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Health Security Act
Title II
TITLE II_NEW BENEFITS


table of contents of title


Subtitle A_Medicare Outpatient Prescription Drug Benefit
Sec._2001._Coverage of outpatient prescription drugs.
Sec._2002._Payment rules and related requirements for outpatient
drugs.
Sec._2003._Medicare rebates for covered outpatient drugs.
Sec._2004._Counseling by participating pharmacies.
Sec._2005._Extension of 25 percent rule for portion of premium
attributable to covered outpatient drugs.
Sec._2006._Coverage of home infusion drug therapy services.
Sec._2007._Civil money penalties for excessive charges.
Sec._2008._Conforming amendments to medicaid program.
Sec._2009._Effective date.
Subtitle B_Long-Term Care
Part 1_State Programs for Home and Community-Based Services for
Individuals With Disabilities
Sec._2101._State programs for home and community-based services
for individuals with disabilities.
Sec._2102._State plans.
Sec._2103._Individuals with disabilities defined.
Sec._2104._Home and community-based services covered under State
plan.
Sec._2105._Cost sharing.
Sec._2106._Quality assurance and safeguards.
Sec._2107._Advisory groups.
Sec._2108._Payments to States.
Sec._2109._Total Federal budget; allotments to States.
Part 2_Medicaid Nursing Home Improvements
Sec._2201._Reference to amendments.
Part 3_Private Long-Term Care Insurance
SUBPART A_GENERAL PROVISIONS
Sec._2301._Federal regulations; prior application or certain
requirements.
Sec._2302._National Long-term Care Insurance Advisory Council.
Sec._2303._Relation to State law.
Sec._2304._Definitions.
SUBPART B_FEDERAL STANDARDS AND REQUIREMENTS
Sec._2321._Requirements to facilitate understanding and
comparison of benefits.
Sec._2322._Requirements relating to coverage.
Sec._2323._Requirements relating to premiums.
Sec._2324._Requirements relating to sales practices.
Sec._2325._Continuation, renewal, replacement, conversion, and
cancellation of policies.
Sec._2326._Requirements relating to payment of benefits.
SUBPART C_ENFORCEMENT
Sec._2342._State programs for enforcement of standards.
Sec._2342._Authorization of appropriations for State programs.
Sec._2343._Allotments to States.
Sec._2344._Payments to States.
Sec._2345._Federal oversight of State enforcement.
Sec._2346._Effect of failure to have approved State program.
SUBPART D_CONSUMER EDUCATION GRANTS
Sec._2361._Grants for consumer education.
Part 4_Tax Treatment of Long-term Care Insurance and Services
Sec._2401._Reference to tax provisions.
Part 5_Tax Incentives for Individuals with Disabilities Who Work
Sec._2501._Reference to tax provision.
Part 6_Demonstration and Evaluation
Sec._2601._Demonstration on acute and long-term care integration.
Sec._2602._Performance review of the long-term care programs.

Title II, Subtitle A

Subtitle A_Medicare Outpatient Prescription Drug Benefit
SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.
__(a) Covered Outpatient Drugs as Medical and Other Health
Services._Section 1861(s)(2)(J) of the Social Security Act (42
U.S.C. 1395x(s)(2)(J)) is amended to read as follows:
__``(J) covered outpatient drugs;''.
__(b) Definition of Covered Outpatient Drug._Section 1861(t) of
such Act (42 U.S.C. 1395x(t)), as amended by section 13553(b) of
the Omnibus Budget Reconciliation Act of 1993 (hereafter in this
subtitle referred to as ``OBRA     1993''), is amended_
__(1) in the heading, by adding at the end the following: ``;
Covered Outpatient Drugs'';
__(2) in paragraph (1), by striking ``paragraph (2)'' and
inserting ``the succeeding paragraphs of this subsection''; and
__(3) by striking paragraph (2) and inserting the following:
__``(2) Except as otherwise provided in paragraph (3), the term
`covered outpatient drug' means any of the following products
used for a medically accepted indication (as described in
paragraph (4)):
__``(A) A drug which may be dispensed only upon prescription and_
__``(i) which is approved for safety and effectiveness as a
prescription drug under section 505 or 507 of the Federal Food,
Drug, and Cosmetic Act or which is approved under section 505(j)
of such Act;
__``(ii)(I) which was commercially used or sold in the United
States before the date of the enactment of the Drug Amendments of
1962 or which is identical, similar, or related (within the
meaning of section 310.6(b)(1) of title 21 of the Code of Federal
Regulations) to such a drug, and (II) which has not been the
subject of a final determination by the Secretary that it is a
`new drug' (within the meaning of section 201(p) of the Federal
Food, Drug, and Cosmetic Act) or an action brought by the
Secretary under section 301, 302(a), or 304(a) of such Act to
enforce section 502(f) or 505(a) of such Act; or
__``(iii)(I) which is described in section 107(c)(3) of the Drug
Amendments of 1962 and for which the Secretary has determined
there is a compelling justification for its medical need, or is
identical, similar, or related (within the meaning of section
310.6(b)(1) of title 21 of the Code of Federal Regulations) to
such a drug, and (II) for which the Secretary has not issued a
notice of an opportunity for a hearing under section 505(e) of
the Federal Food, Drug, and Cosmetic Act on a proposed order of
the Secretary to withdraw approval of an application for such
drug under such section because the Secretary has determined that
the drug is less than effective for all conditions of use
prescribed, recommended, or suggested in its labeling;
__``(B) A biological product which_
__``(i) may only be dispensed upon prescription,
__``(ii) is licensed under section 351 of the Public Health
Service Act, and
__``(iii) is produced at an establishment licensed under such
section to produce such product; and
__``(C) Insulin certified under section 506 of the Federal Food,
Drug, and Cosmetic Act.
__``(3) The term `covered outpatient drug' does not include any
product which is intravenously administered in a home setting
unless it is a covered home infusion drug (as described in
paragraph (5)).

__``(4) For purposes of paragraph (2), the term `medically
accepted indication', with respect to the use of an outpatient
drug, includes any use which has been approved by the Food and
Drug Administration for the drug, and includes another use of the
drug if_
__``(A) the drug has been approved by the Food and Drug
Administration; and
__``(B)(i) such use is supported by one or more citations which
are included (or approved for inclusion) in one or more of the
following compendia: the American Hospital Formulary Service-Drug
Information, the American Medical Association Drug Evaluations,
the United States Pharmacopoeia-Drug Information, and other
authoritative compendia as identified by the Secretary, unless
the Secretary has determined that the use is not medically
appropriate or the use is identified as not indicated in one or
more such compendia, or
__``(ii) the carrier involved determines, based upon guidance
provided by the Secretary to carriers for determining accepted
uses of drugs, that such use is medically accepted based on
supportive clinical evidence in peer reviewed medical literature
appearing in publications which have been identified for purposes
of this clause by the Secretary.
The Secretary may revise the list of compendia in paragraph
(B)(i) designated as appropriate for identifying medically
accepted indications for drugs.
__``(5)(A) For purposes of paragraph (3), the term `covered home
infusion drug' means a covered outpatient drug dispensed to an
individual that_
__``(i) is administered intravenously, subcutaneously,
epidurally, or through other means determined by the Secretary,
using an access device that is inserted in to the body and an
infusion device to control the rate of flow of the drug,
__``(ii) is administered in the individual's home (including an
institution used as his home, other than a hospital under
subsection (e) or a skilled nursing facility that meets the
requirements of section 1819(a)), and
__``(iii)(I) is an antibiotic drug and the Secretary has not
determined, for the specific drug or the indication to which the
drug is applied, that the drug cannot generally be administered
safely and effectively in a home setting, or
__``(II) is not an antibiotic drug and the Secretary has
determined, for the specific drug or the indication to which the
drug is applied, that the drug can generally be administered
safely and effectively in a home setting.
__``(B) Not later than January 1, 1996, (and periodically
thereafter), the Secretary shall publish a list of the drugs, and
indications for such drugs, that are covered home infusion drugs,
with respect to which home infusion drug therapy may be provided
under this title.''.

__(c) Exceptions; Exclusions From Coverage._Section 1862(a) of
such Act (42 U.S.C. 1395y(a)), as amended by sections 4034(b)(4)
and 4118(b), is amended_
__(1) by striking ``and'' at the end of paragraph (15),
__(2) by striking the period at the end of paragraph (16) and
inserting ``; or'', and
__(3) by inserting after paragraph (16) the following new
paragraph:
__``(17) A covered outpatient drug (as described in section
1861(t))_
__``(A) when furnished as part of, or as incident to, any other
item or service for which payment may be made under this title,
or
__``(B) which is listed under paragraph (2) of section 1927(d)
(other than subparagraph (I) or (J) of such paragraph) as a drug
which may be excluded from coverage under a State plan under
title XIX and which the Secretary elects to exclude from coverage
under this part.

__(d) Other Conforming Amendments._(1) Section 1861 of such Act
(42 U.S.C. 1395x) is amended_

__(A) in subsection (s)(2), as amended by section 13553 of OBRA
1993_
__(i) by striking subparagraphs (O) and (Q),
__(ii) by adding ``and'' at the end of subparagraph (N),
__(iii) by striking ``; and'' at the end of subparagraph (P) and
inserting a period, and
__(iv) by redesignating subparagraph (P) as subparagraph (O); and
__(B) by striking the subsection (jj) added by section 4156(a)(2)
of the Omnibus Budget Reconciliation Act of 1990.
__(2) Section 1881(b)(1)(C) of such Act (42 U.S.C.
1395rr(b)(1)(C)), as amended by section 13566(a) of OBRA    1993,
is amended by striking ``section 1861(s)(2)(P)'' and inserting
``section 1861(s)(2)(O)''.
SEC. 2002. PAYMENT RULES AND RELATED REQUIREMENTS FOR COVERED
OUTPATIENT DRUGS.
__(a) In General._Section 1834 of the Social Security Act (42
U.S.C. 1395m) is amended by inserting after subsection (c) the
following new subsection:
__``(d) Payment for and Certain Requirements Concerning Covered
Outpatient Drugs._
__``(1) Deductible._
__``(A) In general._Payment shall be made under paragraph (2)
only for expenses incurred by an individual for a covered
outpatient drug during a calendar year after the individual has
incurred expenses in the year for such drugs (during a period in
which the individual is entitled to benefits under this part)
equal to the deductible amount for that year.
__``(B) Deductible amount._
__``(i) For purposes of subparagraph (A), the deductible amount
is_
__``(I) for 1996, $250, and
__``(II) for any succeeding year, the amount (rounded to the
nearest dollar) that the Secretary estimates will ensure that the
percentage of the average number of individuals covered under
this part (other than individuals enrolled with an eligible
organization under section 1876 or an organization described in
section 1833(a)(1)(A)) during the year who will incur expenses
for covered outpatient drugs equal to or greater than such amount
will be the same as the percentage for the previous year.
__``(ii) The Secretary shall promulgate the deductible amount for
1997 and each succeeding year during September of the previous
year.
__``(C) Special rule for determination of expenses incurred._In
determining the amount of expenses incurred by an individual for
covered outpatient drugs during a year for purposes of
subparagraph (A), there shall not be included any expenses
incurred with respect to a drug to the extent such expenses
exceed the payment basis for such drug under paragraph (3).
__``(2) Payment amount._
__``(A) In general._Subject to the deductible established under
paragraph (1), the amount payable under this part for a covered
outpatient drug furnished to an individual during a calendar year
shall be equal to_
__``(i) 80 percent of the payment basis described in paragraph
(3), in the case of an individual who has not incurred expenses
for covered outpatient drugs during the year (including the
deductible imposed under paragraph (1)) in excess of the
out-of-pocket limit for the year under subparagraph (B); and
__``(ii) 100 percent of the payment basis described in paragraph
(3), in the case of any other individual.
__``(B) Out-of-pocket limit described._
__``(i) For purposes of subparagraph (A), the out-of-pocket limit
for a year is equal to_
__``(I) for 1996, $1000, and
__``(II) for any succeeding year, the amount (rounded to the
nearest dollar) that the Secretary estimates will ensure that the
percentage of the average number of individuals covered under
this part (other than individuals enrolled with an eligible
organization under section 1876 or an organization described in
section 1833(a)(1)(A)) during the year who will incur expenses
for covered outpatient drugs equal to or greater than such amount
will be the same as the percentage for the previous year.
__``(ii) The Secretary shall promulgate the out-of-pocket limit
for 1997 and each succeeding year during September of the
previous year.
__``(C) Special rule for determination of expenses incurred._In
determining the amount of expenses incurred by an individual for
covered outpatient drugs during a year for purposes of
subparagraph (A), there shall not be included any expenses
incurred with respect to a drug to the extent such expenses
exceed the payment basis for such drug under paragraph (3).
__``(3) Payment basis._For purposes of paragraph (2), the payment
basis is the lesser of_
__``(A) the actual charge for a covered outpatient drug, or
__``(B) the applicable payment limit established under paragraph
(4).

__``(4) Payment limits._
__``(A) Payment limit for single source drugs and multiple source
drugs with restrictive prescriptions._In the case of a covered
outpatient drug that is a multiple source drug which has a
restrictive prescription, or that is single source drug, the
payment limit for a payment calculation period is equal to_
__``(i) for drugs furnished after 1996, the 90th percentile of
the actual charges (computed on the geographic basis specified by
the Secretary) for the drug product for the second previous
payment calculation period, or
__``(ii) the amount of the administrative allowance (established
under paragraph (5)) plus the product of the number of dosage
units dispensed and the per unit estimated acquisition cost for
the drug product (determined under subparagraph (C)) for the
period,
whichever is less.
__``(B) Payment limit for multiple source drugs without
restrictive prescriptions._In the case of a drug that is a
multiple source drug which does not have a restrictive
prescription, the payment limit for a payment calculation period
is equal to the amount of the administrative allowance
(established under paragraph (5)) plus the product of the number
of dosage units dispensed and the unweighted median of the unit
estimated acquisition cost (determined under subparagraph (C))
for the drug products for the period.
__``(C) Determination of unit price._
__``(i) In general._The Secretary shall determine, for the
dispensing of a covered outpatient drug product in a payment
calculation period, the estimated acquisition cost for the drug
product. With respect to any covered outpatient drug product,
such cost may not exceed 93 percent of the average manufacturer
non-retail price for the drug (as defined in section 1850(f)(2))
during the period.
__``(ii) Compliance with request for information._If a wholesaler
or direct seller of a covered outpatient drug refuses, after
being requested by the Secretary, to provide price information
requested to carry out clause (i), or deliberately provides
information that is false, the Secretary may impose a civil money
penalty of not to exceed $10,000 for each such refusal or
provision of false information. The provisions of section 1128A
(other than subsections (a) and (b)) shall apply to civil money
penalties under the previous sentence in the same manner as they
apply to a penalty or proceeding under section 1128A(a).
Information gathered pursuant to clause (i) shall not be
disclosed except as the Secretary determines to be necessary to
carry out the purposes of this part.
__``(5) Administrative allowance for purposes of payment limit._
__``(A) In general._Except as provided in subparagraph (B), the
administrative allowance under paragraph (4) is_
__``(i) for 1996, $5, and
__``(ii) for each succeeding year, the amount for the previous
year adjusted by the percentage change in the consumer price
index for all urban consumers (U.S. city average) for the
12-month period ending with June of that previous year.
__``(B) Reduction for mail order pharmacies._The Secretary may,
after consulting with representatives of pharmacists, individuals
enrolled under this part, and of private insurers, reduce the
administrative allowances established under subparagraph (A) for
any covered outpatient drug dispensed by a mail order pharmacy,
based on differences between such pharmacies and other pharmacies
with respect to operating costs and other economies.
__``(6) Assuring appropriate prescribing and dispensing
practices._
__``(A) In general._The Secretary shall establish a program to
identify (and to educate physicians and pharmacists concerning)_
__``(i) instances or patterns of unnecessary or inappropriate
prescribing or dispensing practices for covered outpatient drugs,
__``(ii) instances or patterns of substandard care with respect
to such drugs,
__``(iii) potential adverse reactions, and
__``(iv) appropriate use of generic products.
__``(B) Standards._In carrying out the program under subparagraph
(A), the Secretary shall establish for each covered outpatient
drug standards for the prescribing of the drug which are based on
accepted medical practice. In establishing such standards, the
Secretary shall incorporate standards from such current
authoritative compendia as the Secretary may select, except that
the Secretary may modify such a standard by regulation on the
basis of scientific and medical information that such standard is
not consistent with the safe and effective use of the drug.




