HR 5898 IH
101st CONGRESS
2d Session
 H. R. 5898
To amend the Internal Revenue Code of 1986 to provide incentives for the
purchase of long-term care insurance, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
October 22, 1990
Mr. RITTER introduced the following bill; which was jointly referred to the
Committees on Ways and Means and Energy and Commerce
A BILL
To amend the Internal Revenue Code of 1986 to provide incentives for the
purchase of long-term care insurance, 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; ETC.
  (a) SHORT TITLE- This Act may be cited as the `Long-Term Care Incentives
  Act of 1990'.
  (b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided,
  whenever in this Act an amendment or repeal is expressed in terms of an
  amendment to, or repeal of, a section or other provision, the reference
  shall be considered to be made to a section or other provision of the
  Internal Revenue Code of 1986.
  (c) TABLE OF CONTENTS-
  Sec. 1. Short title; etc.
TITLE I--TAX TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE POLICIES
Sec. 101. Definitions of qualified long-term care insurance and premiums.
Sec. 102. Treatment of qualified long-term care insurance as accident and
health insurance for purposes of taxation of insurance companies.
Sec. 103. Treatment of accelerated death benefits under life insurance
contracts.
TITLE II--TAX INCENTIVES FOR PURCHASE OF QUALIFIED LONG-TERM CARE INSURANCE
Sec. 201. Credit for qualified long-term care premiums.
Sec. 202. Deduction for expenses relating to qualified long-term care.
Sec. 203. Exclusion from gross income of benefits received under qualified
long-term care insurance.
Sec. 204. Employer deduction for contributions made for long-term care
insurance.
Sec. 205. Inclusion of qualified long-term care insurance in cafeteria plans.
Sec. 206. Exclusion from gross income for amounts withdrawn from individual
retirement plans and section 401(k) plans for qualified long-term care
premiums and expenses.
Sec. 207. Exclusion from gross income for amounts received on cancellation
of life insurance policies and used for qualified long-term care insurance.
Sec. 208. Use of gain from sale of principal residence for purchase of
qualified long-term health care insurance.
TITLE III--MEDICAID AMENDMENTS
Sec. 301. Expansion of medicaid eligibility for long-term care benefits.
Sec. 302. Requiring coverage of home and community-based long-term care.
Sec. 303. Effective date.
TITLE I--TAX TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE POLICIES
SEC. 101. DEFINITIONS OF QUALIFIED LONG-TERM CARE INSURANCE AND PREMIUMS.
  (a) IN GENERAL- Chapter 79 (relating to definitions) is amended by adding
  at the end the following new section:
`SEC. 7705. QUALIFIED LONG-TERM CARE INSURANCE AND PREMIUMS.
  `(a) QUALIFIED LONG-TERM CARE INSURANCE-
  `(1) IN GENERAL- For purposes of this title, the term `qualified long-term
  care insurance' means insurance under a policy or rider, issued by a
  qualified issuer, which--
  `(A) provides coverage for not less than 24 consecutive months for each
  covered persons,
  `(B) provides benefits on an expense incurred, indemnity, disability,
  prepaid, capitation, or other basis,
  `(C) provides benefits for--
  `(i) medically necessary diagnostic, preventive, therapeutic, rehabilitation,
  or maintenance services,
  `(ii) personal care services necessitated by physical disability, or
  `(iii) preventive, therapeutic, rehabilitation, maintenance, or personal
  care services necessitated by cognitive impairment or the loss of functional
  capacity,
when provided in a nursing home, a respite care facility, the home of the
covered individual, or any other setting which is not an acute care unit of
a hospital or a medical clinic,
  `(D) limits coverage for nursing home care described in subparagraph
  (C) to 95 percent of the national median cost of such nursing home care,
  as determined by the Secretary, and
  `(E) provides coverage for care described in subparagraph (C) (other than
  nursing home care) equal to not less than 50 percent of the limitation
  established under subparagraph (D).
  `(2) QUALIFIED ISSUER- For purposes of paragraph (1), the term `qualified
  issuer' means any of the following, if subject to the jurisdiction and
  regulation of at least 1 State insurance department:
  `(A) Private insurance company.
  `(B) Fraternal benefit society.
  `(C) Nonprofit health corporation.
  `(D) Nonprofit hospital corporation.
