract);
(4) collect, analyze, publish, and disseminate data and
information (either directly or under grant or contract); and
(5) develop model formats and procedures for insurance
products; and develop proposed standards, rules and procedures
for regulatory programs, as appropriate.
(e) There are authorized to be appropriated, for activities of the
Advisory Council, $1,500,000 for fiscal year 1995, and each subsequent
year.
SEC. 402. POLICY REQUIREMENTS.
(a) Section 7702B of the Internal Revenue Code of 1986 (as added by
section 302) is amended by inserting after subsection (e) the following
new subsection:
``(f) Consumer Protection Provisions.--
``(1) In general.--The requirements of this subsection are
met with respect to any contract if any long-term care
insurance policy issued under the contract meets--
``(A) the requirements of the model regulation and
model Act described in paragraph (2),
``(B) the disclosure requirement of paragraph (3),
``(C) the requirements relating to
nonforfeitability under paragraph (4), and
``(D) the requirements relating to rate
stabilization under the paragraph (5),
``(2) Requirements of model regulation and act.--
``(A) In general.--The requirements of this
paragraph are met with respect to any policy if such
policy meets--
``(i) Model regulation.--The following
requirements of the model regulation:
``(I) Section 7A (relating to
guaranteed renewal or
noncancellability), and the
requirements of section 6B of the model
Act relating to such section 7A.
``(II) Section 7B (relating to
prohibitions on limitations and
exclusions).
``(III) Section 7C (relating to
extension of benefits).
``(IV) Section 7D (relating to
continuation or conversion of
coverage).
``(V) Section 7E (relating to
discontinuance and replacement of
policies).
``(VI) Section 8 (relating to
unintentional lapse).
``(VII) Section 9 (relating to
disclosure), other than Section 9F
thereof.
``(VIII) Section 10 (relating to
prohibitions against post-claims
underwriting).
``(IX) Section 11 (relating to
minimum standards).
``(X) Section 12 (relating to
requirement to offer inflation
protection), except that any
requirement for a signature on a
rejection of inflation protection shall
permit the signature to be on an
application or on a separate form.
``(XI) Section 23 (relating to
prohibition against preexisting
conditions and probationary periods in
replacement policies or certificates).
``(ii) Model act.--The following
requirements of the model Act:
``(I) Section 6C (relating to
preexisting conditions).
``(II) Section 6D (relating to
prior hospitalization).
``(B) Definitions.--For purposes of this
paragraph--
``(i) Model provisions.--The terms `model
regulation' and `model Act' mean the long-term
care insurance model regulation, and the long-
term care insurance model Act, respectively,
promulgated by the National Association of
Insurance Commissioners (as adopted in January
of 1993).
``(ii) Coordination.--Any provision of the
model regulation or model Act listed under
clause (i) or (ii) of subparagraph (A) shall be
treated as including any other provision of
such regulation or Act necessary to implement
the provision.
``(3) Tax disclosure requirement.--The requirement of this
paragraph is met with respect to any policy if such policy
meets the requirements of section 4980D(d)(1).
``(4) Nonforfeiture requirements.--
``(A) In general.--The requirements of this
paragraph are met with respect to any level premium
long-term care insurance policy if the issuer of such
policy offers to the policyholder, including any group
policyholder, a nonforfeiture provision.
``(B) Requirements of provision.--The nonforfeiture
provision required under subparagraph (A) shall meet
the following requirements:
``(i) The nonforfeiture provision shall be
appropriate captioned.
``(ii) The nonforfeiture provision shall
provide for a benefit available in the event of
a default in the payment of any premiums and
the amount of the benefit may be adjusted
subsequent to being initially granted only as
necessary to reflect changes in claims,
persistency, and interest as reflected in
changes in rates for premium paying policies
approved by the Secretary for the same policy
form.