__``(C) Drug use review._The Secretary may provide for a drug use
review program with respect to covered outpatient drugs dispensed
to individuals eligible for benefits under this part. Such
program may include such elements as the Secretary determines to
be necessary to assure that prescriptions (i) are appropriate,
(ii) are medically necessary, and (iii) are not likely to result
in adverse medical results, including any elements of the State
drug use review programs required under section 1927(g) that the
Secretary determines to be appropriate.
__``(7) Administrative improvements._The Secretary shall develop,
in consultation with representatives of pharmacies and of other
interested persons, a standard claims form for covered outpatient
drugs in accordance with title V of the Health Security Act.
__``(8) Definitions._In this subsection:
__``(A) Multiple and single source drugs._The terms `multiple
source drug' and `single source drug' have the meanings of those
terms under section 1927(k)(7).
__``(B) Restrictive prescription._A drug has a `restrictive
prescription' only if_
__``(i) in the case of a written prescription, the prescription
for the drug indicates, in the handwriting of the physician or
other person prescribing the drug and with an appropriate phrase
(such as `brand medically necessary') recognized by the
Secretary, that a particular drug product must be dispensed, or
__``(ii) in the case of a prescription issued by telephone_
__``(I) the physician or other person prescribing the drug
(through use of such an appropriate phrase) states that a
particular drug product must be dispensed, and
__``(II) the physician or other person submits to the pharmacy
involved, within 30 days after the date of the telephone
prescription, a written confirmation which is in the handwriting
of the physician or other person prescribing the drug and which
indicates with such appropriate phrase that the particular drug
product was required to have been dispensed.
__``(C) Payment Calculation Period._The term `payment calculation
period' means the 6-month period beginning with January of each
year and the 6-month period beginning with July of each year.''.
__(b) Submission of Claims by Pharmacies._Section 1848(g)(4) of
such Act (42 U.S.C. 1395w     4(g)(4)) is amended_
__(1) in the heading_
__(A) by striking ``Physician'', and
__(B) by inserting ``by physicians and suppliers'' after
``claims'',
__(2) in the matter in subparagraph (A) preceding clause (i)_
__(A) by striking ``For services furnished on or after September
1, 1990, within 1 year'' and inserting ``Within 1 year (90 days
in the case of covered outpatient drugs)'',
__(B) by striking ``a service'' and inserting ``an item or
service'', and
__(C) by inserting ``or of providing a covered outpatient drug,''
after ``basis,'' and
__(3) in subparagraph (A)(i), by inserting ``item or'' before
``service.
__(c) Special Rules for Carriers._
__(1) Use of regional carriers._Section 1842(b)(2) of such Act
(42 U.S.C. 1395u(b)(2)) is amended by adding at the end the
following:
__``(D) With respect to activities related to covered outpatient
drugs, the Secretary may enter into contracts with carriers under
this section to perform the activities on a regional basis.''.
__(2) Payment on other than a cost basis._Section 1842(c)(1)(A)
of such Act (42 U.S.C. 1395u(c)(1)(A)) is amended_
__(A) by inserting ``(i)'' after ``(c)(1)(A)'',
__(B) in the first sentence, by inserting ``, except as otherwise
provided in clause (ii),'' after ``under this part, and'', and
__(C) by adding at the end the following:
__``(ii) To the extent that a contract under this section
provides for activities related to covered outpatient drugs, the
Secretary may provide for payment for those activities based on
any method of payment determined by the Secretary to be
appropriate.''.
__(3) Use of other entities for covered outpatient drugs._Section
1842(f) of such Act (42 U.S.C. 1395u(f)) is amended_
__(A) by striking ``and'' at the end of paragraph (1),
__(B) by substituting ``; and'' for the period at the end of
paragraph (2), and,
__(C) by adding at the end the following:
__``(3) with respect to activities related to covered outpatient
drugs, any other private entity which the Secretary determines is
qualified to conduct such activities.''.
__(4) Designated carriers to process claims of railroad
retirees._Section 1842(g) of such Act (42 U.S.C. 1395u(g)) is
amended by inserting ``(other than functions related to covered
outpatient drugs)'' after ``functions''.
__(d) Contracts for Automatic Data Processing Equipment._Actions
taken before 1995 that affect contracts related to the processing
of claims for covered outpatient drugs (as defined in section
1861(t) of the Social Security Act) shall not be subject to
section 111 of the Federal Property and Administrative Services
Act of 1949, and shall not be subject to administrative or
judicial review.
__(e) Conforming Amendments._
__(1)(A) Section 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1)),
as amended by section 13544(b)(2) of OBRA    1993, is amended_
__(i) by striking ``and'' at the end of clause (O), and
__(ii) by inserting before the semicolon at the end the
following: ``, and (Q) with respect to covered outpatient drugs,
the amounts paid shall be as prescribed by section 1834(d)''.
__(B) Section 1833(a)(2) of such Act (42 U.S.C. 1395l(a)(2)) is
amended in the matter preceding subparagraph (A) by inserting ``,
except for covered outpatient drugs,'' after ``and (I) of such
section''.
__(2) Section 1833(b)(2) of such Act (42 U.S.C. 1395l(b)(2)) is
amended by inserting ``or with respect to covered outpatient
drugs'' before the comma.
__(3) The first sentence of section 1842(h)(2) of such Act (42
U.S.C. 1395u(h)(2)) is amended by inserting ``(other than a
carrier described in subsection (f)(3))'' after ``Each carrier''.
__(4) The first sentence of section 1866(a)(2)(A) of such Act (42
U.S.C. 1395cc(a)(2)(A)) is amended_
__(A) in clause (i), by inserting ``section 1834(d), after
``section 1833(b),'', and
__(B) in clause (ii), by inserting ``, other than for covered
outpatient drugs,'' after ``provider)''.
SEC. 2003. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS.
__(a) In General._Part B of title XVIII of the Social Security
Act is amended by adding at the end the following new section:
``REBATES FOR COVERED OUTPATIENT DRUGS
__``Sec. 1850. (a) Requirement for Rebate Agreement._In order for
payment to be available under this part for covered outpatient
drugs of a manufacturer dispensed on or after January 1, 1996,
the manufacturer must have entered into and have in effect a
rebate agreement with the Secretary meeting the requirements of
subsection (b), and an agreement to give equal access to
discounts in accordance with subsection (e).
__``(b) Terms, Implementation, and Enforcement of Rebate
Agreement._
__``(1) Periodic rebates._
__``(A) In general._A rebate agreement under this section shall
require the manufacturer to pay to the Secretary for each
calendar quarter, not later than 30 days after the date of
receipt of the information described in paragraph (2) for such
quarter, a rebate in an amount determined under subsection (c)
for all covered outpatient drugs of the manufacturer described in
subparagraph (B).
__``(B) Drugs included in quarterly rebate calculation._Drugs
subject to rebate with respect to a calendar quarter are drugs
which are either_
__``(i) dispensed by participating pharmacies during such quarter
to individuals (other than individuals enrolled with an eligible
organization with a contract under section 1876) eligible for
benefits under this part, as reported by such pharmacies to the
Secretary, or
__``(ii) dispensed by nonparticipating pharmacies to such
individuals and included in claims for payment of benefits
received by the Secretary during such quarter.
__``(2) Information furnished to manufacturers._
__``(A) In general._The Secretary shall report to each
manufacturer, not later than 60 days after the end of each
calendar quarter, information on the total number, for each
covered outpatient drug, of units of each dosage form, strength,
and package size dispensed under the plan during the quarter, on
the basis of the data reported to the Secretary described in
paragraph (1)(B).
__``(B) Audit._The Comptroller General may audit the records of
the Secretary to the extent necessary to determine the accuracy
of reports by the Secretary pursuant to subparagraph (A).
Adjustments to rebates shall be made to the extent determined
necessary by the audit to reflect actual units of drugs
dispensed.
__``(3) Provision of price information by manufacturer._
__``(A) Quarterly pricing information._Each manufacturer with an
agreement in effect under this section shall report to the
Secretary, not later than 30 days after the last day of each
calendar quarter, on the average manufacturer retail price and
the average manufacturer non-retail price for each dosage form
and strength of each covered outpatient drug for the quarter.
__``(B) Base quarter prices._Each manufacturer of a covered
outpatient drug with an agreement under this section shall report
to the Secretary, by not later than 30 days after the effective
date of such agreement (or, if later, 30 days after the end of
the base quarter), the average manufacturer retail price, for
such base quarter, for each dosage form and strength of each such
covered drug.
__``(C) Verification of average manufacturer price._The Secretary
may inspect the records of manufacturers, and survey wholesalers,
pharmacies, and institutional purchasers of drugs, as necessary
to verify prices reported under subparagraph (A).
__``(D) Penalties._
__``(i) Civil money penalties._The Secretary may impose a civil
money penalty on a manufacturer with an agreement under this
section_
__``(I) for failure to provide information required under
subparagraph (A) on a timely basis, in an amount up to $10,000
per day of delay;
__``(II) for refusal to provide information about charges or
prices requested by the Secretary for purposes of verification
pursuant to subparagraph (C), in an amount up to $100,000; and
__``(III) for provision, pursuant to subparagraph (A) or (B), of
information that the manufacturer knows or should know is false,
in an amount up to $100,000 per item of information.
Such civil money penalties are in addition to any other penalties
prescribed by law. The provisions of section 1128A (other than
subsections (a) (with respect to amounts of penalties or
additional assessments) and (b)) shall apply to a civil money
penalty under this subparagraph in the same manner as such
provisions apply to a penalty or proceeding under section
1128A(a).
__``(ii) Termination of agreement._If a manufacturer with an
agreement under this section has not provided information
required under subparagraph (A) or (B) within 90 days of the
deadline imposed, the Secretary may suspend the agreement with
respect to covered outpatient drugs dispensed after the end of
such 90-day period and until the date such information is
reported (but in no case shall a suspension be for less than 30
days).
__``(4) Length of agreement._
__``(A) In general._A rebate agreement shall be effective for an
initial period of not less than one year and shall be
automatically renewed for a period of not less than one year
unless terminated under subparagraph (B).
__``(B) Termination._
__``(i) By the secretary._The Secretary may provide for
termination of a rebate agreement for violation of the
requirements of the agreement or other good cause shown. Such
termination shall not be effective earlier than 60 days after the
date of notice of such termination. The Secretary shall afford a
manufacturer an opportunity for a hearing concerning such
termination, but such hearing shall not delay the effective date
of the termination.
__``(ii) By a manufacturer._A manufacturer may terminate a rebate
agreement under this section for any reason. Any such termination
shall not be effective until the calendar quarter beginning at
least 60 days after the date the manufacturer provides notice to
the Secretary.
__``(iii) Effective date of termination._Any termination under
this subparagraph shall not affect rebates due under the
agreement before the effective date of its termination.
__``(iv) Notice to pharmacies._In the case of a termination under
this subparagraph, the Secretary shall notify pharmacies that are
participating suppliers under this part and physician
organizations not less than 30 days before the effective date of
such termination.
__``(c) Amount of Rebate._
__``(1) Basic rebate._Each manufacturer shall remit a basic
rebate to the Secretary for each calendar quarter in an amount,
with respect to each dosage form and strength of a covered drug
(except as provided under paragraph (4)), equal to the product
of_
__``(A) the total number of units subject to rebate for such
quarter, as described in subsection (b)(1)(B); and
__``(B) the greater of_
__``(i) the difference between the average manufacturer retail
price and the average manufacturer non-retail price,
__``(ii) 17 percent of the average manufacturer retail price, or
__``(iii) the amount determined pursuant to paragraph (4).
__``(2) Additional rebate._Each manufacturer shall remit to the
Secretary, for each calendar quarter, an additional rebate for
each dosage form and strength of a covered drug (except as
provided under paragraph (4)), in an amount equal to_
__``(A) the total number of units subject to rebate for such
quarter, as described in subsection (b)(1)(B), multiplied by
__``(B) the amount, if any, by which the average manufacturer
retail price for covered drugs of the manufacturer exceeds the
average manufacturer retail price for the base quarter, increased
by the percentage increase in the Consumer Price Index for all
urban consumers (U.S. average) from the end of such base quarter
to the month before the beginning of such calendar quarter.
__``(3) Negotiated rebate amount for new drugs._
__``(A) In general._The Secretary may negotiate with the
manufacturer a per-unit rebate amount, in accordance with this
paragraph, for any covered outpatient drug (except as provided
under paragraph (4)) first marketed after June 30, 1993_
__``(i) which is not marketed in any country specified in section
802(b)(4)(A) of the Federal Food, Drug, and Cosmetic Act and for
which the Secretary believes the average manufacturer's retail
price may be excessive, or
__``(ii) which is marketed in one or more of such countries, at
prices significantly lower than the average manufacturer retail
price.
__``(B) Maximum rebate amount for drugs marketed in certain
countries._The rebate negotiated pursuant to this paragraph for a
drug described in subparagraph (A)(ii) may be an amount up to the
difference between the average manufacturer retail price and any
price at which the drug is available to wholesalers in a country
specified in such section 802(b)(4)(A).
__``(C) Factors to be considered._In making determinations with
respect to the prices of a covered drug described in subparagraph
(A) and in negotiating a rebate amount pursuant to this
paragraph, the Secretary shall take into consideration, as
applicable and appropriate, the prices of other drugs in the same
therapeutic class, cost information requested by the Secretary
and supplied by the manufacturer or estimated by the Secretary,
prescription volumes, economies of scale, product stability,
special manufacturing requirements, prices of the drug in
countries specified in subparagraph (A)(i) (in the case of a drug
described in such subparagraph), and other relevant factors.
__``(D) Option to exclude coverage._If the Secretary is unable to
negotiate with the manufacturer an acceptable rebate amount with
respect to a covered outpatient drug pursuant to this paragraph,
the Secretary may exclude such drug from coverage under this
part.
__``(E) Effective date of exclusion from coverage._An exclusion
of a drug from coverage pursuant to subparagraph (D) shall be
effective on and after_
__``(i) the date 6 months after the effective date of marketing
approval of such drug by the Food and Drug Administration, or
__``(ii) (if earlier) the date the manufacturer terminates
negotiations with the Secretary concerning the rebate amount.
__``(4) No rebate required for generic drugs._Paragraphs (1)
through (3) shall not apply with respect to a covered outpatient
drug that is not a single source drug or an innovator multiple
source drug (as such terms are defined in section 1927(k)).
__``(5) Deposit of rebates._The Secretary shall deposit rebates
under this section in the Federal Supplementary Medical Insurance
Trust Fund established under section 1841.
__``(d) Confidentiality of Information._Notwithstanding any other
provision of law, information disclosed by a manufacturer under
this section is confidential and shall not be disclosed by the
Secretary, except_
__``(A) as the Secretary determines to be necessary to carry out
this section,
__``(B) to permit the Comptroller General to review the
information provided, and
__``(C) to permit the Director of the Congressional Budget Office
to review the information provided.
__``(e) Agreement to Give Equal Access to Discounts._An agreement
under this subsection by a manufacturer of covered outpatient
drugs shall guarantee that the manufacturer will offer, to each
wholesaler or retailer (or other purchaser representing a group
of such wholesalers or retailers) that purchases such drugs on
substantially the same terms (including such terms as prompt
payment, cash payment, volume purchase, single-site delivery, the
use of formularies by purchasers, and any other terms effectively
reducing the manufacturer's costs) as any other purchaser
(including any institutional purchaser) the same price for such
drugs as is offered to such other purchaser. In determining a
manufacturer's compliance with the previous sentence, there shall
not be taken into account terms offered to the Department of
Veterans Affairs, the Department of Defense, or any public
program.
__``(f) Definitions._For purposes of this section_
__``(1) Average manufacturer retail price._The term `average
manufacturer retail price' means, with respect to a covered
outpatient drug of a manufacturer for a calendar quarter, the
average price (inclusive of discounts for cash payment, prompt
payment, volume purchases, and rebates (other than rebates under
this section), but exclusive of nominal prices) paid to the
manufacturer for the drug in the United States for drugs
distributed to the retail pharmacy class of trade.
__``(2) Average manufacturer non-retail price._The term `average
manufacturer non-retail price' means, with respect to a covered
outpatient drug of a manufacturer for a calendar quarter, the
weighted average price (inclusive of discounts for cash payment,
prompt payment, volume purchases, and rebates (other than rebates
under this section), but exclusive of nominal prices) paid to the
manufacturer for the drug in the United States by hospitals and
other institutional purchasers that purchase drugs for
institutional use and not for resale.
__``(3) Base quarter._The term `base quarter' means, with respect
to a covered outpatient drug of a manufacturer, the calendar
quarter beginning April 1, 1993, or (if later) the first full
calendar quarter during which the drug was marketed in the United
States.
__``(4) Covered drug._The term `covered drug' includes each
innovator multiple source drug and single source drug, as those
terms are defined in section 1927(k)(7).
__``(5) Manufacturer._The term `manufacturer' means, with respect
to a covered outpatient drug_
__``(A) the entity whose National Drug Code number (as issued
pursuant to section 510(e) of the Federal Food, Drug, and
Cosmetic Act) appears on the labeling of the drug; or
__``(B) if the number described in subparagraph (A) does not
appear on the labeling of the drug, the person named as the
applicant in a human drug application (in the case of a new drug)
or the product license application (in the case of a biological
product) for such drug approved by the Food and Drug
Administration.''.
__(b) Conforming Amendment Relating to Exclusions From
Coverage._Section 1862(a)(18) of such Act (42 U.S.C. 1395y(a)),
as added by section 2001(c), is amended_
__(A) by striking ``or'' at the end of subparagraph (A),
__(B) by striking the period at the end of subparagraph (B) and
inserting ``, or'', and
__(C) by adding at the end the following new subparagraphs:
__``(C) furnished during a year for which the drug's manufacturer
does not have in effect a rebate agreement with the Secretary
that meets the requirements of section 1850 for the year, or
__``(D) excluded from coverage during the year by the Secretary
pursuant to section 1850(c)(3)(D) (relating to negotiated rebate
amounts for certain new drugs).''.