  `(E) Nonprofit medical service corporation.
  `(F) Prepaid health plan.
  `(b) QUALIFIED LONG-TERM CARE PREMIUMS-
  `(1) IN GENERAL- For purposes of this title, the term `qualified long-term
  care premiums' means the amount paid during a taxable year for qualified
  long-term care insurance covering an individual, to the extent such amount
  does not exceed the limitation determined under the following table:
`In the case of an individual
--
with an attained age before the
--The limitation
close of the taxable year of:
--is:
40 or less
--$200
More than 40 but not more than 50
--375
More than 50 but not more than 60
--750
More than 60 but not more than 70
--1,600
More than 70
--2,000.
  `(2) INDEXING-
  `(A) IN GENERAL- In the case of any taxable year beginning after December
  31, 1991, each dollar amount contained in paragraph (1) shall be increased
  by the medical care cost adjustment for such taxable year. If any increase
  determined under the preceding sentence is not a multiple of $10, such
  increase shall be rounded to the nearest multiple of $10.
  `(B) MEDICAL CARE COST ADJUSTMENT- For purposes of subparagraph (A),
  the medical care cost adjustment for any taxable year is the percentage
  (if any) by which--
  `(i) the medical care component of the Consumer Price Index (as defined
  in section 1(f)(5)) for August of the calendar year preceding the calendar
  year in which the taxable year begins, exceeds
  `(ii) such component for August of 1990.'
  (b) CLERICAL AMENDMENT- The table of sections for chapter 79 is amended
  by inserting after the item relating to section 7704 the following new item:
`Sec. 7705. Qualified long-term care insurance and premiums.'
SEC. 102. TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE AS ACCIDENT AND
HEALTH INSURANCE FOR PURPOSES OF TAXATION OF INSURANCE COMPANIES.
  (a) IN GENERAL- Section 818 (relating to other definitions and special
  rules) is amended by adding at the end the following new subsection:
  `(g) QUALIFIED LONG-TERM CARE INSURANCE TREATED AS ACCIDENT OR HEALTH
  INSURANCE- For purposes of this subchapter, any reference to noncancellable
  accident or health insurance contracts shall be treated as including a
  reference to qualified long-term care insurance.'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 103. TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE INSURANCE
CONTRACTS.
  (a) EXCLUSION OF AMOUNTS RECEIVED- Section 101 (relating to certain death
  benefits) is amended by adding at the end the following new subsection:
  `(g) TREATMENT OF CERTAIN ACCELERATED DEATH BENEFITS-
  `(1) IN GENERAL- For purposes of this section, any amount paid to an
  individual under a life insurance contract on the life of an insured who
  is a terminally ill individual, who has a dread disease, or who has been
  permanently confined to a nursing home shall be treated as an amount paid
  by reason of the death of such insured.
  `(2) TERMINALLY ILL INDIVIDUAL- For purposes of this subsection, the term
  `terminally ill individual' means an individual who has been certified by
  a physician, licensed under State law, as having an illness or physical
  condition which can reasonably be expected to result in death in 12 months
  or less.
  `(3) DREAD DISEASE- For purposes of this subsection, the term `dread disease'
  means a medical condition which has required or requires extraordinary
  medical intervention without which the insured would die, or a medical
  condition which would, in the absence of extensive or extraordinary medical
  treatment, result in a drastically limited life span.
  `(4) PERMANENTLY CONFINED TO A NURSING HOME- For purposes of this
  subsection, an individual has been permanently confined to a nursing home
  if the individual is presently confined to a nursing home and has been
  certified by a physician, licensed under State law, as having an illness
  or physical condition which can reasonably be expected to result in the
  individual remaining in a nursing home for the rest of his or her life.'
  (b) TREATMENT OF QUALIFIED ACCELERATED DEATH BENEFIT RIDERS AS LIFE
  INSURANCE-
  (1) IN GENERAL- Section 818 (relating to other definitions and special
  rules) is amended by adding at the end the following new subsection:
  `(h) QUALIFIED ACCELERATED DEATH BENEFIT RIDERS TREATED AS LIFE INSURANCE-
  For purposes of this part--
  `(1) IN GENERAL- Any reference to a life insurance contract shall be
  treated as including a reference to a qualified accelerated death benefit
  rider on such contract.