``(iii) The nonforfeiture provision shall
provide for a benefit based on an equitable
schedule where benefits returned are equal to
the asset share remaining in the policy and
which assures that persisting policyholders are
not required to subsidize the cost of insurance
premiums for policyholders who terminate
coverage. The criteria for determining the
actuarial value of this benefit shall be
developed by the National Long-Term Care
Insurance Advisory Committee in consultation
with the American Society of Actuaries and the
National Association of Insurance Commissioners
and shall be approved by Congress.
``(5) Rate stabilization.--
``(A) In general.--The requirements of this
paragraph are met with respect to any long-term care
insurance policy, including any group master policy,
if--
``(i) such policy contains the minimum rate
guarantees specified in subparagraph (B), and
``(ii) the issuer of such policy meets the
requirements specified in subparagraph (C).
``(B) Minimum rate guarantees.--The minimum rate
guarantees specified in this subparagraph are as
follows:
``(i) Rates under the policy shall be
guaranteed for a period of at least 3 years
from the date of issue of the policy.
``(ii) After the expiration of the 3-year
period required under clause (i), any rate
increase shall be guaranteed for a period of at
least 2 years from the effective date of such
rate increase.
``(iii) In the case of any individual age
75 or older who has maintained coverage under a
long-term care insurance policy for 10 years,
rate increase under such policy shall not
exceed 10 percent in any 12-month period.
``(C) Increases in premiums.--The requirements
specified in this subparagraph are as follows:
``(i) In general.--If an issuer of any
long-term care insurance policy, including any
group master policy, plans to increase the
premium rates for a policy, such issuer shall,
at least 90 days before the effective date of
the rate increase, offer to each individual
policyholder under such policy the option to
remain insured under the policy at a reduced
level of benefits which maintains the premium
rate at the rate in effect on the day before
the effective date of the rate increase.
``(ii) Increase of more than 50 percent.--
``(I) In general.--If an issuer of
any long-term care insurance policy,
including any group master policy,
increases premium rates for a policy by
more than 50 percent in any 3-year
period--
``(aa) in the case of a
group master long-term care
insurance policy, the issuer
shall discontinue issuing all
group master long-term care
insurance policies in any State
in which the issuer issues such
policy for a period of 2 years
from the effective date of such
premium increase; and
``(bb) in the case of an
individual long-term care
insurance policy, the issuer
shall discontinue issuing all
individual long-term care
policies in any State in which
the issuer issues such policy
for a period of 2 years from
the effective date of such
premium increase.
``(II) Applicability.--Subclause
(I) shall apply to any issuer of long-
term care insurance policies or any
other person that purchases or
otherwise acquires any long-term care
insurance policies from another issuer
or person.
``(D) Modifications or waivers of requirements.--
The Secretary may modify or waive any of the
requirements under this paragraph if--
``(i) such requirements will adversely
affect an issuer's solvency;
``(ii) such modification or waiver is
required for the issuer to meet other State or
Federal requirements;
``(iii) medical developments, new disabling
diseases, changes in long-term care delivery,
or a new method of financing long-term care
will result in changes to mortality and
morbidity patterns or assumptions;
``(iv) judicial interpretations of a
policy's benefit features results in unintended
claim liabilities; or
``(v) in the case of a purchase or other
acquisition of long-term care insurance
policies of an issuer or other person, the
continued sale of other long-term care
insurance policies by the purchasing issuer or
person is in the best interest of individual
consumers.
``(6) Long-term care insurance policy defined.--For
purposes of this subsection, the term `long-term care insurance
policy' has the meaning given such term by section 4980C(e).''.
SEC. 403. ADDITIONAL REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE
INSURANCE POLICIES.
(a) Chapter 43 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
``SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG-TERM CARE INSURANCE
POLICIES.
``(a) General Rule.--There is hereby imposed on any person failing
to meet the requirements of subsection (c) or (d) a tax in the amount
determined under subsection (b).