SEC. 2004. COUNSELING BY PARTICIPATING PHARMACIES.
__Section 1842(h) of the Social Security Act (42 U.S.C. 1395u(h))
is amended by adding at the end the following:
__``(8) A pharmacy that is a participating supplier under this
part shall agree to answer questions of individuals enrolled
under this part who receive a covered outpatient drug from the
pharmacy regarding the appropriate use of the drug, potential
interactions between the drug and other drugs dispensed to the
individual, and other matters relating to the dispensing of such
drugs.''.
SEC. 2005. EXTENSION OF 25 PERCENT RULE FOR PORTION OF PREMIUM
ATTRIBUTABLE TO COVERED OUTPATIENT DRUGS.
__Section 1839(e) of the Social Security Act (42 U.S.C. 1395r(e))
is amended by adding at the end the following:
__``(3) Notwithstanding the provisions of subsection (a), the
portion of the monthly premium for each individual enrolled under
this part for each month after December 1998 that is attributable
to covered outpatient drugs shall be an amount equal to 50
percent of the portion of the monthly actuarial rate for
enrollees age 65 and over, as determined under subsection (a)(1)
and applicable to such month, that is attributable to covered
outpatient drugs.''.
SEC. 2006. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES.
__(a) In General._Section 1832(a)(2)(A) of the Social Security
Act (42 U.S.C. 1395k(a)(2)(A)) is amended by inserting ``and home
infusion drug therapy services'' before the semicolon.
__(b) Home Infusion Drug Therapy Services Defined._Section 1861
of such Act (42 U.S.C. 1395x) is amended_
__(1) by redesignating the subsection (jj) inserted by section
4156(a)(2) of the Omnibus Budget Reconciliation Act of 1990 as
subsection (kk); and
__(2) by inserting after such subsection the following new
subsection:
``Home Infusion Drug Therapy Services
__``(ll)(1) The term `home infusion drug therapy services' means
the items and services described in paragraph (2) furnished to an
individual who is under the care of a physician_
__``(A) in a place of residence used as the individual's home,
__``(B) by a qualified home infusion drug therapy provider (as
defined in paragraph (3)) or by others under arrangements with
them made by that provider, and
__``(C) under a plan established and periodically reviewed by a
physician.
__``(2) The items and services described in this paragraph are
such nursing, pharmacy, and related services (including medical
supplies, intravenous fluids, delivery, and equipment) as are
necessary to conduct safely and effectively a drug regimen
through use of a covered home infusion drug (as defined in
subsection (t)(5)), but do not include such covered outpatient
drugs.
__``(3) The term `qualified home infusion drug therapy provider'
means any entity that the secretary determines meets the
following requirements:
__``(A) The entity is capable of providing or arranging for the
items and services described in paragraph (2) and covered home
infusion drugs.
__``(B) The entity maintains clinical records on all patients.
__``(C) The entity adheres to written protocols and policies with
respect to the provision of items and services.
__``(D) The entity makes services available (as needed) seven
days a week on a 24-hour basis.
__``(E) The entity coordinates all service with the patient's
physician.
__``(F) The entity conducts a quality assessment and assurance
program, including drug regimen review and coordination of
patient care.
__``(G) The entity assures that only trained personnel provide
covered home infusion drugs (and any other service for which
training is required to provide the service safely).
__``(H) The entity assumes responsibility for the quality of
services provided by others under arrangements with the entity.
__``(I) In the case of an entity in any State in which State or
applicable local law provides for the licensing of entities of
this nature, (A) is licensed pursuant to such law, or (B) is
approved, by the agency of such State or locality responsible for
licensing entities of this nature, as meeting the standards
established for such licensing.
__``(J) The entity meets such other requirements as the Secretary
may determine are necessary to assure the safe and effective
provision of home infusion drug therapy services and the
efficient administration of the home infusion drug therapy
benefit.''.
__(c) Payment._
__(1) In general._Section 1833 of such Act (42 U.S.C. 1395l) is
amended_
__(A) in subsection (a)(2)(B), by striking ``or (E)'' and
inserting ``(E), or (F)'',
__(B) in subsection (a)(2)(D), by striking ``and'' at the end,
__(C) in subsection (a)(2)(E), by striking the semicolon and
inserting ``; and'',
__(D) by inserting after subsection (a)(2)(E) the following new
subparagraph:
__``(F) with resect to home infusion drug therapy services, the
amounts described in section 1834(j);'',
__(E) in the first sentence of subsection (b), by striking
``services, (3)'' and inserting ``services and home infusion drug
therapy services, (3)''.
__(2) Amount described._Section 1834 of such Act, as amended by
section 13544(b)(i) of OBRA   1993, is amended by adding at the
end the following new subsection:
__``(j) Home infusion Drug Therapy Services._
__``(1) In general._With respect to home infusion drug therapy
services, payment under this part shall be made in an amount
equal to the lesser of the actual charges for such services or
the fee schedule established under paragraph (2).
__``(2) Establishment of fee schedule._The Secretary shall
establish by regulation before the beginning of 1996 and each
succeeding year a fee schedule for home infusion drug therapy
services for which payment is made under this part. A fee
schedule established under this subsection shall be on a per diem
basis.''.
__(3) Prohibition on certain referrals._Section 1877(h)(6) of
such Act (42 U.S.C. 1395nn(h)(6)), as amended by section 13562(a)
of OBRA   1993, is amended by adding at the end the following:
__``(L) Home infusion drug therapy services.''.
__(d) Certification._Section 1835(a)(2) of such Act (42 U.S.C.
1395n(a)(2)) is amended_
__(1) by striking ``and'' at the end of subparagraph (E),
__(2) by striking the period at the end of subparagraph (F) and
inserting ``; and'', and
__(3) by inserting after subparagraph (F) the following:
__``(G) in the case of home infusion drug therapy services, (i)
such services are or were required because the individual needed
such services for the administration of a covered home infusion
drug, (ii) a plan for furnishing such services has been
established and is reviewed periodically by a physician, and
(iii) such services are or were furnished while the individual is
or was under the care of a physician.''.
__(e) Certification of Home infusion Drug Therapy Providers;
Intermediate Sanctions for Noncompliance._
__(1) Treatment as provider of services._Section 1861(u) of such
Act (42 U.S.C. 1395x(u)) is amended by inserting ``home infusion
drug therapy provider,'' after ``hospice program,''.
__(2) Consultation with state agencies and other
organizations._Section 1863 of such Act (42 U.S.C. 1395z) is
amended by striking ``and (dd)(2)'' and inserting ``(dd)(2), and
(ll)(3)''.
__(3) Use of state agencies in determining compliance._Section
1864(a) of such Act (42 U.S.C. 1395aa(a)) is amended_
__(A) in the first sentence, by striking ``an agency is a hospice
program'' and inserting ``an agency or entity is a hospice
program or a home infusion drug therapy provider,'' after ``home
health agency, or whether''; and
__(B) in the second sentence_
__(i) by striking ``institution or agency'' and inserting
``institution, agency, or entity'', and
__(ii) by striking ``or hospice program'' and inserting ``hospice
program, or home infusion drug therapy provider''.
__(4) Application of intermediate sanctions._Section 1846 of such
Act (42 U.S.C. 1395w     2) is amended_
__(A) in the heading, by adding ``and for qualified home infusion
drug therapy providers'' at the end,
__(B) in subsection (a), by inserting ``or that a qualified home
infusion drug therapy provider that is certified for
participation under this title no longer substantially meets the
requirements of section 1861(ll)(3)'' after ``under this part'',
and
__(C) in subsection (b)(2)(A)(iv), by inserting ``or home
infusion drug therapy services'' after ``clinical diagnostic
laboratory tests''.
__(f) Use of Regional Intermediaries in Administration of
Benefit._Section 1816 of such Act (42 U.S.C. 1395h) is amended by
adding at the end the following new subsection:
__``(k) With respect to carrying out functions relating to
payment for home infusion drug therapy services and covered home
infusion drugs, the Secretary may enter into contracts with
agencies or organizations under this section to perform such
functions on a regional basis.''.
SEC. 2007. CIVIL MONEY PENALTIES FOR EXCESSIVE CHARGES.
__Section 1128A(a) of the Social Security Act (42 U.S.C. 1320a
7a(a)), as amended by sections 4041(a)(1), 4043(a)(1), and
4043(c), is amended_
__(1) by striking ``,or'' at the end of paragraph (5) and adding
a semicolon,
__(3) by adding ``or'' at the end of paragraph (6), and
__(4) by inserting after paragraph (6) the following:
__``(7) in the case of a pharmacy, presents or causes to be
presented to any person a request for payment for covered
outpatient drugs (as defined in section 1861(t)) dispensed to an
individual enrolled under part B of title XVIII and for which the
amount charged by the pharmacy is greater than the amount the
pharmacy charges the general public (as determined by the
Secretary);''.
SEC. 2008. CONFORMING AMENDMENTS TO MEDICAID PROGRAM.
__(a) In General._
__(1) Requiring medicare rebate as condition of coverage._The
first sentence of section 1927(a)(1) of the Social Security Act
(42 U.S.C. 1396r    8(a)(1)) is amended_
__(A) in the first sentence of paragraph (1), by striking ``and
paragraph (6)'' and inserting ``, paragraph (6), and (for
calendar quarters beginning on or after January 1, 1996)
paragraph (7)''; and
__(B) by adding at the end the following new paragraph:
__``(7) Requirement relating to rebate agreements for covered
outpatient drugs under medicare program._A manufacturer meets the
requirements of this paragraph for quarters in a year if the
manufacturer has in effect an agreement with the Secretary under
section 1850 for providing rebates for covered outpatient drugs
furnished to individuals under title XVIII during the year.''.

__(2) Non-duplication of rebates._Section 1927(b)(1) of the
Social Security Act (42 U.S.C. 1396r    8(b)(1)) is amended_
__(A) by redesignating subparagraph (B) as subparagraph (C), and
__(B) by inserting after subparagraph (A) the following new
subparagraph:
__``(B) Non-duplication of medicare rebate._Covered drugs
furnished to an individual eligible for benefits under both part
B of title XVIII and a State plan under this title shall not be
included in the determination of units of covered outpatient
drugs subject to rebate under this section.''.

__(b) Effective Date._The amendments made by subsection (a) shall
apply to quarters beginning on or after January 1, 1996.


SEC. 2009. EFFECTIVE DATE.
__The amendments made by this subtitle shall apply to items and
services furnished on or after January 1, 1996.