  `(2) QUALIFIED ACCELERATED DEATH BENEFIT RIDER- For purposes of this
  subsection, the term `qualified accelerated death benefit rider' means any
  rider or addendum on, or other provision of, a life insurance contract
  which provides for payments to an individual on the life of an insured
  upon such insured becoming a terminally ill individual (as defined in
  section 101(g)(2)) or incurring a dread disease (as defined in section
  101(g)(3)) or being permanently confined to a nursing home (as defined in
  section 101(g)(4)).'
  (2) DEFINITIONS OF LIFE INSURANCE AND MODIFIED ENDOWMENT CONTRACTS-
  (A) RIDER TREATED AS QUALIFIED ADDITIONAL BENEFIT- Subparagraph (A) of
  section 7702(f)(5) (relating to definition of life insurance contract)
  is amended by striking `or' at the end of clause (iv), by redesignating
  clause (v) as clause (vi), and by inserting after clause (iv) the following
  new clause:
  `(v) any qualified accelerated death benefit rider (as defined in section
  818(h)(2)), or any qualified long-term care insurance which reduces the
  death benefit, or'.
  (B) TRANSITIONAL RULE- For purposes of applying section 7702 or 7702A of
  the Internal Revenue Code of 1986 to any contract (or determining whether
  either such section applies to such contract), the issuance of a rider or
  addendum on, or other provision of, a life insurance contract permitting
  the acceleration of death benefits (as described in section 101(g)) or for
  qualified long-term care insurance shall not be treated as a modification
  or material change of such contract.
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1990.
TITLE II--TAX INCENTIVES FOR PURCHASE OF QUALIFIED LONG-TERM CARE INSURANCE
SEC. 201. CREDIT FOR QUALIFIED LONG-TERM CARE PREMIUMS.
  (a) GENERAL RULE- Subpart C of part IV of subchapter A of chapter 1
  (relating to refundable credits) is amended by redesignating section 35
  as section 36 and by inserting after section 34 the following new section:
`SEC. 35. LONG-TERM CARE INSURANCE CREDIT.
  `(a) GENERAL RULE- In the case of an individual, there shall be allowed
  as a credit against the tax imposed by this subtitle for the taxable year
  an amount equal to the applicable percentage of the qualified long-term
  care premiums (as defined in section 7705(b)) paid during such taxable
  year for such individual or the spouse of such individual.
  `(b) APPLICABLE PERCENTAGE-
  `(1) IN GENERAL- For purposes of this section, the term `applicable
  percentage' means 28 percent reduced (but not below zero) by 1 percentage
  point for each $1,000 (or fraction thereof) by which the taxpayer's adjusted
  gross income for the taxable year exceeds the base amount.
  `(2) BASE AMOUNT- For purposes of paragraph (1) the term `base amount'
  means--
  `(A) except as otherwise provided in this paragraph, $25,000,
  `(B) $40,000 in the case of joint return, and
  `(C) zero in the case of a taxpayer who--
  `(i) is married at the close of the taxable year (within the meaning of
  section 7703) but does not file a joint return for such taxable year, and
  `(ii) does not live apart from his or her spouse at all times during the
  taxable year.
  `(c) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- Any amount allowed as a
  credit under this section shall not be taken into account under section 213.'
  (b) CLERICAL AMENDMENT- The table of sections for subpart C of part IV
  of subchapter A of chapter 1 is amended by striking the item relating to
  section 35 and inserting the following:
`Sec. 35. Long-term care insurance credit.
`Sec. 36. Overpayments of tax.'
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 202. DEDUCTION FOR EXPENSES RELATING TO QUALIFIED LONG-TERM CARE.
  (a) DEDUCTION FOR QUALIFIED LONG-TERM CARE PREMIUMS- Subparagraph (C) of
  section 213(d)(1) (relating to the definition of medical care) is amended
  by striking `aged)' and inserting the following: `aged, and amounts paid
  as qualified long-term care premiums (as defined in section 7705(b))'.
  (b) DEDUCTION FOR LONG-TERM CARE EXPENSES FOR PARENT OR GRANDPARENT-
  Section 213 (relating to deduction for medical expenses) is amended by
  adding at the end the following new subsection:
  `(f) SPECIAL RULE FOR CERTAIN LONG-TERM CARE EXPENSES- For purposes of
  subsection (a), the term `dependent' shall include any parent or grandparent
  of the taxpayer for whom the taxpayer has long-term care expenses described
  in section 7705(a)(1)(C), but only to the extent of such expenses.'