``(b) Amount of Tax.--
``(1) In general.--For purposes of subsection (a), the
amount of the tax shall not exceed the greater of--
``(A) 3 times the amount of any commissions paid
for each policy involved in the violation, or
``(B) $10,000.
``(2) Waiver.--In the case of a failure which is due to
reasonable cause and not to willful neglect, the Secretary may
waive part or all of the tax imposed by subsection (a) to the
extent that payment of the tax would be excessive relative to
the failure involved.
``(c) Additional Responsibilities.--The requirements of this
subjection are as follows:
``(1) Requirements of model provisions.--
``(A) Model regulation.--The following requirements
of the model regulation must be met:
``(i) Section 13 (relating to application
forms and replacement coverage).
``(ii) Section 14 (relating to reporting
requirements), except that the issuer shall
also report at least annually the number of
claims denied during the reporting period for
each class of business (expended as a
percentage of claims denied), other than claims
denied for failure to meet the waiving period
or because of any applicable pre-existing
condition.
``(iii) Section 20 (relating to filing
requirements for marketing).
``(iv) Section 21 (relating to standards
for marketing), including inaccurate completion
of medical histories, other than section
21C(1), 21(C)(3) and 21C(6) thereof, except
that--
``(I) in addition to such
requirements, no person shall in
selling or offering to sell a long-term
care insurance policy, misrepresent a
material fact;
``(II) no such requirements shall
include a requirement to inquire or
identify whether a prospective
applicant or enrollee for long-term
care insurance has accident and
sickness insurance; and
``(III) the association shall
disclose in any long-term care
insurance solicitation the amount of
compensation that the association
receives from endorsement or sale of
the policy or certificate to its
members, expressed as a percentage of
annual premium generated by such
policies.
``(v) Section 22 (relating to
appropriateness of recommended purchase).
``(vi) Section 24 (relating to standard
format outline of coverage).
``(vii) Section 25 (relating to requirement
to deliver shopper's guide).
``(B) Model act.--The following requirements of the
model Act must be met:
``(i) Section 6F (relating to right to
return), except that such section shall also
apply to denials of applications and any refund
shall be made within 30 days of the return or
denial.
``(ii) Section 6G (relating to outline of
coverage).
``(iii) Section 6H (relating to
requirements for certificates under group
plans).
``(iv) Section 6I (relating to policy
summary).
``(v) Section 6J (relating to monthly
reports on accelerated death benefits).
``(vi) Section 7 (relating to
incontestability period).
``(C) Definitions.--For purposes of this paragraph,
the terms `model regulation' and `model Act' have the
meanings given such terms by section 7702B(f)(2)(B).
``(2) Delivery of policy.--If an application for a long-
term care insurance policy (or for a certificate under a group
long-term care insurance policy) is approved, the issuer shall
deliver to the applicant (or policyholder or certificate-
holder) the policy (or certificate) of insurance not later than
30 days after the date of the approval.
``(3) Information on denials of claims.--If a claim under a
long-term care insurance policy is denied, the issuer shall,
within 60 days of the date of a written request by the
policyholder or certificate-holder (or representative)--
``(A) provide a written explanation of the reasons
for the denial, and
``(B) make available all information directly
relating to such denial except in cases where such
issuer would be prohibited from providing information
regarding claims denial under confidentiality statues
or other state or Federal laws.
``(d) Disclosure.--The requirements of this subsection are met if
either of the following statements, whichever is applicable, is
prominently displayed on the front page of any long-term care insurance
policy and in the outline of coverage required under subsection
(c)(1)(B)(ii):
``(1) A statement that: `This policy is intended to be a
qualified long-term care insurance contract under section
7702B(b) of the Internal Revenue Code of 1986.'.
``(2) A statement that: `This policy is not intended to be
a qualified long-term care insurance contract under section
7702B(b) of the Internal Revenue Code of 1986.'.