Title II, Subtitle B

Subtitle B_Long-Term Care
PART 1_STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR
INDIVIDUALS WITH DISABILITIES
SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES
FOR INDIVIDUALS WITH DISABILITIES.
__(a) In General._Each State that has a plan for the home and
community-based services to individuals with disabilities
submitted to and approved by the Secretary under section 2102(b)
is entitled to payment in accordance with section 2108.
__(b) No Individual Entitlement Established._Nothing in this part
shall be construed to create an entitlement in individuals or a
requirement that a State with such an approved plan expend the
entire amount of funds to which it is entitled in any year.
__(c) State Defined._In this subpart, the term ``State'' includes
the District of Columbia, Puerto Rico, the Virgin Islands, Guam,
American Samoa, and the Northern Mariana Islands.
SEC. 2102. STATE PLANS.
__(a) Plan Requirements._In order to be approved under subsection
(b), a State plan for home and community-based services for
individuals with disabilities must meet the following
requirements (except to the extent provided in subsection (b)(2),
relating to phase-in period):
__(1) Eligibility._
__(A) In general._Within the amounts provided by the State (and
under section 2108) for such program, the plan shall provide that
services under the plan will be available to individuals with
disabilities (as defined in section 2103(a)) in the State.
__(B) Initial screening._The plan shall provide a process for the
initial screening of individuals who appear to have some
reasonable likelihood of being an individual with disabilities.
__(C) Restrictions._The plan may not limit the eligibility of
individuals with disabilities based on_
__(i) income,
__(ii) age,
__(iii) geography,
__(iv) nature, severity, or category of disability,
__(v) residential setting (other than an institutional setting),
or
__(vi) other grounds specified by the Secretary.
__(D) Maintenance of effort._The plan must provide assurances
that, in the case of an individual receiving medical assistance
for home and community-based services under the State medicaid
plan as of the date of the enactment of this Act, the State will
continue to make available (either under this plan, under the
State medicaid plan, 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.
__(2) Services._
__(A) Specification._Consistent with section 2104, the plan shall
specify_
__(i) the services made available under the State plan,
__(ii) the extent and manner in which such services are allocated
and made available to individuals with disabilities, and
__(iii) the manner in which services under the State plan are
coordinated with each other and with health and long-term care
services available outside the plan for individuals with
disabilities.
Subject to section 2104(e)(1)(B), such services may be delivered
in an individual's home, a range of community residential
arrangements, or outside the home.
__(B) Allocation._The State plan_
__(i) shall specify how it will allocate services under the plan,
during and after the 7-fiscal-year phase-in period beginning with
fiscal year 1996, among covered individuals with disabilities,
and
__(ii) may not allocate such services based on the income or
other financial resources of such individuals.
__(C) Limitation on licensure or certification._The State may not
subject consumer-directed providers of personal assistance
services to licensure, certification, or other requirements which
the Secretary finds not to be necessary for the health and safety
of individuals with disabilities.
__(D) Consumer choice._To the extent possible, the choice of an
individual with disabilities (and that individual's family)
regarding which covered services to receive and the providers who
will provide such services shall be followed.
__(E) Requirement to serve low-income individuals._The State plan
shall assure that_
__(i) the proportion of the population of low-income individuals
with disabilities in the State that represents individuals with
disabilities who are provided home and community-based services
either under the plan, under the State medicaid plan, or under
both, is not less than
__(ii) the proportion of the population of the State that
represents individuals who are low-income individuals.
__(3) Cost sharing._The plan shall impose cost sharing with
respect to covered services only in accordance with section 2105.

__(4) Types of providers and requirements for participation._The
plan shall specify_
__(A) the types of service providers eligible to participate in
the program under the plan, which shall include consumer-directed
providers, and
__(B) any requirements for participation applicable to each type
of service provider.
__(5) Budget._The plan shall specify how the State will manage
Federal and State funds available under the plan during each
5-fiscal-year period (with the first such period beginning with
fiscal year 1996) to serve all categories of individuals with
disabilities and meet the requirements of this subsection.
__(6) Provider reimbursement._
__(A) Payment methods._The plan shall specify the payment methods
to be used to reimburse providers for services furnished under
the plan. Such methods may include retrospective reimbursement on
a fee-for-service basis, prepayment on a capitation basis,
payment by cash or vouchers to individuals with disabilities, or
any combination of these methods. In the case of the use of cash
or vouchers, the plan shall specify how the plan will assure
compliance with applicable employment tax provisions.
__(B) Payment rates._The plan shall specify the methods and
criteria to be used to set payment rates for services furnished
under the plan (including rates for cash payments or vouchers to
individuals with disabilities).
__(C) Plan payment as payment in full._The plan shall restrict
payment under the plan for covered services to those providers
that agree to accept the payment under the plan (at the rates
established pursuant to subparagraph (B)) and any cost sharing
permitted or provided for under section 2105 as payment in full
for services furnished under the plan.
__(7) Quality assurance and safeguards._The State plan shall
provide for quality assurance and safeguards for applicants and
beneficiaries in accordance with section 2106.
__(8) Advisory group._The State plan shall_
__(A) assure the establishment and maintenance of an advisory
group under section 2107(b), and
__(B) include the documentation prepared by the group under
section 2107(b)(4)..
__(9) Administration._
__(A) State agency._The plan shall designate a State agency or
agencies to administer (or to supervise the administration of)
the plan.
__(B) Administrative expenditures._Effective beginning with
fiscal year 2003, the plan shall contain assurances that not more
than 10 percent of expenditures under the plan for all quarters
in any fiscal year shall be for administrative costs.
__(C) Coordination._The plan shall specify how the plan_
__(i) will be integrated with the State medicaid plan, titles V
and XX of the Social Security Act, programs under the Older
Americans Act of 1965, programs under the Developmental
Disabilities Assistance and Bill of Rights Act, the Individuals
with Disabilities Education Act, and any other Federal or State
programs that provide services or assistance targeted to
individuals with disabilities, and
__(ii) will be coordinated with health plans.
__(10) Reports and information to secretary; audits._The plan
shall provide that the State will furnish to the Secretary_
__(A) such reports, and will cooperate with such audits, as the
Secretary determines are needed concerning the State's
administration of its plan under this subpart, including the
processing of claims under the plan, and
__(B) such data and information as the Secretary may require in
order to carry out the Secretary's responsibilities.
__(11) Use of state funds for matching._
__(A) In general._The plan shall provide assurances that Federal
funds will not be used to provide for the State share of
expenditures under this subpart.
__(B) Incorporation of disqualification for certain
provider-related donations and health related taxes._The
Secretary shall apply the provisions of section 1903(w) of the
Social Security Act to plans and payment under this title in a
manner similar to the manner in which such section applies to
plans and payment under title XIX of such Act.
__(b) Approval of Plans._The Secretary shall approve a plan
submitted by a State if the Secretary determines that the plan_
__(1) was developed by the State after consultation with
individuals with disabilities and representatives of groups of
such individuals, and
__(2) meets the requirements of subsection (a).
__(c) Monitoring._The Secretary shall monitor the compliance of
State plans with the eligibility requirements of section 2103 and
may monitor the compliance of such plans with other requirements
of this subpart.
__(d) Regulations._The Secretary shall issue such regulations as
may be appropriate to carry out this subpart on a timely basis.
SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.
__(a) In General._In this subpart, the term ``individual with
disabilities'' means any individual within one or more of the
following 4 categories of individuals:
__(1) Individuals requiring help with activities of daily
living._An individual of any age who_
__(A) requires hands-on or standby assistance, supervision, or
cueing (as defined in regulations) to perform three or more
activities of daily living (as defined in subsection (c)), and
__(B) is expected to require such assistance, supervision, or
cueing over a period of at least 100 days.
__(2) Individuals with severe cognitive or mental impairment._An
individual of any age_
__(A) whose score, on a standard mental status protocol (or
protocols) appropriate for measuring the individual's particular
condition specified by the Secretary, indicates either severe
cognitive impairment or severe mental impairment, or both;
__(B) who_
__(i) requires hands-on or standby assistance, supervision, or
cueing with one or more activities of daily living,
__(ii) requires hands-on or standby assistance, supervision, or
cueing with at least such instrumental activity (or activities)
of daily living related to cognitive or mental impairment as the
Secretary specifies, or
__(iii) 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
__(C) whose is expected to meet the requirements of subparagraphs
(A) and (B) over a period of at least 100 days.
__(3) Individuals with severe or profound mental retardation._An
individual of any age who has severe or profound mental
retardation (as determined according to a protocol specified by
the Secretary).
__(4) Severely disabled children._An individual under 6 years of
age who_
__(A) has a severe disability or chronic medical condition,
__(B) but for receiving personal assistance services or any of
the services described in section 2104(d)(1), would require
institutionalization in a hospital, nursing facility, or
intermediate care facility for the mentally retarded, and
__(C) is expected to have such disability or condition and
require such services over a period of at least 100 days.
__(b) Determination._
__(1) In general._The determination of whether an individual is
an individual with disabilities shall be made, by persons or
entities specified under the State plan, using a uniform protocol
consisting of an initial screening and assessment specified by
the Secretary. A State may collect additional information, at the
time of obtaining information to make such determination, in
order to provide for the assessment and plan described in section
2104(b) or for other purposes. The State shall establish a fair
hearing process for appeals of such determinations.
__(2) Periodic reassessment._The determination that an individual
is an individual with disabilities shall be considered to be
effective under the State plan for a period of not more than 12
months (or for such longer period in such cases as a significant
change in an individual's condition that may affect such
determination is unlikely). A reassessment shall be made if there
is a significant change in an individual's condition that may
affect such determination.
__(c) Activity of Daily Living Defined._In this subpart, the term
``activity of daily living'' means any of the following: eating,
toileting, dressing, bathing, and transferring in and out of bed.


SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER STATE
PLAN.
__(a) Specification._
__(1) In general._Subject to the succeeding provisions of this
section, the State plan under this subpart shall specify_
__(A) the home and community-based services available under the
plan to individuals with disabilities (or to such categories of
such individuals), and
__(B) any limits with respect to such services.
__(2) Flexibility in meeting individual needs._The services shall
be specified in a manner that permits sufficient flexibility for
providers to meet the needs of individuals with disabilities in a
cost effective manner. Subject to subsection (e)(1)(B), such
services may be delivered in an individual's home, a range of
community residential arrangements, or outside the home.
__(b) Requirement for Needs Assessment and Plan of Care._
__(1) In general._The State plan shall provide for home and
community-based services to an individual with disabilities only
if_
__(A) a comprehensive assessment of the individual's need for
home and community-based services (regardless of whether all
needed services are available under the plan) has been made,
__(B) an individualized plan of care based on such assessment is
developed, and
__(C) such services are provided consistent with such plan of
care.
__(2) Involvement of individuals._The individualized plan of care
under paragraph (1)(B) for an individual with disabilities shall_
__(A) be developed by qualified individuals (specified under the
State plan),
__(B) be developed and implemented in close consultation with the
individual and the individual's family,
__(C) be approved by the individual (or the individual's
representative), and
__(D) be reviewed and updated not less often than every 6 months.
__(3) Plan of care._The plan of care under paragraph (1)(B)
shall_
__(A) specify which services specified under the individual plan
will be provided under the State plan under this subpart,
__(B) identify (to the extent possible) how the individual will
be provided any services specified under the plan of care and not
provided under the State plan, and
__(C) specify how the provision of services to the individual
under the plan will be coordinated with the provision of other
health care services to the individual.
The State shall make reasonable efforts to identify and arrange
for services described in subparagraph (B). Nothing in this
subsection shall be construed as requiring a State (under the
State plan or otherwise) to provide all the services specified in
such a plan.
__(c) Mandatory Coverage of Personal Assistance Services._The
State plan shall include, in the array of services made available
to each category of individuals with disabilities, both
agency-administered and consumer-directed personal assistance
services (as defined in subsection (g)).
__(d) Additional Services._
__(1) Types of services._Subject to subsection (e), services
available under a State plan under this subpart shall include any
(or all) of the following:
__(A) Case management.
__(B) Homemaker and chore assistance.
__(C) Home modifications.
__(D) Respite services.
__(E) Assistive devices.
__(F) Adult day services.
__(G) Habilitation and rehabilitation.
__(H) Supported employment.
__(I) Home health services.
__(J) Any other care or assistive services (approved by the
Secretary) that the State determines will help individuals with
disabilities to remain in their homes and communities.

__(2) Criteria for selection of services._The State plan shall
specify_
__(A) the methods and standards used to select the types, and the
amount, duration, and scope, of services to be covered under the
plan and to be available to each category of individuals with
disabilities, and
__(B) how the types, and the amount, duration, and scope, of
services specified meet the needs of individuals within each of
the 4 categories of individuals with disabilities.


__(e) Exclusions and Limitations._
__(1) In general._A State plan may not provide for coverage of_
__(A) room and board,
__(B) services furnished in a hospital, nursing facility,
intermediate care facility for the mentally retarded, or other
institutional setting specified by the Secretary,
__(C) items and services to the extent coverage is provided for
the individual under a health plan or the medicare program.
__(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 disability, the
availability of informal care.
__(f) Payment for Services._A State plan may provide for the use
of_
__(1) vouchers,
__(2) cash payments directly to individuals with disabilities,
__(3) capitation payments to health plans, and
__(4) payment to providers,
to pay for covered services.
__(g) Personal Assistance Services._
__(1) In general._In this section, the term ``personal assistance
services'' means those services specified under the State plan as
personal assistance services and shall include at least hands-on
and standby assistance, supervision, and cueing with activities
of daily living, whether agency-administered or consumer-directed
(as defined in paragraph (2)).
__(2) Consumer-directed; agency-administered._In this part:
__(A) The term ``consumer-directed'' means, with reference to
personal assistance services or the provider of such services,
services that are provided by an individual who is selected and
managed (and, at the individual's option, trained) by the
individual receiving the services.
__(B) The term ``agency-administered'' means, with respect to
such services, services that are not consumer-directed.
SEC. 2105. COST SHARING.
__(a) No or Nominal Cost Sharing for Poorest._The State plan may
not impose any cost sharing (other than nominal cost sharing) for
individuals with income (as determined under subsection (c)) less
than 150 percent of the poverty level (as defined in section
1902(25)) applicable to a family of the size involved.
__(b) Sliding Scale for Remainder._The State plan shall impose
cost sharing in the form of coinsurance (based on the amount paid
under the State plan for a service)_
__(1) at a rate of 10 percent for individuals with disabilities
with income not less than 150 percent, and less than 250 percent,
of the poverty level applicable to a family of the size involved;
__(2)  at a rate of 25 percent for such individuals with income
not less than 250 percent, and less than 400 percent, of the
poverty level applicable to a family of the size involved; and
__(3)  at a rate of 40 percent for such individuals with income
equal to at least 400 percent of the poverty level applicable to
a family of the size involved.
__(c) Determination of Income for Purposes of Cost Sharing._The
State plan shall specify the process to be used to determine the
income of an individual with disabilities for purposes of this
section. Such process shall be consistent with standards
specified by the Secretary.

SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.
__(a) Quality Assurance._The State plan shall specify how the
State will ensure and monitor the quality of services, including_
__(1) safeguarding the health and safety of individuals with
disabilities,
__(2) the minimum standards for agency providers and how such
standards will be enforced,
__(3) the minimum competency requirements for agency provider
employees who provide direct services under this subpart and how
the competency of such employees will be enforced,
__(4) 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,
__(5) participation in quality assurance activities, and
__(6) 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.
__(b) Safeguards._
__(1) Confidentiality._The State plan shall provide safeguards
which restrict the use or disclosure of information concerning
applicants and beneficiaries to purposes directly connected with
the administration of the plan (including performance reviews
under section 2602).
__(2) Safeguards against abuse._The State plans shall provide
safeguards against physical, emotional, or financial abuse or
exploitation (specifically including appropriate safeguards in
cases where payment for program benefits is made by cash payments
or vouchers given directly to individuals with disabilities).
SEC. 2107. ADVISORY GROUPS.
__(a) Federal Advisory Group._
__(1) Establishment._The Secretary shall establish an advisory
group, to advise the Secretary and States on all aspects of the
program under this subpart.
__(2) Composition._The group shall be composed of individuals
with disabilities and their representatives, providers, Federal
and State officials, and local community implementing agencies
and a majority of its members shall be individuals with
disabilities and their representatives.
__(b) State Advisory Groups._
__(1) In general._Each State plan shall provide for the
establishment and maintenance of an advisory group to advise the
State on all aspects of the State plan under this subpart.
__(2) Composition._Members of each advisory group shall be
appointed by the Governor (or other chief executive officer of
the State) and shall include individuals with disabilities and
their representatives, providers, State officials, and local
community implementing agencies and a majority of its members
shall be individuals with disabilities and their representatives.
__(3) Selection of members._Each State shall establish a process
whereby all residents of the State, including individuals with
disabilities and their representatives, shall be given the
opportunity to nominate members to the advisory group.
__(4) Particular concerns._Each advisory group shall_
__(A) before the State plan is developed, advise the State on
guiding principles and values, policy directions, and specific
components of the plan,
__(B) meet regularly with State officials involved in developing
the plan, during the development phase, to review and comment on
all aspects of the plan,
__(C) participate in the public hearings to help assure that
public comments are addressed to the extent practicable,
__(D) document any differences between the group's
recommendations and the plan,
__(E) document specifically the degree to which the plan is
consumer-directed, and
__(F) meet regularly with officials of the designated State
agency (or agencies) to provide advice on all aspects of
implementation and evaluation of the plan.


SEC. 2108. PAYMENTS TO STATES.
__(a) In General._Subject to section 2102(a)(9)(B) (relating to
limitation on payment for administrative costs), the Secretary
shall pay to each State with a plan approved under this subpart,
for each quarter, from its allotment under section 2109(b), an
amount equal to_
__(1) the Federal matching percentage (as defined in subsection
(b)) of amount demonstrated by State claims to have been expended
during the quarter for home and community-based services under
the plan for individuals with disabilities; plus
__(2) an amount equal to 90 percent of amount expended during the
quarter under the plan for activities (including preliminary
screening) relating to determination of eligibility and
performance of needs assessment; plus
__(3) an amount equal to 90 percent (or, beginning with quarters
in fiscal year 2003, 75 percent) of the amount expended during
the quarter for the design, development, and installation of
mechanical claims processing systems and for information
retrieval; plus
__(4) an amount equal to 50 percent of the remainder of the
amounts expended during the quarter as found necessary by the
Secretary for the proper and efficient administration of the
State plan.
__(b) Federal Matching Percentage._
__(1) In general._In subsection (a), the term ``Federal matching
percentage'' means, with respect to a State, the reference
percentage specified in paragraph (2) increased by 28 percentage
points, except that the Federal matching percentage shall in no
case be less than 75 percent or more than 95 percent.
__(2) Reference percentage._
__(A) In general._The reference percentage specified in this
paragraph is 100 percent less the State percentage specified in
subparagraph (B), except that_
__(i) the percentage under this paragraph shall in no case be
less than 50 percent or more than 83 percent, and
__(ii) the percentage for Puerto Rico, the Virgin Islands, Guam,
the Northern Mariana Islands, and American Samoa shall be 50
percent.
__(B) State percentage._The State percentage specified in this
subparagraph is that percentage which bears the same ratio to 45
percent as the square of the per capita income of such State
bears to the square of the per capita income of the continental
United States (including Alaska) and Hawaii.
__(c) Payments on Estimates with Retrospective Adjustments._The
method of computing and making payments under this section shall
be as follows:
__(1) The Secretary shall, prior to the beginning of each
quarter, estimate the amount to be paid to the State under
subsection (a) for such quarter, based on a report filed by the
State containing its estimate of the total sum to be expended in
such quarter, and such other information as the Secretary may
find necessary.
__(2) From the allotment available therefore, the Secretary shall
pay the amount so estimated, reduced or increased, as the case
may be, by any sum (not previously adjusted under this section)
by which the Secretary finds that the estimate of the amount to
be paid the State for any prior period under this section was
greater or less than the amount which should have been paid.
__(d) Application of Rules Regarding Limitations on
Provider-Related Donations and Health Care Related Taxes._The
provisions of section 1903(w) of the Social Security Act shall
apply to payments to States under this section in the same manner
as they apply to payments to States under section 1903(a) of such
Act .
SEC. 2109. TOTAL FEDERAL BUDGET; ALLOTMENTS TO STATES.
__(a) Total Federal Budget._
__(1) Fiscal years 1996 through 2003._For purposes of this
subpart, the total Federal budget for State plans under this
subpart for each of fiscal years 1996 through 2003 is the
following:
__(A) For fiscal year 1996, 4.5 billion.
__(B) For fiscal year 1997, 7.8 billion.
__(C) For fiscal year 1998, 11.0 billion.
__(D) For fiscal year 1999, 14.7 billion.
__(E) For fiscal year 2000, 18.7 billion. [$56 to 2000}
__(F) For fiscal year 2001, 26.7 billion. [48-56 for out years]
__(G) For fiscal year 2002, 35.5 billion.
__(H) For fiscal year 2003, 38.3 billion.
__(2) Subsequent fiscal years._For purposes of this subpart, the
total Federal budget for State plans under this subpart for each
fiscal year after fiscal year 2003 is the total Federal budget
under this subsection for the preceding fiscal year multiplied
by_
__(A) a factor (described in paragraph (3)) reflecting the change
in the CPI for the fiscal year, and
__(B) a factor (described in paragraph (4)) reflecting the change
in the number of individuals with disabilities for the fiscal
year.
__(3) CPI increase factor._For purposes of paragraph (2)(A), the
factor described in this paragraph for a fiscal year is the ratio
of_
__(A) the annual average index of the consumer price index for
the preceding fiscal year, to_
__(B) such index, as so measured, for the second preceding fiscal
year.
__(4) Disabled population factor._For purposes of paragraph
(2)(B), the factor described in this paragraph for a fiscal year
is 100 percent plus (or minus) the percentage increase (or
decrease) change in the disabled population of the United States
(as determined for purposes of the most recent update under
subsection (b)(3)(D).
___T3[review:] (5) Additional funds due to medicaid offsets._
__(A) In general._Each participating State must provide the
Secretary with information concerning offsets and reductions in
the medicaid program resulting from home and community-based
services provided under this title, that would have been paid for
under the State medicaid plan but for the provision of similar
services under the program under this title.
__(B) Reports._Each State with a program under this title shall
submit such reports to the Secretary as the Secretary may require
in order to monitor compliance with subparagraph (A).
__(C) Compliance._The Secretary shall review such reports. The
Secretary shall increase the total Federal budget for State plans
under subsection (a)(1) by the amount of any reduction in Federal
expenditures for medical assistance under the State medicaid plan
for home and community based services.
__(D) No duplicate payment._No paymet may be made to a State
under this section for any services to the extent that the State
received payment for such services under section 1903(a) of the
Social Security Act.
__(b) Allotments to States._
__(1) In general._The Secretary shall allot to each State for
each fiscal year an amount that bears the same ratio to the total
Federal budget for the fiscal year (specified under paragraph (1)
or (2) of subsection (a)) as the State allotment factor (under
paragraph (2) for the State for the fiscal year) bears to the sum
of such factors for all States for that fiscal year.
__(2) State allotment factor._
__(A) In general._For each State for each fiscal year, the
Secretary shall compute a State allotment factor equal to the sum
of_
__(i) the base allotment factor (specified in subparagraph (B)),
and
__(ii) the low income allotment factor (specified in subparagraph
(C)),
for the State for the fiscal year.
__(B) Base allotment factor._The base allotment factor, specified
in this subparagraph, for a State for a fiscal year is equal to
the product of the following:
__(i) Number of individuals with disabilities._The number of
individuals with disabilities in the State (determined under
paragraph (3)) for the fiscal year.
__(ii) 80 percent of the national per capita budget._80 percent
of the national average per capita budget amount (determined
under paragraph (4)) for the fiscal year.
__(iii) Wage adjustment factor._The wage adjustment factor
(determined under paragraph (5)) for the State for the fiscal
year.
__(iv) Federal matching rate._The Federal matching rate
(determined under section 2108(b)) for the fiscal year.
__(C) Low income allotment factor._The low income allotment
factor, specified in this subparagraph, for a State for a fiscal
year is equal to the product of the following:
__(i) Number of individuals with disabilities._The number of
individuals with disabilities in the State (determined under
paragraph (3)) for the fiscal year.
__(ii) 10 percent of the national per capita budget._10 percent
of the national average per capita budget amount (determined
under paragraph (4)) for the fiscal year.
__(iii) Wage adjustment factor._The wage adjustment factor
(determined under paragraph (5)) for the State for the fiscal
year.
__(iv) Federal matching rate._The Federal matching rate
(determined under section 2108(b)) for the fiscal year.
__(v) Low income index._The low income index (determined under
paragraph (6)) for the State for the preceding fiscal year.
__(3) Number of individuals with disabilities._The number of
individuals with disabilities in a State for a fiscal year shall
be determined as follows:
__(A) Base._The Secretary shall determine the number of
individuals in the State by age, sex, and income category, based
on the 1990 decennial census, adjusted (as appropriate) by the
March 1994 current population survey.
__(B) Disability prevalence level by population category._The
Secretary shall determine, for each such age, sex, and income
category, the national average proportion of the population of
such category that represents individuals with disabilities. The
Secretary may conduct periodic surveys in order to determine such
proportions.
__(C) Base disabled population in a State._The number of
individuals with disabilities in a State in 1994 is equal to the
sum of the products, for such each age, sex, and income category,
of_
__(i) the population of individuals in the State in the category
(determined under subparagraph (A)), and
__(ii) the national average proportion for such category
(determined under subparagraph (B)).
__(D) Update._The Secretary shall determine the number of
individuals with disabilities in a State in a fiscal year equal
to the number determined under subparagraph (C) for the State
increased (or decreased) by the percentage increase (or decrease)
in the disabled population of the State as determined under the
current population survey from 1994 to the year before the fiscal
year involved.
__(4) National per capita budget amount._The national average per
capita budget amount, for a fiscal year, is_
__(A) the total Federal budget specified under subsection (a) for
the fiscal year; divided by
__(B) the sum, for the fiscal year, of the numbers of individuals
with disabilities (determined under paragraph (3)) for all the
States for the fiscal year.
__(5) Wage adjustment factor._The wage adjustment factor, for a
State for a fiscal year, is equal to the ratio of_
__(A) the average hourly wages for service workers (other than
household or protective services) in the State, to
__(B) the national average hourly wages for service workers
(other than household or protective services).
The hourly wages shall be determined under this paragraph based
on data from the most recent decennial census for which such data
are available.
__(6) Low income index._The low income index for each State for a
fiscal year is the ratio, determined for the preceding fiscal
year, of_
__(A) the percentage of the State's population that has income
below 150 percent of the poverty level, to
__(B) the percentage of the population of the United States that
has income below 150 percent of the poverty level.
Such percentages shall be based on data from the most recent
decennial census for which such data are available, adjusted by
data from the most recent current population survey as determined
appropriate by the Secretary.
__(c) State Entitlement._This subpart constitutes budget
authority in advance of appropriations Acts, and represents the
obligation of the Federal Government to provide for the payment
to States of amounts described in section 2109(a).
PART 2_MEDICAID NURSING HOME IMPROVEMENTS
SEC. 2201. REFERENCE TO AMENDMENTS.
__For amendments to the medicaid program under title XIX of the
Social Security Act to improvement nursing home benefits under
such program, see part 2 of subtitle C of title IV.
PART 3_PRIVATE LONG-TERM CARE INSURANCE
Subpart A_General Provisions
SEC. 2301. FEDERAL REGULATIONS; PRIOR APPLICATION OR CERTAIN
REQUIREMENTS.
__(a) In General._The Secretary, with the advice and assistance
of the Advisory Council, as appropriate, shall promulgate
regulations as necessary to implement the provisions of this
part, in accordance with the timetable specified in subsection
(b).
__(b) Timetable for Publication of Regulations._
__(1) Federal register notice._Within 120 days after the date a
majority of the members are first appointed to the Advisory
Council pursuant to section 2302, the Secretary shall publish in
the Federal Register a notice setting forth the projected
timetable for promulgation of regulations required under this
part. Such timetable shall indicate which regulations are
proposed to be published by the end of the first, second, and
third years after appointment of the Advisory Council.
__(2) Final deadline._All regulations required under this part
shall be published by the end of the third year after appointment
of the Advisory Council.
__(c) Provisions Effective Without Regard to Promulgation of
Regulations._
__(1) In general._Notwithstanding any other provision of this
part, insurers shall be required, not later than 6 months after
the enactment of this Act, regardless of whether final
implementing regulations have been promulgated by the Secretary,
to comply with the following provisions of this part:
__(A) Section 2321(c) (standard outline of coverage);
__(B) Section 2321(d) (reporting to State insurance
commissioners);
__(C) Section 2322(b) (preexisting condition exclusions);
__(D) Section 2322(c) (limiting conditions on benefits);
__(E) Section 2322(d) (inflation protection);
__(F) Section 2324 (sales practices);
__(G) Section 2325 (continuation, renewal, replacement,
conversion, and cancellation of policies); and
__(H) Section 2326 (payment of benefits).
__(2) Interim requirements._Before the effective date of
applicable regulations promulgated by the Secretary implementing
requirements of this part as specified below, such requirements
will be considered to be met_
__(A) in the case of section 2321(c) (requiring a standard
outline of coverage), if the long-term care insurance policy
meets the requirements of section 6.G.(2) of the NAIC Model Act
and of section 24 of the NAIC Model Regulation;
__(B) in the case of section 2321(d) (requiring reporting to the
State insurance commissioner), if the insurer meets the
requirements of section 14 of the NAIC Model Regulation;
__(C) in the case of section 2322(c)(1) (general requirements
concerning limiting conditions on benefits), if such policy meets
the requirements of section 6.D. of the NAIC Model Act;
__(D) in the case of section 2322(c)(2) (limiting conditions on
home health care or community-based services) if such policy
meets the requirements of section 11 of the NAIC Model
Regulations;
__(E) in the case of section 2322(d) (concerning inflation
protection), if the insurer meets the requirements of section 12
of the NAIC Model Regulation;
__(F) in the case of section 2324(b) (concerning applications for
the purchase of insurance), if the insurer meets the requirements
of section 10 of the NAIC Model Regulation;
__(G) in the case of section 2324(d) (concerning compensation for
the sale of policies), if the insurer meets the requirements of
the optional regulation entitled ``Permitted Compensation
Arrangements'' included in the NAIC Model Regulation;
__(H) in the case of section 2324(g) (concerning sales through
employers or membership organizations), if the insurer and the
membership organization meet the requirements of section 21.C. of
the NAIC Model Regulation;
__(I) in the case of section 2324(h) (concerning interstate sales
of group policies), if the insurer and the policy meet the
requirements of section 5 of the NAIC Model Act; and
__(J) in the case of section 2325(f) (concerning continuation,
renewal, replacement, and conversion of policies), if the insurer
and the policy meet the requirements of section 7 of the NAIC
Model Regulation.