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 203. EXCLUSION FROM GROSS INCOME OF BENEFITS RECEIVED UNDER QUALIFIED
LONG-TERM CARE INSURANCE.
  (a) IN GENERAL- Section 105 (relating to amounts received under accident and
  health plans) is amended by adding at the end the following new subsection:
  `(j) SPECIAL RULES RELATING TO QUALIFIED LONG-TERM CARE INSURANCE- For
  purposes of section 104, this section, and section 106--
  `(1) BENEFITS TREATED AS PAYABLE FOR SICKNESS, ETC- Any benefit received
  through qualified long-term care insurance shall be treated as amounts
  received through accident or health insurance for personal injuries or
  sickness.
  `(2) EXPENSES FOR WHICH REIMBURSEMENT PROVIDED UNDER QUALIFIED LONG-TERM
  CARE INSURANCE TREATED AS INCURRED FOR MEDICAL CARE OR FUNCTIONAL
  LOSS- Expenses incurred by the taxpayer, his or her spouse, dependent,
  parents, the parents of his or her spouse, or grandparents to the extent
  of benefits paid under qualified long-term care insurance shall be treated
  for purposes of subsection (b) as incurred for medical care (as defined in
  section 213(d)), and benefits received under such qualified long-term care
  insurance shall be treated for purposes of subsection (c) as payment for
  the permanent loss or loss of use of a member or function of the body or
  the permanent disfigurement of the taxpayer, his or her spouse, dependent,
  his or her parents, the parents of his or her spouse, or grandparents.
  `(3) REFERENCES TO ACCIDENT AND HEALTH PLANS-
  `(A) IN GENERAL- Any reference to an accident or health plan shall be
  treated as including a reference to a plan providing qualified long-term
  care insurance.
  `(B) LIMITATION- Subparagraph (A) shall apply for purposes of section 106
  only to the extent of qualified long-term care premiums (as defined in
  section 7705(b)).'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 204. EMPLOYER DEDUCTION FOR CONTRIBUTIONS MADE FOR LONG-TERM CARE
INSURANCE.
  (a) IN GENERAL- Subparagraph (B) of section 404(b)(2) (relating to plans
  providing certain deferred benefits) is amended to read as follows:
  `(B) EXCEPTIONS- Subparagraph (A) shall not apply to--
  `(i) any benefit provided through a welfare benefit fund (as defined in
  section 419(e)), or
  `(ii) any benefit provided under qualified long-term care insurance through
  the payment (in whole or in part) of qualified long-term care premiums
  (as defined in section 7705(b)) by an employer pursuant to a plan for its
  active or retired employees, but only if any refund or premium is applied
  to reduce the future costs of the plan or increase benefits under the plan.'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 205. INCLUSION OF QUALIFIED LONG-TERM CARE INSURANCE IN CAFETERIA PLANS.
  (a) IN GENERAL- Paragraph (2) of section 125(d) (relating to the exclusion
  of deferred compensation) is amended by adding at the end the following
  new subparagraph:
  `(D) EXCEPTION FOR LONG-TERM CARE INSURANCE CONTRACTS- For purposes
  of subparagraph (A), amounts paid or incurred for any long-term care
  insurance contract shall not be treated as deferred compensation to the
  extent section 404(b)(2)(A) does not apply to such amounts by reason of
  section 404(b)(2)(B)(ii).'
  (b) CONFORMING AMENDMENT- Subsection (f) of section 125 (relating to
  qualified benefits) is amended by striking `and such term includes' and
  inserting the following: `, qualified long-term care insurance, and'.
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 206. EXCLUSION FROM GROSS INCOME FOR AMOUNTS WITHDRAWN FROM INDIVIDUAL
RETIREMENT PLANS AND SECTION 401(k) PLANS FOR QUALIFIED LONG-TERM CARE
PREMIUMS AND EXPENSES.
  (a) IN GENERAL- Part III of subchapter B of chapter 1 (relating to items
  specifically excluded from gross income) is amended by redesignating
  section 136 as section 137 and by inserting after section 135 the following
  new section:
`SEC. 136. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS AND SECTION 401(K)
PLANS FOR QUALIFIED LONG-TERM CARE PREMIUMS AND EXPENSES.