``(e) Long-Term Care Insurance Policy Defined.--For purposes of
this section, the term `long-term care insurance policy' means any
insurance policy or rider advertised, marketed, offered or designed to
provide coverage for not less than 12 consecutive months for each
covered person on an expense incurred, indemnity, prepaid or other
basis; for one or more necessary diagnostic, preventive, therapeutic,
rehabilitative, maintenance or personal care services, provided in a
setting other than an acute care unit of a hospital. Such term includes
group and individual annuities and life insurance policies or riders
which provide directly or which supplement long-term care insurance.
Such term also includes a policy or rider which provides for payment of
benefits based upon cognitive impairment or the loss of functional
capacity. Long-term care insurance may be issued by insurers; fraternal
benefit societies; nonprofit health, hospital and medical service
corporations; prepaid health plans; health maintenance organizations or
any similar organization to the extent such organizations are otherwise
authorized to issue life or health insurance. Long-term care insurance
shall not include any insurance policy which is offered primarily to
provide basic medicare supplement coverage, basic hospital expense
coverage, basic medical-surgical expense coverage, hospital confinement
indemnity coverage, major medical expense coverage, disability income
or related asset-protection coverage, accident only coverage, specified
disease or specified accident coverage, or limited benefit health
coverage. With regard to life insurance, this term does not include
life insurance policies which accelerate the death benefit specifically
for one or more of the qualifying events of terminal illness, medical
conditions requiring extraordinary medical intervention, or permanent
institutional confinement, and which provide the option of a lump-sum
payment for those benefits and in which neither the benefits nor the
eligibility for the benefits is conditioned upon the receipt of long-
term care.''.
(b) The table of sections for chapter 43 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new item:
``Sec. 4980C. Failure to meet requirements for long-term care insurance
policies.''.
SEC. 404. RELATION TO STATE LAW.
Insurance policies which have been deemed in compliance with the
requirements of this title and the Internal Revenue Code of 1986 (as
amended by this title) by the State Insurance Commissioner in the State
of domicile shall be deemed approved for sale in any other State. No
State may prohibit an insurance carrier from selling outside the State
of domicile long-term care insurance policies which have been approved
in the State of domicile.
SEC. 405. UNIFORM LANGUAGE AND DEFINITIONS.
(a) The Advisory Council shall develop recommendations for the use
of uniform language and definitions in long-term care insurance
policies (as defined in section 4980C(e) of the Internal Revenue Code
of 1986) for approval by Congress.
(b) Standards under subsection (a) may permit the use of nonuniform
language to the extent required to take into account differences among
States in the licensing of nursing facilities and other providers of
long-term care.
SEC. 406. EFFECTIVE DATES.
(a) The amendments made by section 402 shall apply to contracts
issued in taxable years beginning after the date of the enactment of
this Act.
(b) The amendments made by section 402 shall apply to actions taken
in taxable years beginning after the date of the enactment of this Act.
TITLE V--FINANCIAL ELIGIBILITY STANDARDS
SEC. 501. REVISIONS TO FINANCIAL ELIGIBILITY PROVISIONS.
(a) Section 1902(a) of the Social Security Act (42 U.S.C. 1396a(a))
is amended--
(1) in paragraph (17)(C), by inserting ``subject to
subsection (z),'' before ``provide'', and
(2) by adding at the end the following new subsection:
``(z)(1) For purposes of subsection (a)(17)(C), notwithstanding any
other provision of this title, the resources of an individual, and the
spouse of such individual, which shall be used to determine financial
eligibility for nursing facility services under this title shall
include--
``(A) all of the real property owned by the individual,
including but not limited to, the individual's primary
residence;
``(B) all personal property of the individual, including
but not limited to, any automobiles owned by the individual;
and
``(C) all liquid assets held by the individual, including
but not limited to, the asset value of any trust established by
such individual.
``(2)(A) An individual shall not be eligible for nursing facility
services under this title if the total value of the resources owned by
the individual (individually or jointly with his or her spouse, if any)
exceeds the value of the median price of a home in the geographic
region in which such individual resides.