SEC. 2302. NATIONAL LONG-TERM CARE INSURANCE ADVISORY COUNCIL.
__(a) Appointment._The Secretary shall appoint an advisory board
to be known as the National Long-Term Care Insurance Advisory
Council.
__(b) Composition._
__(1) Number and qualifications of members._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. At least one member shall have
experience as a State insurance commissioner or legislator with
expertise in policy development with respect to, and regulation
of, long-term care insurance.
__(2) Terms of Office._
__(A) In general._Except as otherwise provided in this
subsection, members shall be appointed for terms of office of 5
years.
__(B) Initial members._Of the initial members of the Council, one
shall be appointed for a term of 5 years, one for 4 years, one
for 3 years, one for 2 years, and one for 1 year.
__(C) Two-term limit._No member shall be eligible to serve in
excess of two consecutive terms, but may continue to serve until
such member's successor is appointed.
__(3) Vacancies._Any member appointed to fill a vacancy occurring
before the expiration of the term of such member's predecessor
shall be appointed for the remainder of such term.
__(4) Removal._No member may be removed during the member's term
of office except for just and sufficient cause.
__(c) Chairperson._The Secretary shall appoint a Chairperson from
among the members.
__(d) Compensation._
__(1) In general._Except as provided in paragraph (3), members of
the Advisory Council, while serving on business of the Advisory
Council, shall be entitled to receive compensation at a rate not
to exceed the daily equivalent of the rate specified for level V
of the Executive Schedule under section 5316 of title 5, United
States Code.
__(2) Travel._Except as provided in paragraph (3), members of the
Advisory Council, while serving on business of the Advisory
Council away from their homes or regular places of business, may
be allowed travel expenses (including per diem in lieu of
subsistence) as authorized by section 5703(b) of title 5, United
States Code, for persons in the Government service employed
intermittently.
__(3) Restriction._A member of the Advisory Council may not be
compensated under this section if the member is receiving
compensation or travel expenses from another source while serving
on business of the Advisory Council.
__(e) Meetings._The Advisory Council shall meet not less often
than 2 times a year at the direction of the Chairperson.
__(f) Staff and Support._
__(1) In general._The Advisory Council shall have a salaried
executive director appointed by the Chairperson, and staff
appointed by the executive director with the approval of the
Chairperson.
__(2) Federal entities._The head of each Federal department and
agency shall make available to the Advisory Council such
information and other assistance as it may require to carry out
its responsibilities.
__(g) General Responsibilities._The Advisory Council shall_
__(1) provide advice, recommendations, and assistance to the
Secretary on matters relating to long-term care insurance as
specified in this part 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 the Secretary's consideration proposed models,
standards, requirements, and procedures relating to long-term
care insurance, as appropriate, with respect to the content and
format of insurance policies, agent and insurer practices
concerning the sale and servicing of such policies, and
regulatory activities; and
__(4) monitor the development of the long-term care insurance
market (including policies, marketing practices, pricing,
eligibility and benefit preconditions, and claims payment
procedures) and advise the Secretary concerning the need for
regulatory changes.
__(h) Specific Matters for Consideration._The Advisory Council
shall consider, and provide views and recommendations to the
Secretary concerning, the following matters relating to long-term
care insurance:
__(1) Uniform terms, definitions, and formats._The Advisory
Council shall develop and propose to the Secretary uniform
terminology, definitions, and formats for use in long-term care
insurance policies.
__(2) Standard outline of coverage._The Advisory Council shall
develop and propose to the Secretary a standard format for use by
all insurers offering long-term care policies for the outline of
coverage required pursuant to section 2321(c).
__(3) Premiums._
__(A) Consideration of federal requirements._The Advisory Council
shall consider, and make recommendations to the Secretary
concerning_
__(i) whether Federal standards should be established governing
the amounts of and rates of increase in premiums in long-term
care policies, and
__(ii) if so, what factors should be taken into account (and
whether such factors should include the age of the insured,
actuarial information, cost of care, lapse rates, financial
reserve requirements, insurer solvency, and tax treatment of
premiums, and benefits.
__(4) Upgrades of coverage._The Advisory Council shall consider,
and make recommendations to the Secretary concerning, whether
Federal standards are needed governing the terms and conditions
insurers may place on insured individuals' eligibility to obtain
improved coverage (including any restrictions considered
advisable with respect to premium increases, agent commissions,
medical underwriting, and age rating).
__(5) Threshold conditions for payment of benefits._The Advisory
Council shall_
__(A) consider, and make recommendations to the Secretary
concerning, the advisability of establishing standardized sets of
threshold conditions (based on degrees of functional or cognitive
impairment or on other conditions) for payment of covered
benefits;
__(B) to the extent found appropriate, recommend to the Secretary
specific sets of threshold conditions to be used for such
purpose;
__(C) develop and propose to the Secretary, with respect to
assessments of insured individuals' levels of need for purposes
of receipt of covered benefits_
__(i) professional qualification standards applicable to
individuals making such determinations; and
__(ii) uniform procedures and formats for use in performing and
documenting such assessments.
__(6) Dispute resolution._The Advisory Council shall consider,
and make recommendations to the Secretary concerning, procedures
that insurers and States should be required to implement to
afford insured individuals a reasonable opportunity to dispute
denial of benefits under a long-term care insurance policy.
__(7) Sales and servicing of policies._The Advisory Council shall
consider, and make recommendations to the Secretary concerning_
__(A) training and certification to be required of agents
involved in selling or servicing long-term care insurance
policies;
__(B) appropriate limits on commissions or other compensation
paid to agents for the sale or servicing of such policies;
__(C) sales practices that should be prohibited or limited with
respect to such policies (including any financial limits that
should be applied concerning the individuals to whom such
policies may be sold); and
__(D) appropriate standards and requirements with respect to
sales of such policies by or through employers and other
entities, to employees, members, or affiliates of such entities.
__(8) Continuing care retirement communities._The Advisory
Council shall consider, and make recommendations to the Secretary
concerning, the extent to which the long-term care insurance
aspects of continuing care retirement community arrangements
should be subject to regulation under this part (and the
Secretary, in consultation with the Secretary of the Treasury,
shall consider such recommendations and promulgate appropriate
regulations).
__(i) Activities._In order to carry out its responsibilities
under this part, 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 (and shall consult the National Association of
Insurance Commissioners);
__(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 policies
and marketing materials; and develop proposed standards, rules,
and procedures for regulatory programs.
__(j) Authorization of Appropriations._There are authorized to be
appropriated, for activities of the Advisory Council, $1,500,000
for fiscal year 1995, and $2,000,000 for each succeeding fiscal
year.
SEC. 2303. RELATION TO STATE LAW.
__Nothing in this part shall be construed as preventing a State
from applying standards that provide greater protection to
insured individuals under long-term care insurance policies than
the standards promulgated under this part, except that such State
standards may not be inconsistent with any of the requirements of
this part or of regulations hereunder.
SEC. 2304. DEFINITIONS.
__For purposes of this part:
__(1) Activity of daily living._The term ``activity of daily
living'' means any of the following: eating, toileting, dressing,
bathing, and transferring in and out of bed.
__(2) Adult day care._The term ``adult day care'' means a program
providing social and health-related services during the day to
six or more adults with disabilities (or such smaller number as
the Secretary may specify in regulations) in a community group
setting outside the home.
__(3) Advisory council._The term ``Advisory Council'' means the
National Long-Term Care Insurance Advisory Council established
pursuant to section 2302.
__(4) Certificate._The term ``certificate'' means a document
issued to an individual as evidence of such individual's coverage
under a group insurance policy.
__(5) Continuing care retirement community._The term ``continuing
care retirement community'' means a residential community
operated by a private entity that enters into contractual
agreements with residents under which such entity guarantees, in
consideration for residents' purchase of or periodic payment for
membership in the community, to provide for such residents'
future long-term care needs.
__(6) Designated representative._The term ``designated
representative'' means the person designated by an insured
individual (or, if such individual is incapacitated, pursuant to
an appropriate administrative or judicial procedure) to
communicate with the insurer on behalf of such individual in the
event of such individual's incapacitation.
__(7) Home health care._The term ``home health care'' means
medical and nonmedical services including such services as
homemaker services, assistance with activities of daily living,
and respite care provided to individuals in their residences.
__(8) Insured individual._The term ``insured individual'' means,
with respect to a long-term care insurance policy, any individual
who has coverage of benefits under such policy.
__(9) Insurer._The term ``insurer'' means any person that offers
or sells an individual or group long-term care insurance policy
under which such person is at risk for all or part of the cost of
benefits under the policy, and includes any agent of such person.
__(10) Long-term care insurance policy._The term ``long-term care
insurance policy'' has the meaning given that term in section 4
of the NAIC Model Act, except that the last sentence of such
section shall not apply.
__(11) NAIC model act._The term ``NAIC Model Act'' means the
Long-Term Care Insurance Model Act published by the NAIC, as
amended through January 1993.
__(12) NAIC model regulation._The term ``NAIC Model Regulation''
means the Long-Term Care Insurance Model Regulation published by
the NAIC, as amended through January 1993.
__(13) Nursing facility._The term ``nursing facility'' means a
facility licensed by the State to provide to residents_
__(A) skilled nursing care and related services for residents who
require medical or nursing care;
__(B) rehabilitation services for the rehabilitation of injured,
disabled, or sick individuals, or
__(C) on a regular basis, health-related care and services to
individuals who because of their mental or physical condition
require care and services (above the level of room and board)
which can be made available to them only through institutional
facilities.
__(14) Policyholder._The term ``policyholder'' means the entity
which is the holder of record of a group long-term care insurance
policy.
__(15) Residential care facility._The term ``residential care
facility'' means a facility (including a nursing facility) that_
__(A) provides to residents medical or personal care services
(including at a minimum assistance with activities of daily
living) in a setting other than an individual or single-family
home, and
__(B) does not provide services of a higher level than can be
provided by a nursing facility.
__(16) Respite care._The term ``respite care'' means the
temporary provision of care (including assistance with activities
of daily living) to an individual, in the individual's home or
another setting in the community, for the purpose of affording
such individual's unpaid caregiver a respite from the
responsibilities of such care.
__(17) State insurance commissioner._The term ``State  insurance
commissioner'' means the State official bearing such title, or,
in the case of a jurisdiction where such title is not used, the
State official with primary responsibility for the regulation of
insurance.

Subpart B_Federal Standards and Requirements
SEC. 2321. REQUIREMENTS TO FACILITATE UNDERSTANDING AND
COMPARISON OF BENEFITS.
__(a) In General._The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations designed to standardize formats and
terminology used in long-term care insurance policies, to require
insurers to provide to customers and beneficiaries information on
the range of public and private long-term care coverage
available, and to establish such other requirements as may be
appropriate to promote consumer understanding and facilitate
comparison of benefits, which shall include at a minimum the
requirements specified in this section.
__(b) Uniform Terms, Definitions, and Formats._Insurers shall be
required to use, in long-term care insurance policies, uniform
terminology, definitions of terms, and formats, in accordance
with regulations promulgated by the Secretary, after considering
recommendations of the Advisory Council.
__(c) Standard Outline of Coverage._
__(1) In general._Insurers shall be required to develop for each
long-term care insurance policy offered or sold, to include as a
part of each such policy, and to make available to each potential
purchaser and furnish to each insured individual and
policyholder, an outline of coverage under such policy that_
__(A) includes the elements specified in paragraph (2),
__(B) is in a uniform format (as prescribed by Secretary on the
basis of recommendations by the Advisory Council),
__(C) accurately and clearly reflects the contents of the policy,
and
__(D) is updated periodically on such timetable as may be
required by the Secretary (or more frequently as necessary to
reflect significant changes in outlined information).
__(2) Contents of outline._The outline of coverage for each
long-term care insurance policy shall include at least the
following:
__(A) Benefits._A description of_
__(i) the principal benefits covered, including the extent of_
__(I) benefits for services furnished in residential care
facilities, and
__(II) other benefits,
__(ii) the principal exclusions from and limitations on coverage,
__(iii) the terms and conditions, if any, upon which the insured
individual may obtain upgraded benefits, and
__(iv) the threshold conditions for entitlement to receive
benefits.
__(B) Continuation, renewal, and conversion._A statement of the
terms under which a policy may be_
__(i) returned (and premium refunded) during an initial
examination period,
__(ii) continued in force or renewed,
__(iii) converted to an individual policy (in the case of
coverage under a group policy),
__(C) Cancellation._A statement of the circumstances in which a
policy may be terminated, and the refund or nonforfeitures
benefits (if any) applicable in each such circumstance,
including_
__(i) death of the insured individual,
__(ii) nonpayment of premiums,
__(iii) election by the insured individual not to renew,
__(iv) any other circumstance.
__(D) Premium._A statement of_
__(i) the total annual premium, and the portion of such premium
attributable to each covered benefit,
__(ii) any reservation by the insurer of a right to change
premiums,
__(iii) any limit on annual premium increases,
__(iv) any expected premium increases associated with automatic
or optional benefit increases (including inflation protection),
and
__(v) any circumstances under which payment of premium is waived.
__(E) Declaration concerning summary._A statement, in bold face
type on the face of the document in language understandable to
the average individual, that the outline of coverage is a summary
only, not a contract of insurance, and that the policy contains
the contractual provisions that govern.
__(F) Cost/value comparison._
__(i) Information on average costs (and variation in such costs)
for nursing facility care (and such other care as the Secretary
may specify) and information on the value of benefits relative to
such costs.
__(ii) A comparison of benefits, over a period of at least 20
years, for policies with and without inflation protection.
__(iii) A declaration as to whether the amount of benefits will
increase over time, and, if so, a statement of the type and
amount of, any limitations on, and any premium increases for,
such benefit increases.
__(G) Tax treatment._A statement of the Federal income tax
treatment of premiums and benefits under the policy, as
determined by the Secretary of the Treasury.
__(H) Other._Such other information as the Secretary may require.
__(d) Reporting to State Insurance Commissioner._Each insurer
shall be required to report at least annually, to the State
insurance commissioner of each State in which any long-term care
insurance policy of the insurer is sold, such information, in
such format, as the Secretary may specify with respect to each
such policy, including_
__(1) the standard outline of coverage required pursuant to
subsection (c);
__(2) lapse rates and replacement rates for such policies;
__(3) the ratio of premiums collected to benefits paid;
__(4) reserves;
__(5) written materials used in sale or promotion of such policy;
and
__(6) any other information the Secretary may require.
__(e) Comparison of Long-Term Care Coverage Alternatives._Each
insurer shall be required to furnish to each individual before a
long-term care insurance policy of the insurer is sold to the
individual information on the conditions of eligibility for, and
benefits under, each of the following:
__(1) Policies offered by the insurer._The standard outline of
coverage, and such other information as the Secretary may
specify, with respect to each long-term care insurance policy
offered by the insurer.
__(2) Comparison to other available private
insurance._Information, in such format as may be required under
this part, on_
__(A) benefits offered under long-term care insurance policies of
the insurer (and the threshold conditions for receipt by an
insured individual of each such benefit); and
__(B) additional benefits available under policies offered by
other private insurers (to the extent such information is made
available by the State insurance commissioner).
__(3) Public programs; regional alliances._Information furnished
to the insurer, pursuant to section 2342(b)(2), by the State in
which such individual resides, on conditions of eligibility for,
and long-term care benefits (or the lack of such benefits) under_
__(A) each public long-term care program administered by the
State,
__(B) the Medicare programs under title XVIII of the Social
Security Act; and
__(C) each regional alliance operating in the State.
SEC. 2322. REQUIREMENTS RELATING TO COVERAGE.
__(a) In General._The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements with respect to
the terms of and benefits under long-term care insurance
policies, which shall include at a minimum the requirements
specified in this section.
__(b) Limitations on Preexisting Condition Exclusions._
__(1) Initial policies._A long-term care insurance policy may not
exclude or limit coverage for any service or benefit, the need
for which is the result of a medical condition or disability
because an insured individual received medical treatment for, or
was diagnosed as having, such condition before the issuance of
the policy, unless_
__(A) the insurer, prior to issuance of the policy, determines
and documents (with evidence including written evidence that such
condition has been treated or diagnosed by a qualified health
care professional) that the insured individual had such condition
during the 6-month period (or such longer period as the Secretary
may specify) ending on the effective date of the policy; and
__(B) the need or such service or benefit begins within 6 months
(or such longer period as the Secretary may specify) following
the effective date of the policy.