  `(a) GENERAL RULE- In the case of an individual, gross income shall not
  include any qualified distribution.
  `(b) QUALIFIED DISTRIBUTION- For purposes of this section, the term
  `qualified distribution' means any amount distributed from an individual
  retirement plan or a section 401(k) plan during the taxable year if such
  amount is used during such year--
  `(1) to pay qualified long-term care premiums (as defined in section 7705(b))
  for the benefit of the payee or distributee or the spouse of the payee or
  distributee, if such policy may not be surrendered for cash, or
  `(2) to pay long-term care expenses (as described in section 7705(a)(1)(C))
  of such an individual.
  `(c) SPECIAL RULES- For purposes of this section--
  `(1) QUALIFIED DISTRIBUTIONS FROM IRA DEEMED MADE FIRST FROM DESIGNATED
  NONDEDUCTIBLE CONTRIBUTIONS- For purposes of section 72, qualified
  distributions from an individual retirement plan shall be treated as made
  from designated nondeductible contributions to the extent thereof and then
  from other amounts.
  `(2) SPECIAL RULES FOR SECTION 401(k) PLANS-
  `(A) QUALIFIED DISTRIBUTIONS FROM SECTION 401(k) PLAN MAY NOT EXCEED ELECTIVE
  DEFERRALS- This section shall not apply to any distribution from a section
  401(k) plan to the extent the aggregate amount of such distributions for the
  use described in subsection (a) exceeds the aggregate employer contributions
  made pursuant to the employee's election under section 401(k)(2) (and the
  income thereon).
  `(B) WITHDRAWALS NOT TO CAUSE DISQUALIFICATION- A plan shall not be treated
  as failing to satisfy the requirements of section 401, and an arrangement
  shall not be treated as failing to be a qualified cash or deferred
  arrangement (as defined in section 401(k)(2)), merely because under the
  plan or arrangement distributions are permitted which are excludable from
  gross income by reason of this section.
  `(d) SECTION 401(k) PLAN- For purposes of this section, the term `section
  401(k) plan' means any employer plan which meets the requirements of
  section 401(a) and which includes a qualified cash or deferred arrangement
  (as defined in section 401(k)).'
  (b) CONFORMING AMENDMENTS-
  (1) Subsection (k) of section 401 is amended by adding at the end the
  following new paragraph:
  `(11) CROSS REFERENCE-
 `For provision permitting tax-free withdrawals for qualified long-term care
 premiums and expenses, see section 136.'
  (2) Subsection (d) of section 408 is amended by adding at the end the
  following new paragraph:
  `(8) CROSS REFERENCE-
 `For provision permitting tax-free withdrawals for qualified long-term care
 premiums and expenses, see section 136.'
  (3) The table of sections for such part III is amended by striking the
  item relating to section 136 and inserting the following new items:
`Sec. 136. Distributions from individual retirement plans and section 401(k)
plans for qualified long-term care premiums and expenses.
`Sec. 137. Cross references to other Acts.'
  (b) INCREASE IN AMOUNT OF DEDUCTIBLE CONTRIBUTIONS TO INDIVIDUAL RETIREMENT
  PLANS-
  (1) IN GENERAL- Subparagraph (A) of section 219(b)(1) (relating to maximum
  amount of deduction) is amended by striking `$2,000' and inserting `$4,000'.
  (2) SPOUSAL IRA- Paragraph (2) of section 219(c) (relating to special
  rules for certain married individuals) is amended by striking `$2,250'
  and `$2,000' and inserting `$4,500' and `$4,000', respectively.
  (c) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 207. EXCLUSION FROM GROSS INCOME FOR AMOUNTS RECEIVED ON CANCELLATION
OF LIFE INSURANCE POLICIES AND USED FOR QUALIFIED LONG-TERM CARE INSURANCE.
  (a) IN GENERAL-
  (1) EXCLUSION FROM GROSS INCOME-
  (A) IN GENERAL- Part III of subchapter B of chapter 1 (relating to items
  specifically excluded from gross income), as amended by section 206,
  is further amended by redesignating section 137 as section 138 and by
  inserting after section 136 the following new section:
`SEC. 137. AMOUNTS RECEIVED ON CANCELLATION, ETC. OF LIFE INSURANCE CONTRACTS
AND USED TO PAY PREMIUMS FOR QUALIFIED LONG-TERM CARE INSURANCE.