``(B) For purposes of subparagraph (A), the Secretary shall
establish a valuation system for single family homes in appropriate
geographic regions, taking appropriate account of the variation in
values between urban and rural areas. The valuation system established
by the Secretary shall be updated annually.
``(C) Subparagraph (A) shall apply for a couple in the same manner
as such subparagraph applies for an individual where one member of the
couple applies for nursing facility services under this title.
``(D) For purposes of determining the total value of resources in
paragraph (A), the value of resources held jointly with the
individual's spouse shall be considered available to the individual
applying for medical assistance as determined under section 1924(d)(2).
``(3) No provision under this subsection shall affect the community
spouse protections contained in section 1924.
``(4) The Secretary shall provide grants to States for
demonstration projects to investigate the coordination of private long-
term care insurance benefits and financial eligibility requirements
under this title. Such demonstration projects shall include, but not be
limited to, investigations of--
``(A) a State policy which subtracts the amounts paid by an
individual for private long-term care insurance from the
individual's resources which are counted to determine financial
eligibility; and
``(B) a State policy which provides purchasers of private
long-term care insurance with impoverishment protections by
using medicaid as reinsurance.
``(5) Eligibility requirements under paragraphs (1) through (4) of
this subsection shall not apply to services provided under this title
other than nursing facility services.''.
SEC. 502. EFFECTIVE DATE.
The amendments made by this title shall be effective January 1,
1995.
TITLE VI--ESTABLISHMENT OF PROGRAM FOR HOME AND COMMUNITY-BASED
SERVICES FOR CERTAIN INDIVIDUALS WITH DISABILITIES
SEC. 600. SHORT TITLE.
This title may be cited as the ``Home and Community-Based Services
for Individuals with Disabilities Program Amendments of 1994''.
SEC. 601. ESTABLISHMENT OF PROGRAM.
(a) Establishment of Program.--Title XIX of the Social Security Act
(42 U.S.C. 1396 et seq.) is amended by redesignating section 1931 as
section 1932 and by inserting after section 1931 the following new
section:
``home and community-based services for individuals with disabilities.
``Sec. 1932. (a) In General.--There is hereby established a program
under which States will be required to provide for home and community-
based services as described in this section on behalf of individuals
with disabilities who meet the requirements described in this section.
This program is established notwithstanding any other provisions of
this title, and such services must be provided to all such individuals
by a State that has an approved State plan under this title. The State
shall not have responsibility to cover such services under this title
to the extent that such services are provided to an individual under
any other public programs. All provisions of this title shall be
applicable to the program established under this section except as are
inconsistent with this section.
``(b) Eligibility.--
``(1) Individuals with disabilities defined.--In this
section, the term `individual with disabilities' means any
individual who falls within one or both of the following 2
categories of individuals:
``(A) Individuals requiring help with activities of
daily living.--An individual of any age who--
``(i) requires hands-on or standby
assistance, supervision, or cueing (as defined
in regulations) to perform 3 or more activities
of daily living (as defined in paragraph (2)),
and
``(ii) is expected to require such
assistance, supervision, or cueing over a
period of at least 100 days.
``(B) Individuals with moderate cognitive or mental
impairment.--An individual of any age--
``(i) whose score, on a standard mental
status protocol (or protocols) appropriate for
measuring the individual's particular condition
specified by the Secretary, indicates either
moderate cognitive impairment or moderate
mental impairment, or both;
``(ii) who displays symptoms of one or more
serious behavioral problems (that is on a list
of such problems specified by the Secretary)
which create a need for supervision to prevent
harm to self or others; and
``(iii) who is expected to meet the
conditions of clauses (i) or (ii) over a period
of at least 100 days.
``(2) Activity of daily living defined.--In this
section, the term `activity of daily living' means any
of the following: eating, toileting (dressing and
bathing), transferring, and mobility.
``(c) Screening.--
``(1) Initial screening.--The State shall provide for an
initial screening of all individuals who appear to have some
reasonable likelihood of being an individual with disabilities.