__(2) Replacement policies._Solely for purposes of the
requirements of paragraph (1), with respect to an insured
individual, the effective date of a long-term care insurance
policy issued to replace a previous policy, with respect to
benefits which are the same as or substantially equivalent to
benefits under such previous policy, shall be considered to be
the effective date of such previous policy with respect to such
individual.
__(c) Limiting Conditions on Benefits._
__(1) In general._A long-term care insurance policy may not_
__(A) condition eligibility for benefits for a type of service on
the need for or receipt of any other type of service (such as
prior hospitalization or institutionalization, or a higher level
of care than the care for which benefits are covered);
__(B) condition eligibility for any benefit (where the need for
such benefit has been established by an independent assessment of
impairment) on any particular medical diagnosis (including any
acute condition) or on one of a group of diagnoses;
__(C) condition eligibility for benefits furnished by licensed or
certified providers on compliance by such providers with
conditions not required under Federal or State law; or
__(D) condition coverage of any service on provision of such
service by a provider, or in a setting, providing a higher level
of care than that required by an insured individual.
__(2) Home care or community-based services._A long-term care
insurance policy that provides benefits for any home care or
community-based services provided in a setting other than a
residential care facility_
__(A) may not limit such benefits to services provided by
registered nurses or licensed practical nurses;
__(B) may not limit such benefits to services furnished by
persons or entities participating in programs under titles XVIII
and XIX of the Social Security Act and in part 1 of this
subtitle; and
__(C) must provide, at a minimum, benefits for personal
assistance with activities of daily living, home health care,
adult day care, and respite care.
__(3) Nursing facility services._A long-term care insurance
policy that provides benefits for any nursing facility services_
__(A) must provide benefits for such services provided by all
types of nursing facilities licensed by the State, and
__(B) may provide benefits for care in other residential
facilities.
__(4) Prohibition on discrimination by diagnosis._A long-term
care insurance policy may not provide for treatment of_
__(A) Alzheimer's disease or any other progressive degenerative
dementia of an organic origin,
__(B) any organic or inorganic mental illness,
__(C) mental retardation or any other cognitive or mental
impairment, or
__(D) HIV infection or AIDS,
different from the treatment of any other medical condition for
purposes of determining whether threshold conditions for the
receipt of benefits have been met, or the amount of benefits
under the policy.
__(d) Inflation Protection._
__(1) Requirement to offer._An insurer offering for sale any
long-term care insurance policy shall be required to afford the
purchaser the option to obtain coverage under such policy (upon
payment of increased premiums) of annual increases in benefits at
rates in accordance with paragraph (2).
__(2) Rate increase in benefits._For purposes of paragraph (1),
the benefits under a policy for each year shall be increased by a
percentage of the full value of benefits under the policy for the
previous year, which shall be not less than 5 percent of such
value (or such other rate of increase as may be determined by the
Secretary to be adequate to offset increases in the costs of
long-term care services for which coverage is provided under the
policy).
__(3) Requirement of written rejection._Inflation protection in
accordance with paragraph (1) may be excluded from the coverage
under a policy only if the insured individual (or, if different,
the person responsible for payment of premiums has rejected in
writing the option to obtain such coverage.
SEC. 2323. REQUIREMENTS RELATING TO PREMIUMS.
__(a) In General._The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements applicable to
premiums for long-term care insurance policies, which shall
include at a minimum the requirements specified in this section.
__(b) Limitations on Rates and Increases._The Secretary, after
considering recommendations of the Advisory Council, may
establish by regulation such standards and requirements as may be
determined appropriate with respect to_
__(1) mandatory or optional State procedures for review and
approval of premium rates and rate increases or decreases;
__(2) limitations on the amount of initial premiums, or on the
rate or amount of premium increases;
__(3) the factors to be taken into consideration by an insurer in
proposing, and by a State in approving or disapproving, premium
rates and increases; and
__(4) the extent to which consumers should be entitled to
participate or be represented in the rate-setting process and to
have access to actuarial and other information relied on in
setting rates.
SEC. 2324. REQUIREMENTS RELATING TO SALES PRACTICES.
__(a) In General._The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements applicable to
the sale or offering for sale of long-term care insurance
policies, which shall include at a minimum the requirements
specified in this section.
__(b) Applications._Any insurer that offers any long-term care
insurance policy (including any group policy) shall be required
to meet such requirements with respect to the content, format,
and use of application forms for long-term care insurance as the
Secretary may require by regulation.
__(c) Agent Training and Certification._An insurer may not sell
or offer for sale a long-term care insurance policy through an
agent who does not comply with minimum standards with respect to
training and certification established by the Secretary after
consideration of recommendations by the Advisory Council.
__(d) Compensation for Sale of Policies._Compensation by an
insurer to an agent or agents for the sale of an original
long-term care insurance policy, or for servicing or renewing
such a policy, may not exceed amounts (or percentage shares of
premiums or other reference amounts) specified by the Secretary
in regulations, after considering recommendations of the Advisory
Council.
__(e) Prohibited Sales Practices._The following practices by
insurers shall be prohibited with respect to the sale or offer
for sale of long-term care insurance policies:
__(1) False and misleading representations._Making any statement
or representation_
__(A) which the insurer knows or should know is false or
misleading (including the inaccurate, incomplete, or misleading
comparison of long-term care insurance policies or insurers), and
__(B) which is intended, or would be likely, to induce any person
to purchase, retain, terminate, forfeit, permit to lapse, pledge,
assign, borrow against, convert, or effect a change with respect
to, any long-term care insurance policy.
__(2) Inaccurate completion of medical history._Making or causing
to be made (by any means including failure to inquire about or to
record information relating to preexisting conditions) statements
or omissions, in records detailing the medical history of an
applicant for insurance, which the insurer knows or should know
render such records false, incomplete, or misleading in any way
material to such applicant's eligibility for or coverage under a
long-term care insurance policy.
__(3) Undue pressure._Employing force, fright, threat, or other
undue pressure, whether explicit or implicit, which is intended,
or would be likely, to induce the purchase of a long-term care
insurance policy.
__(4) Cold lead advertising._Using, directly or indirectly, any
method of contacting consumers (including any method designed to
induce consumers to contact the insurer or agent) for the purpose
of inducing the purchase of long-term care insurance (regardless
of whether such purpose is the sole or primary purpose of the
contact) without conspicuously disclosing such purpose.
__(f) Prohibition on Sale of Duplicate Benefits._An insurer or
agent may not sell or issue to an individual a long-term care
insurance policy that the insurer or agent knows or should know
provides for coverage that duplicates coverage already provided
in another long-term care insurance policy held by such
individual (unless the policy is intended to replace such other
policy).
__(g) Sales Through Employers or Membership Organizations._
__(1) Requirements concerning such arrangements._In any case
where an employer, organization, association, or other entity
(referred to as a ``membership entity'') endorses a long-term
care insurance policy to, or such policy is marketed or sold
through such membership entity to, employees, members, or other
individuals affiliated with such membership entity_
__(A) the insurer offering such policy shall not permit its
marketing or sale through such entity unless the requirements of
this subsection are met; and
__(B) a membership entity that receives any compensation for such
sale, marketing, or endorsement of such policy shall be
considered the agent of the insurer for purposes of this part.
__(2) Disclosure and information requirements._A membership
entity that endorses a long-term care insurance policy, or
through which such policy is sold, to individuals affiliated with
such entity, shall_
__(A) disclose prominently, in a form and manner designed to
ensure that each such individual who receives information
concerning any such policy through such entity is aware of and
understands such disclosure_
__(i) the manner in which the insurer and policy were selected;
__(ii) the extent (if any) to which a person independent of the
insurer with expertise in long-term care insurance analyzed the
advantages and disadvantages of such policy from the standpoint
of such individuals (including such matters as the merits of the
policy compared to other available benefit packages, and the
financial stability of the insurer), and the results of any such
analysis;
__(iii) any organizational or financial ties between the entity
(or a related entity) and the insurer (or a related entity);
__(iv) the nature of compensation arrangements (if any) and the
amount of compensation (including all fees, commissions, and
other forms of financial support) for the endorsement or sale of
such policy; and
__(B) make available to such individuals, either directly or
through referrals, appropriate counseling to assist such
individuals to make educated and informed decisions concerning
the purchase of such policies.
SEC. 2325. CONTINUATION, RENEWAL, REPLACEMENT, CONVERSION, AND
CANCELLATION OF POLICIES.
__(a) In General._The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements applicable to
the renewal, replacement, conversion, and cancellation of
long-term care insurance policies, which shall include at a
minimum the requirements specified in this section.
__(b) Insured's Right to Cancel During Examination Period._Each
individual insured (or, if different, each individual liable for
payment of premiums) under a long-term care insurance policy
shall have the unconditional right to return the policy within 30
days after the date of its issuance and delivery, and to obtain a
full refund of any premium paid.
__(c) Insurer's Right to Cancel (or Deny Benefits) Based on Fraud
or Nondisclosure._An insurer shall have the right to cancel a
long-term care insurance policy, or to refuse to pay a claim for
benefits, based on evidence that the insured falsely represented
or failed to disclose information material to the determination
of eligibility to purchase such insurance, but only if_
__(1) the insurer presents written documentation, developed at
the time the insured applied for such insurance, of the insurer's
request for the information thus withheld or misrepresented, and
the insured individual's response to such request;
__(2) the insurer presents medical records or other evidence
showing that the insured individual knew or should have known
that such response was false, incomplete, or misleading;
__(3) notice of cancellation is furnished to the insured
individual before the date 3 years after the effective date of
the policy (or such earlier date as the Secretary may specify in
regulations); and
__(4) the insured individual is afforded the opportunity to
review and refute the evidence presented by the insurer pursuant
to paragraphs (1) and (2).
__(d) Insurer's Right to Cancel for Nonpayment of Premiums._
__(1) In general._Insurers shall have the right to cancel
long-term care insurance policies for nonpayment of premiums,
subject to the provisions of this subsection and subsection (e)
(relating to nonforfeiture).
__(2) Notice and acknowledgement._
__(A) In general._The insurer may not cancel coverage of an
insured individual until_
__(i) the insurer, not earlier than the date when such payment is
30 days past due, has given written notice to the insured
individual (by registered letter or the equivalent) of such
intent, and
__(ii) 30 days have elapsed since the insurer obtained written
acknowledgment of receipt of such notice from the insured
individual (or the designated representative, at the insured
individual's option or in the case of an insured individual
determined to be incapacitated in accordance with paragraph (4)).
__(B) Additional Requirement for Group Policies._In the case of a
group long-term care insurance policy, the notice and
acknowledgement requirements of subparagraph (A) apply with
respect to the policyholder and to each insured individual.
__(3) Reinstatement of coverage of incapacitated individuals._In
any case where the coverage of an individual under a long-term
care insurance policy has been canceled pursuant to paragraph
(2), the insurer shall be required to reinstate full coverage of
such individual under such policy, retroactive to the effective
date of cancellation, if the insurer receives from such
individual (or the designated representative of such individual),
within 5 months after such date_
__(A) evidence of a determination of such individual's
incapacitation in accordance with paragraph (4) (whether made
before or after such date), and
__(B) payment of all premiums due and past due, and all charges
for late payment.
__(4) Determination of incapacitation._For purposes of this
subsection, the term ``determination of incapacitation'' means a
determination by a qualified health professional (in accordance
with such requirements as the Secretary may specify), that an
insured individual has suffered a cognitive impairment or loss of
functional capacity which could reasonably be expected to render
the individual permanently or temporarily unable to deal with
business or financial matters. The standard used to make such
determination shall not be more stringent than the threshold
conditions for the receipt of covered benefits.

__(5) Designation of representative._The insurer shall be
required_
__(A) to require the insured individual, at the time of sale or
issuance of a long-term care insurance policy_
__(i) to designate a representative for purposes of communication
with the insurer concerning premium payments in the event the
insured individual cannot be located or is incapacitated, or
__(ii) to complete a signed and dated statement declining to
designate a representative, and
__(B) to obtain from the insured individual, at the time of each
premium payment (but in no event less often than once in each
12-month period) reconfirmation or revision of such designation
or declination.
__(e) Nonforfeiture._
__(1) In general._The Secretary, after consideration of
recommendations by the Advisory Council, shall by regulation
require appropriate nonforfeiture benefits with respect to each
long-term care insurance policy that lapses for any reason
(including nonpayment of premiums, cancellation, or failure to
renew, but excluding lapses due to death) after remaining in
effect beyond a specified minimum period.
__(2) Nonforfeiture benefits._The standards established under
this subsection shall require that the amount or percentage of
nonforfeiture benefits shall increase proportionally with the
amount of premiums paid by a policyholder.
__(f) Continuation, Renewal, Replacement, and Conversion of
Policies._
__(1) In general._Insurers shall not be permitted to cancel, or
refuse to renew (or replace with a substantial equivalent), any
long-term care insurance policy for any reason other than for
fraud or material misrepresentation (as provided in subsection
(c)) or for nonpayment of premium (as provided in subsection
(d)).
__(2) Duration and renewal of policies._Each long-term care
insurance policy shall contain a provision that clearly states_
__(A) the duration of the policy,
__(B) the right of the insured individual (or policyholder) to
renewal (or to replacement with a substantial equivalent),
__(C) the date by which, and the manner in which, the option to
renew must be exercised, and
__(D) any applicable restrictions or limitations (which may not
be inconsistent with the requirements of this part).
__(3) Replacement of policies._
__(A) In general._Except as provided in subparagraph (B), an
insurer shall not be permitted to sell any long-term care
insurance policy as a replacement for another such policy unless
coverage under such replacement policy is available to an
individual insured for benefits covered under the previous policy
to the same extent as under such previous policy (including every
individual insured under a group policy) on the date of
termination of such previous policy, without exclusions or
limitations that did not apply under such previous policy.
__(B) Insured's option to reduce coverage._In any case where an
insured individual covered under a long-term care insurance
policy knowingly and voluntarily elects to substitute for such
policy a policy that provides less coverage, substitute policy
shall be considered a replacement policy for purposes of this
part.