  `No amount (which but for this section would be includible in the gross
  income of an individual) shall be included in gross income on the whole
  or partial surrender, cancellation, or exchange of any life insurance
  contract during the taxable year if--
  `(1) such individual has attained age 59 1/2  on or before the date of
  the transaction, and
  `(2) the amount otherwise includible in gross income is used during such
  year to pay for any policy of qualified long-term care insurance which--
  `(A) is for the benefit of such individual or the spouse of such individual
  if such spouse has attained age 59 1/2  on or before the date of the
  transaction, and
  `(B) may not be surrendered for cash.'
  (B) CLERICAL AMENDMENT- The table of sections for such part III is amended
  by striking the last item and inserting the following new items:
`Sec. 137. Amounts received on cancellation, etc. of life insurance contracts
and used to pay premiums for qualified long-term care insurance.
`Sec. 138. Cross references to other Acts.'
  (2) CERTAIN EXCHANGES NOT TAXABLE- Subsection (a) of section 1035 (relating
  to certain exchanges of insurance contracts) is amended by striking the
  period at the end of paragraph (3) and inserting `; or', and by adding at
  the end the following new paragraph:
  `(4) in the case of an individual who has attained age 59 1/2 , a contract of
  life insurance or an endowment or annuity contract for a policy of qualified
  long-term care insurance, if such policy may not be surrendered for cash.'
  (b) EFFECTIVE DATE- The amendments made by this section shall apply to
  taxable years beginning after December 31, 1990.
SEC. 208. USE OF GAIN FROM SALE OF PRINCIPAL RESIDENCE FOR PURCHASE OF
QUALIFIED LONG-TERM HEALTH CARE INSURANCE.
  (a) IN GENERAL- Subsection (d) of section 121 (relating to 1-time exclusion
  of gain from sale of principal residence by individual who has attained
  age 55) is amended by adding at the end the following new paragraph:
  `(10) ELIGIBILITY OF HOME EQUITY CONVERSION SALE-LEASEBACK TRANSACTION
  FOR EXCLUSION-
  `(A) IN GENERAL- For purposes of this section, the term `sale or exchange'
  includes a home equity conversion sale-leaseback transaction.
  `(B) HOME EQUITY CONVERSION SALE-LEASEBACK TRANSACTION- For purposes of
  subparagraph (A), the term `home equity conversion sale-leaseback' means
  a transaction in which--
  `(i) the seller-lessee--
  `(I) has attained the age of 55 before the date of transaction,
  `(II) sells property which during the 5-year period ending on the date of
  the transaction has been owned and used as a principal residence by such
  seller-lessee for periods aggregating 3 years or more,
  `(III) uses a portion of the proceeds from such sale to purchase a policy
  of qualified long-term care insurance, which policy may not be surrendered
  for cash,
  `(IV) obtains occupancy rights in such property pursuant to a written
  lease requiring a fair rental, and
  `(V) receives no option to repurchase the property at a price less than
  the fair market price of the property unencumbered by any leaseback at
  the time such option is exercised, and
  `(ii) the purchaser-lessor--
  `(I) is a person,
  `(II) is contractually responsible for the risks and burdens of ownership
  and receives the benefits of ownership (other than the seller-lessee's
  occupancy rights) after the date of such transaction, and
  `(III) pays a purchase price for the property that is not less than the
  fair market price of such property encumbered by a leaseback, and taking
  into account the terms of the lease.
  `(C) ADDITIONAL DEFINITIONS- For purposes of subparagraph (B)--
  `(i) OCCUPANCY RIGHTS- The term `occupancy rights' means the right to occupy
  the property for any period of time, including a period of time measured by
  the life of the seller-lessee on the date of the sale-leaseback transaction
  (or the life of the surviving seller-lessee, in the case of jointly held
  occupancy rights), or a periodic term subject to a continuing right of
  renewal by the seller-lessee (or by the surviving seller-lessee, in the
  case of jointly held occupancy rights).
  `(ii) FAIR RENTAL- The term `fair rental' means a rental for any
  subsequent year which equals or exceeds the rental for the first year of
  a sale-leaseback transaction.'