Such a screening may be conducted by a qualified case manager,
or by any other person or entity designated by the State under
criteria specified by the Secretary. Such assessment shall be
conducted using a uniform protocol specified by the Secretary.
A State may specify the collection of addition information, or
an alternative protocol, if approved in advance by the
Secretary. Such assessment shall include, at a minimum an
assessment of the individual's--
``(A) ability or inability to perform any
activities of daily living;
``(B) health status;
``(C) mental status;
``(D) current living arrangement; and
``(E) use of formal and informal long-term care
support systems.
``(2) Periodic reassessment.--For any individual who
receives services under this program, the State shall arrange
for a reassessment of the individual's need for services under
this section after a significant change in an individual's
condition that may affect the individual's need for such
services, within 6 months of the most recent assessment, or for
such longer period in such cases as a significant change in an
individual's condition that may affect such determination is
unlikely.
``(d) Care Plan Development.--
``(1) In general.--The State shall assign a qualified case
manager to any individual who qualifies for coverage under this
section. The qualified case manager shall arrange for the
development of, or develop, an individualized written plan of
care based upon the comprehensive assessment. The care plan
shall be developed under any criteria that may be specified by
the State based upon any criteria that the Secretary may
specify. At a minimum, such plan shall identify--
``(A) the long-term problems and needs of the
individual;
``(B) the mix of formal and informal services and
support systems that are available to meet the long-
term care and service needs of the individual;
``(C) goals for the individual which shall be
measurable to the extent practicable;
``(D) the appropriate services necessary to meet
such needs; and
``(E) the manner in which covered services will be
provided.
``(2) Provision of services.--
``(A) Covered services.--The qualified case
manager, in consultation with the individual, the
individual's family and the individual's primary
medical care provider, shall arrange for, or provide,
the appropriate covered services in a cost-effective
manner, consistent with obtaining quality care. The
qualified case manager also shall assist in making the
necessary arrangements for the delivery of such
services and the implementation of the care plan.
``(B) Non-covered services.--The State may require
the qualified case manager to assist the individual in
obtaining non-covered services, at the individual's own
expense, or through other programs that may be
available. Nothing in this section shall be construed
to make the State responsible for payment under this
section for any services that are not covered services,
as defined in subsection (f)(1), or from prohibiting
the individual, or other individuals, from paying for
non-covered services or services in excess of the
amount or type approved by the case manager.
``(C) Individual choice.--The acceptance of
benefits under this provision is a voluntary choice of
the individual or his or her representative. Nothing in
this section shall be construed to require an
individual to accept the services available under this
section, or to accept benefits under this section
instead of entering a nursing facility, skilled nursing
facility, or intermediate care facility for the
mentally retarded. An individual shall not be denied
other covered services under this section solely
because he or she refuses to accept one such covered
service, unless the failure to accept that one covered
service would vitiate the effectiveness of the other
covered services, and no cost-effective alternative
acceptable to the individual is reasonably available.
To the extent possible, the case manager shall follow
the choice of an individual with disabilities regarding
which covered services to receive and the providers who
will provide such services.
``(3) Coordination.--The plan shall specify how the plan
will integrate services provided under this section with
services provided under titles V and XX of this Act and the
Housing and Urban Development Act, programs under the Older
Americans Act of 1965, and any other Federal or State programs
that provide services or assistance targeted to the aged and
individuals with disabilities.
``(4) Involvement of individuals.--The qualified case
manager shall be responsible for arranging for the involvement
of appropriate persons in the comprehensive assessment and
development of the plan of care. In addition, the plan of care
shall be developed and implemented in close consultation with
the individual and individual's family.
``(5) Care plan monitoring.--The qualified case manager
shall monitor the delivery of services to the individual, the
qualify of care provided, and the status of individual.
Periodic reassessments of the status and needs of the
individual, and revisions of the care plan, shall be made by
the qualified case manager as appropriate. Such reassessments
shall be conducted not less than every 6 months. If the
individual is no longer eligible for benefits as a result of
improved health conditions or death, the qualified case
manager, in consultation with the individual's primary medical
care provider, shall discharge the case.
``(6) Qualified case manager.--In this section, the term
`qualified case manager' means a person or entity which--
``(A) provides case management services to an
individual who is eligible for home and community-based
services;
``(B) is not a relative of the individual receiving
such case management services;
``(C) has experience in assessing individuals'
functional and cognitive impairment;
``(D) has experience or has been trained in
establishing, and in periodically reviewing and
revising, individual community care plans, and in the
provision of case management services to individuals
who are eligible for home and community-based services
under this section;
``(E) completes the individual care plan in a
timely manner and reviews and discusses new and revised
individual care plans with the individual or such
individual's representative or both; and
``(F) meets such other standards established by the
Secretary or the State which may include standards
which assure--
``(i) the quality of the case management
services; and
``(ii) that individuals whose home and
community-based services such person or entity
manages are not at risk of financial
exploitation due to such a manager.
``(7) Relative defined.--In this section, the term
`relative' means an individual bearing a relationship to
another individual which is described in paragraphs (1) through
(8) of section 152(a) of the Internal Revenue Code of 1986.
``(e) Types of Providers and Requirements for Participation.--
``(1) In general.--The State plan shall specify--
``(A) the types of services eligible to participate
in the program under the plan; and
``(B) any requirements for participation applicable
to each type of service provider.
``(2) Service provider defined.--In this section, the term
`service provider' means a provider who is licensed under State
law or who meets other criteria as the Secretary or State may
specify.
``(f) Covered Services.--
``(1) In general.--In this section, the term `covered
services' includes--
``(A) case management;
``(B) adult day services;
``(C) habilitation and rehabilitation services;
``(D) home health care;
``(E) respite services; and
``(F) hospice services.
``(2) Delivery of services.--Subject to the limits in
subsection (g), covered services may be delivered in an
individual's home, a range of community residential
arrangements, or outside the home.
``(3) Amount, scope, and duration.--In establishing the
amount, scope, and duration of services required to be
provided, covered services shall be treated as required
services under this title.
``(g) Exclusions and Limitations.--
``(1) In general.--The following are specifically excluded
from coverage under this section:
``(A) Room and board.
``(B) Items or services otherwise covered to the
extent that such items or services are covered under an
insurance plan or program other than a State health
program.
``(C) Services provided to an individual who
otherwise would be institutionalized in a nursing
facility or intermediate care facility for the mentally
retarded, unless the State, or if delegated, the
qualified case manager reasonably estimates (under
methods specified by the Secretary) that the cost of
covered services under this section would be lower than
if the individual were so institutionalized.
``(D) Services specified in the plan of care which
are not specified as covered services under subsection
(f)(1).
``(2) Taking into account informal care.--A State plan may
take into account, in determining the amount and array of
services made available to covered individuals with
disabilities, the availability of informal care.
``(h) Maintenance of Effort.--The State plan must provide
assurances that, in the case of an individual receiving medical
assistance for home and community-based services under this title as of
the date of the enactment of this section, the State will continue to
make available (either under this title or otherwise) to such
individual an appropriate level of assistance for home and community-
based services, taking into account the level of assistance provided as
of such date and the individual's need for home and community-based
services.
``(i) Quality Assurance and Safeguards.--
``(1) Quality assurance.--The State shall ensure and
monitor the quality of services, including--
``(A) safeguarding the health and safety of
individuals with disabilities;
``(B) establishing minimum standards for care
managers and providers and enforcing those standards,
``(C) establishing the minimum competency
requirements for provider employees who provide direct
services under this section and how the competency of
such employees will be enforced;
``(D) obtaining meaningful consumer input,
including consumer surveys that measure the extent to
which participants receive the services described in
the plan of care and participant satisfaction with such
services;
``(E) participation in quality assurance
activities; and
``(F) specifying the role of the long-term care
ombudsman (under the Older Americans Act of 1965) and
the Protection and Advocacy Agency (under the
Developmental Disabilities Assistance and Bill of
Rights Act) in assuring quality of services and
protecting the rights of individuals with disabilities.