  (b) EFFECTIVE DATE- The amendment made by this section shall apply to
  sales after December 31, 1990, in taxable years beginning after such date.
TITLE III--MEDICAID AMENDMENTS
SEC. 301. EXPANSION OF MEDICAID ELIGIBILITY FOR LONG-TERM CARE BENEFITS.
  (a) IN GENERAL- Title XIX of the Social Security Act is amended by
  redesignating section 1927 as section 1928 and by inserting after section
  1926 the following new section:
`ELIGIBILITY FOR LONG-TERM CARE BENEFITS
  `SEC. 1927. (a) ELIGIBILITY- Any individual--
  `(1) who is 65 years of age or older,
  `(2) who is described in section 1903(v)(1),
  `(3) who has resources (including a residence, liquid assets, and all
  personal items with a fair market value in excess of $5,000, and including
  resources of the individual's spouse) which does not exceed the resource
  limitation specified in subsection (b),
  `(4) who is not otherwise eligible for medical assistance for nursing
  facility services or home and community-based long-term care under this
  title, and
  `(5) who has been provided 24 months of nursing facility services (during
  a period in which the individual required the level of care provided in a
  nursing facility) during the previous 48 months (or, with respect to the
  application of subsection (d), 72 months),
is eligible, notwithstanding any other provisions of this title, for medical
assistance under this title for nursing facility services and home and
community based long-term care under this title so long as the individual
continues to meet the requirements of this subsection (other than paragraph
(5)) and is confined to a nursing facility or otherwise requires the same
level of care as is provided in a nursing facility.
  `(b) RESOURCE LIMITATION- For purposes of this section, the resource
  limitation specified in this subsection is $500,000, increased, for each year
  after 1991, by the percentage increase in the Consumer Price Index for All
  Urban Consumers (all items; U.S. city average) from July 1990 to July of the
  previous year, rounded (if not a multiple of $1,000) to the nearest $1,000.
  `(c) TREATMENT OF LEVEL OF CARE-
  `(1) IN GENERAL- For purposes of subsection (a), an individual is
  considered to require the level of care provided in a nursing facility
  if the individual requires the assistance of another individual in the
  performance of at least 3 activities of daily living or has a similar
  level of functioning as a result of mental illness or disease (including
  as a result of Alzheimer's disease).
  `(2) ACTIVITIES OF DAILY LIVING DEFINED- The `activities of daily living'
  referred to in paragraph (1) are the following: eating, bathing, dressing,
  toileting, and transferring in and out of a bed or in and out of a chair.
  `(d) SUBSTITUTION OF EXPENSES INCURRED FOR QUALIFIED HOME CARE FOR MONTHS
  IN NURSING FACILITY-
  `(1) IN GENERAL- In determining whether an individual has been provided
  24 months of nursing facility services under subsection (a)(5), expenses
  incurred (whether paid for by insurance, themselves, or relatives but
  not including expenses for which payment is made under this title, by
  the Department of Veterans' Affairs, the Department of Defense, or other
  Federal programs) for qualified home care (as defined in paragraph (3))
  in the manner specified in paragraph (2).
  `(2) CONVERTING EXPENSES TO MONTHS- Expenses described in paragraph (1)
  shall be converted to months of nursing facility services by dividing
  such expenses by the national median monthly cost (as determined by the
  Secretary, and using a weighted average for both public and private nursing
  facilities) for nursing facility services in the month in which the expenses
  are incurred.
  `(3) QUALIFIED HOME CARE DEFINED- In this subsection, the term `qualified
  home care' means home health care and home and community-based services
  (described in section 1915).'.
SEC. 302. REQUIRING COVERAGE OF HOME AND COMMUNITY-BASED LONG-TERM CARE.