``(2) Safeguards.--
``(A) Confidentiality.--The State shall provide
safeguards which restrict the use or disclosure of
information concerning applicants and beneficiaries to
purposes directly connected with the administration of
the program.
``(B) Safeguards against abuse.--The State shall
provide safeguards against physical, emotional, or
financial abuse or exploitation in the provision of
care management and covered services.
``(j) Provider Reimbursement.--
``(1) Payment methods.--The State shall specify the payment
methods to be used to reimburse providers and case managers for
services furnished under the plan. Such methods may include
reimbursement on a fee-for-service basis, prepayment on a
capitation basis, or a combination of these methods. The State,
if it chooses, may provide the case manager with authority to
negotiate rates with individual providers.
``(2) Payment rates.--The State shall specify the methods
and criteria to be used to set payment rates for services
furnished under the plan. In addition to any other
requirements, such payments must be sufficient to ensure that
the requirements of 1902(a)(30)(A) are satisfied.
``(3) Payment in full.--Except as specified in subsection
(d)(2)(B), the State shall restrict payment for covered
services to those providers that agree to accept the payment
under the plan (at rates established pursuant to subparagraph
(2)) as payment in full for services furnished under this
section.
``(k) Approval of State Plan Amendments.--Each state shall take
whatever action is necessary to have an amendment to its State plan
under this title approved by October 1, 1996, that implements this
section for that State not later than October 1, 1997, except that
where an Act of the State legislature is necessary to effectuate such
State plan amendment and said legislature is not in session as of the
date of the enactment of this section, the State shall have said
amendment approved not later than 6 months after the commencement of
the session of its legislature that begins immediately subsequent to
such date of enactment, if such date is later than October 1, 1996.''.
SEC. 602. INCREASED RESOURCE DISREGARDS FOR NURSING FACILITY RESIDENTS.
Section 1902(a)(10) of the Social Security Act (42 U.S.C.
1396a(a)(10)) is amended--
(1) by striking ``and'' at the end of subparagraph (F); and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G) that, in determining the eligibility of any
individual who is an inpatient in a nursing facility or
intermediate care facility for the mentally retarded,
in the case of an unmarried individual, the first
$12,000 of resources shall be disregarded.''.
TITLE VII--ASSET TRANSFERS
SEC. 701. TRANSFERS OF ASSETS.
Section 1917(c)(1)(B)(i) of the Social Security Act (42 U.S.C.
1396p(c)(1)(B)(i)) is amended to read as follows:
``(B)(i) The look-back date specified in this subparagraph
is a date that is 60 months before the date specified in clause
(ii).''.
SEC. 702. TREATMENT OF CERTAIN TRUSTS.
Section 1917(c)(2) of the Social Security Act (42 U.S.C.
1396p(c)(2)) is amended by adding at the end the following new flush
sentences:
``In order for the income or assets of an income cap trust, nonprofit
asset trust or other such trust arrangement to be exempt under this
paragraph, the trust must be irrevocable and all amounts remaining in
the beneficiary's account must be paid to the State upon the death of
the beneficiary. For purposes of this section, the term `trust' shall
not include a personal service contract annuity for a family member
within the 60-month period even if such transfer is for fair market
value. The Secretary shall prohibit, by regulation, the use of family
limited partnerships to convert available assets into an exempt status;
purchases of interests in third-party assets for the purpose of
rendering otherwise includable assets unavailable, and not subject to
liens; and purchase of care services agreements for past services by
family members to reduce countable assets.''.
SEC. 703. EFFECTIVE DATE.
The amendments made by this title shall be effective January 1,
1995.
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