  (a) IN GENERAL- Section 1915(d) of the Social Security Act (42
  U.S.C. 1396n(d)) is amended--
  (1) in paragraph (1), by striking `the Secretary shall grant a waiver to
  provide that a State plan' and inserting `each State plan';
  (2) in paragraph (1), by adding at the end the following: `The State may
  limit the individuals provided benefits under this subsection to individuals
  with respect to whom the State has determined that the amount of medical
  assistance provided under this subsection will not exceed the amount of
  such medical assistance provided to such individual if the individual
  were a resident of a nursing facility. For purposes of this paragraph,
  each individual who requires personal assistance in the performance of at
  least 3 activities of daily living (as defined in section 1927(c)(2)) or
  has a similar level of functioning as a result of mental illness or disease
  (including as a result of Alzheimer's disease) shall be considered to have
  met the standard for the determination described in such section.';
  (3) in paragraph (2)--
  (A) in the matter before subparagraph (A), by striking `A waiver shall not
  be granted under this subsection unless the State provides' and inserting
  `Each State shall provide',
  (B) in subparagraph (A), by striking `under the waiver' and inserting
  `under this subsection',
  (C) in subparagraph (B)(iii), by striking `under such waiver',
  (D) in subparagraph (C), by striking `if available under the waiver'
  and inserting `under this subsection,
  (E) in the second sentence, by striking `with a waiver under this
  subsection', and
  (F) in the second sentence, by striking `the impact of the waiver granted
  under this subsection';
  (4) in paragraph (3)--
  (A) by amending the first sentence to read as follows: `The requirements
  of sections 1902(a)(10)(B) and 1902(a)(10)(C)(i)(III) shall not apply to
  medical assistance provided under this subsection.',
  (B) by striking the second sentence, and
  (C) in the third sentence, by striking `A waiver' and inserting `A State
  under this subsection';
  (5) in paragraph (4), by striking `A waiver under this subsection may'
  and inserting `A State under this subsection shall';
  (6) by striking paragraph (5) and inserting the following:
  `(5) Federal financial participation is not available under section 1903(a)
  for medical assistance provided under this subsection to the extent that
  the average per capita expenditure under this subsection in any fiscal
  year exceeds the average per capita expenditures under the State plan
  under this title for individuals 65 years of age or older residing in a
  nursing facility.'; and
  (7) by striking paragraph (6).
  (c) CONFORMING AMENDMENTS- Section 1902(a) of such Act (42 U.S.C. 1396a(a))
  is amended--
  (1) in paragraph (10)(A)--
  (A) in clause (i), by striking `or' at the end of subclause (V), by
  striking the semicolon at the end of subclause (VI) and inserting `, or',
  and by adding at the end the following:
  `(VII) who are described in section 1927(a) or who is described in section
  1915(d)(1) and would be eligible under the State plan under this title
  for medical assistance under section 1927(a) if they were in a nursing
  facility;';
  (B) in clause (ii)(VI), by striking `, (d),';
  (C) in the matter following subparagraph (E), by striking `or' before `(X)'
  and inserting before the semicolon at the end the following: `, and (XI)
  the making available of medical assistance for certain nursing facility
  services and home and community based long-term care in accordance with
  sections 1927 and 1915(d) shall not, by reason of this paragraph, require
  such assistance to be made available to other individuals'; and
  (2) by striking `and' at the end of paragraph (52), by striking the period
  at the end of paragraph (53) and inserting `; and', and by inserting after
  paragraph (54) the following:
  `(54) provides for medical assistance for certain nursing facility services
  and home and community based long-term care in accordance with sections
  1927 and 1915(d).'.
SEC. 303. EFFECTIVE DATE.
  (a) IN GENERAL- The amendments made by this title apply (except as provided
  under subsection (b)) to payments under title XIX of the Social Security
  Act for calendar quarters beginning on or after one year after the date
  of the enactment of this Act, without regard to whether regulations to
  implement such amendments are promulgated by such date.
  (b) DELAY PERMITTED IF STATE LEGISLATION REQUIRED- In the case of a State
  plan for medical assistance under title XIX of the Social Security Act
  which the Secretary of Health and Human Services determines requires State
  legislation (other than legislation authorizing or appropriating funds)
  in order for the plan to meet the additional requirements imposed by the
  amendments made by this title, the State plan shall not be regarded as
  failing to comply with the requirements of such title solely on the basis
  of its failure to meet these additional requirements before the first
  day of the first calendar quarter beginning after the close of the first
  regular session of the State legislature that begins after the date of the
  enactment of this Act. For purposes of the previous sentence, in the case
  of a State that has a 2-year legislative session, each year of such session
  shall be deemed to be a separate regular session of the State legislature.
  (c) TRANSITION- In applying the amendments made by this title, only months
  beginning after the date of the enactment of this Act may be counted
  towards meeting the 24-month deductible described in section 1927(a)(5)
  of the Social Security Act, as inserted by this title.