__(3) Continuation and conversion rights with respect to group
policies._
__(A) In general._Insurers shall be required to include in each
group long-term care insurance policy, a provision affording to
each insured individual, when such policy would otherwise
terminate, the opportunity (at the insurer's option, subject to
approval of the State insurance commissioner) either to continue
or to convert coverage under such policy in accordance with this
paragraph.
__(B) Rights of related individuals._In the case of any insured
individual whose eligibility for coverage under a group policy is
based on relationship to another individual, the insurer shall be
required to continue such coverage upon termination of the
relationship due to divorce or death.
__(C) Continuation of coverage._A group policy shall be
considered to meet the requirements of this paragraph with
respect to rights of an insured individual to continuation of
coverage if coverage of the same (or substantially equivalent)
benefits for such individual under such policy is maintained,
subject only to timely payment of premiums.
__(D) Conversion of coverage._A group policy shall be considered
to meet the requirements of this paragraph with respect to
conversion if it entitles each individual who has been
continuously covered under the policy for at least 6 months
before the date of the termination to issuance of a replacement
policy providing benefits identical to, substantially equivalent
to, or in excess of, the benefits under such terminated group
policy_
__(i) without requiring evidence of insurability with respect to
benefits covered under such previous policy, and
__(ii) at premium rates no higher than would apply if the insured
individual had initially obtained coverage under such replacement
policy on the date such insured individual initially obtained
coverage under such group policy.
__(4) Treatment of substantial equivalence._
__(A) Under secretary's guidelines._The Secretary, after
considering recommendations by the Advisory Council, shall
develop guidelines for comparing long-term care insurance
policies for the purpose of determining whether benefits under
such policies are substantially equivalent.

__(B) Before effective date of secretary's guidelines._During the
period prior to the effective date of guidelines published by the
Secretary under this paragraph, insurers shall comply with
standards for determinations of substantial equivalence
established by State insurance commissioners.
__(5) Additional requirements._Insurers shall comply with such
other requirements relating to continuation, renewal,
replacement, and conversion of long-term care insurance policies
as the Secretary may establish.
SEC. 2326. REQUIREMENTS RELATING TO PAYMENT OF BENEFITS.
__(a) In General._The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements with respect to
claims for and payment of benefits under long-term care insurance
policies, which shall include at a minimum the requirements
specified in this section.
__(b) Standards Relating to Threshold Conditions for Receipt of
Covered Benefits._Each long-term care insurance policy shall meet
the following requirements with respect to identification of, and
determination of whether an insured individual meets, the
threshold conditions for receipt of benefits covered under such
policy:
__(1) Declaration of threshold conditions._
__(A) In general._The policy shall specify the level (or levels)
of functional or cognitive mental impairment (or combination of
impairments) required as a threshold condition of entitlement to
receive benefits under the policy (which threshold condition or
conditions shall be consistent with any regulations promulgated
by the Secretary pursuant to subsection (B)).
__(B) Secretarial responsibility._The Secretary (after
considering the views of the Advisory Council on current
practices of insurers concerning, and the appropriateness of
standardizing, threshold conditions) may promulgate such
regulations as the Secretary finds appropriate establishing
standardized thresholds to be used under such policies as
preconditions for varying levels of benefits.
__(2) Independent professional assessment._The policy shall
provide for a procedure for determining whether the threshold
conditions specified under paragraph (1) have been met with
respect to an insured individual which_
__(A) applies such uniform assessment standards, procedures, and
formats as the Secretary may specify, after consideration of
recommendations by the Advisory Council;
__(B) permits an initial evaluation (or, if the initial
evaluation was performed by a qualified independent assessor
selected by the insurer, a reevaluation) to be made by a
qualified independent assessor selected by the insured individual
(or designated representative) as to whether the threshold
conditions for receipt of benefits have been met;
__(C) permits the insurer the option to obtain a reevaluation by
a qualified independent assessor selected and reimbursed by the
insurer;
__(D) provides that the insurer will consider that the threshold
conditions have been met in any case where_
__(i) the assessment under subparagraph (B) concluded that such
conditions had been met, and the insurer declined the option
under subparagraph (C), or
__(ii) assessments under both subparagraphs (B) and (C) concluded
that such conditions had been met; and
__(E) provides for final resolution of the question by a State
agency or other impartial third party in any case where
assessments under subparagraphs (B) and (C) reach inconsistent
conclusions.
__(3) Qualified independent assessor._For purposes of paragraph
(2), the term ``qualified independent assessor'' means a licensed
or certified professional, as appropriate, who_
__(A) meets such standards with respect to professional
qualifications as may be established by the Secretary, after
consulting with the Secretary of the Treasury, and
__(B) has no significant or controlling financial interest in, is
not an employee of, and does not derive more than 5 percent of
gross income from, the insurer (or any provider of services for
which benefits are available under the policy and in which the
insurer has a significant or controlling financial interest).
__(c) Requirements Relating to Claims for Benefits._Insurers
shall be required_
__(1) to promptly pay or deny claims for benefits submitted by
(or on behalf of) insured individuals who have been determined
pursuant to subsection (b) to meet the threshold conditions for
payment of benefits;
__(2) to provide an explanation in writing of the reasons for
payment, partial payment, or denial of each such claim; and
__(3) to provide an administrative procedure under which an
insured individual may appeal the denial of any claim.
Subpart C_Enforcement
SEC. 2342. STATE PROGRAMS FOR ENFORCEMENT OF STANDARDS.
__(a) Requirement for State Programs Implementing Federal
Standards._In order for a State to be eligible for grants under
this subpart, the State must have in effect a program (including
such laws and procedures as may be necessary) for the regulation
of long-term care insurance which the Secretary has determined_
__(1) includes the elements required under this subpart, and
__(2) is designed to ensure the compliance of long-term care
insurance policies sold in the State, and insurers offering such
policies and their agents, with the requirements established
pursuant to subpart B.
__(b) Activities Under State Program._A State program approved
under this subpart shall provide for the following procedures and
activities:
__(1) Monitoring of insurers and policies._Procedures for ongoing
monitoring of the compliance of insurers doing business in the
State, and of long-term care insurance policies sold in the
State, with requirements under this part, including at least the
following:
__(A) Policy review and certification._A program for review and
certification (and annual recertification) of each such policy
sold in the State.
__(B) Reporting by insurers._Requirements of annual reporting by
insurers selling or servicing long-term care insurance policies
in the State, in such form and containing such information as the
State may require to determine whether the insurer (and policies)
are in compliance with requirements under this part.
__(C) Data collection._Procedures for collection, from insurers,
service providers, insured individuals, and others, of
information required by the State for purposes of carrying out
its responsibilities under this part (including authority to
compel compliance of insurers with requests for such
information).
__(D) Marketing oversight._Procedures for monitoring (through
sampling or other appropriate procedures) the sales practices of
insurers and agents, including review of marketing literature.
__(E) Oversight of administration of benefits._Procedures for
monitoring (through sampling or other appropriate procedures)
insurers' administration of benefits, including monitoring of_
__(i) determinations of insured individuals' eligibility to
receive benefits, and
__(ii) disposition of claims for payment.
__(2) Information to insurers._Procedures for furnishing, to
insurers selling or servicing any long-term care insurance
policies in the State, information on conditions of eligibility
for, and benefits under, each public long-term care program
administered by the State, in order to enable them to comply with
the requirement under section 2321(e)(3).
__(3) Consumer complaints and dispute resolution._Administrative
procedures for the investigation and resolution of complaints by
consumers, and disputes between consumers and insurers, with
respect to long-term care insurance, including_
__(A) procedures for the filing, investigation, and adjudication
of consumer complaints with respect to the compliance of insurers
and policies with requirements under this part, or other
requirements under State law; and
__(B) procedures for resolution of disputes between insured
individuals and insurers concerning eligibility for, or the
amount of, benefits payable under such policies, and other issues
with respect to the rights and responsibilities of insurers and
insured individuals under such policies.
__(4) Technical assistance to insurers._Provision of technical
assistance to insurers to help them to understand and comply with
the requirements of this part, and other State laws, concerning
long-term care insurance policies and business practices.
__(c) State Enforcement Authorities._A State program meeting the
requirements of this subpart shall ensure that the State
insurance commissioner (or other appropriate official or agency)
has the following authority with respect to long-term care
insurers and policies:
__(1) Prohibition of sale._Authority to prohibit the sale, or
offering for sale, of any long-term care insurance policy that
fails to comply with all applicable requirements under this part.
__(2) Plans of correction._Authority, in cases where the business
practices of an insurer are determined not to comply with
requirements under this part, to require the insurer to develop,
submit for State approval, and implement a plan of correction
which must be fulfilled within the shortest period possible (not
to exceed a year) as a condition of continuing to do business in
the State.
__(3) Corrective action orders._Authority, in cases where an
insurer is determined to have failed to comply with requirements
of this part, or with the terms of a policy, with respect to a
consumer or insured individual, to direct the insurer (subject to
appropriate due process) to eliminate such noncompliance within
30 days.
__(4) Civil money penalties._Authority to assess civil money
penalties, in amounts for each violative act up to the greater of
$10,000 or three times the amount of any commission involved_
__(A) for violations of subsections (d) (concerning compensation
or sale of policies), (e) (concerning prohibited sales
practices), and (f) (prohibition on sale of duplicate benefits)
of section 2324,
__(B) for such other violative acts as the Secretary may specify
in regulations, and
__(C) in such other cases as the State finds appropriate.
__(5) Other authorities._Such other authorities as the State
finds necessary or appropriate to enforce requirements under this
part.
__(d) Records, Reports, and Audits._As a condition of approval of
its program under this part, a State must agree to maintain such
records, make such reports (including expenditure reports), and
cooperate with such audits, as the Secretary finds necessary to
determine the compliance of such State program (and insurers and
policies regulated under such program) with the requirements of
this part.
__(e) Secretarial Responsibilities._
__(1) Approval of state programs._The Secretary shall approve a
State program meeting the requirements of this part.
__(2) Information on medicare benefits._The Secretary shall
furnish, to the official in each State with chief responsibility
for the regulation of long-term care insurance, a description of
the Medicare programs under title XVIII of the Social Security
Act which makes clear the unavailability of long-term benefits
under such programs, for distribution by such State official to
insurers selling long-term care insurance in the State, in
accordance with subsection (b)(2).
SEC. 2342. AUTHORIZATION OF APPROPRIATIONS FOR STATE PROGRAMS.
__There are authorized to be appropriated $10,000,000 for fiscal
year 1996, $10,000,000 for fiscal year 1997, $7,500,000 for
fiscal year 1998, and $5,000,000 for fiscal year 1999 and each
succeeding fiscal year, for grants to States with programs
meeting the requirements of this part, to remain available until
expended.
SEC. 2343. ALLOTMENTS TO STATES.
__The allotment for any fiscal year to a State with a program
approved under this part shall be an amount determined by the
Secretary, taking into account the numbers of long-term care
insurance policies sold, and of elderly individuals residing, in
the State, and such other factors as the Secretary finds
appropriate.
SEC. 2344. PAYMENTS TO STATES.
__(a) In General._Each State with a program approved under this
part shall be entitled to payment under this title for each
fiscal year in an amount equal to its allotment for such fiscal
year, for expenditure by such State for up to 50 percent of the
cost of activities under such program.
__(b) State Share of Program Expenditures._No Federal funds from
any source may be used as any part of the non-Federal share of
expenditures under the State program under this subpart.
__(c) Transfer and Deposit Requirements._The Secretary shall make
payments under this section in accordance with section 6503 of
title 31, United States Code.
SEC. 2345. FEDERAL OVERSIGHT OF STATE ENFORCEMENT.
__(a) In General._The Secretary shall periodically review State
regulatory programs approved under section 2341 to determine
whether they continue to comply with the requirements of this
part.
__(b) Notice of Determination of Noncompliance._The Secretary
shall promptly notify the State of a determination that a State
program fails to comply with this part, specifying the
requirement or requirements not met and the elements of the State
program requiring correction.
__(c) Opportunity for Correction._
__(1) In general._The Secretary shall afford a State notified of
noncompliance pursuant to subsection (b) a reasonable opportunity
to eliminate such noncompliance.
__(2) Correction plans._In a case where substantial corrections
are needed to eliminate noncompliance of a State program, the
Secretary may_
__(A) permit the State a reasonable time after the date of the
notice pursuant to subsection (b) to develop and obtain the
Secretary's approval of a correction plan, and
__(B) permit the State a reasonable time after the date of
approval of such plan to eliminate the noncompliance.
__(d) Withdrawal of Program Approval._In the case of a State that
fails to eliminate noncompliance with requirements under this
part by the date specified by the Secretary pursuant to
subsection (c), the Secretary shall withdraw the approval of the
State program pursuant to section 2341(e).
SEC. 2346. EFFECT OF FAILURE TO HAVE APPROVED STATE PROGRAM.
__(a) Restriction on Sale of Long-Term Care Insurance._
__(1) In general._No insurer may sell or offer for sale any
long-term care insurance policy, on or after the date specified
in subsection (c), in a State that does not have in effect a
regulatory program approved under section 2341(e).
__(2) Application of prohibition._For purposes of paragraph (1),
an insurance policy shall not be considered to be sold or offered
for sale in a State solely because it is sold or offered to a
resident of such State.
__(b) Civil Money Penalty._
__(1) In general._An insurer shall be subject to a civil money
penalty, in an amount up to the greater of $10,000 or three times
any commission involved, for each incident in which the insurer
sells, or offers to sell, an insurance policy to an individual in
violation of subsection (a).
__(2) Enforcement procedure._The Secretary shall enforce the
provisions of this subsection in accordance with the procedures
provided under section 5412 of this Act.
__(c) Effective Date._
__(1) In general._The date specified in this subsection, for
purposes of subsection (a), with respect to any requirement under
this part, is the date one year after the date the Secretary
first promulgates regulations with respect to such requirement.
__(2) Exception._To the extent that a State demonstrates to the
Secretary that State legislation is required to meet any such
requirement, the State shall not be regarded as failing to have
in effect a program in compliance with this part solely on the
basis of its failure to comply with such requirement 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 promulgation of the regulation imposing such
requirement. For purposes of the preceding 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.
Subpart D_Consumer Education Grants
SEC. 2361. GRANTS FOR CONSUMER EDUCATION.
__(a) Grant Program Authorized._The Secretary is authorized to
make grants_
__(1) to States,
__(2) to regional alliances (at the option of States within which
such Alliances are located), and
__(3) to national organizations representing insurance consumers,
long-term care providers, and insurers,
for the development and implementation of long-term care
information, counseling, and other programs.
__(b) Applications._
__(1) In general._Each State or organization seeking a grant
under this section shall submit to the Secretary an application,
in such format and containing such information as the Secretary
may require.
__(2) Goals._Programs under this section shall be directed at the
goals of increasing consumers' understanding and awareness of
options available to them with respect to long-term care
insurance (and alternatives, such as public long-term care
programs), including_
__(A) the risk of needing long-term care;
__(B) the costs associated with long-term care services;
__(C) the lack of long-term care coverage under the Medicare
program, Medicare supplemental (Medigap) policies, and standard
private health insurance;
__(D) the limitations on (and conditions of eligibility for)
long-term care coverage under State programs;
__(E) the availability, and variations in coverage and cost, of
private long-term care insurance;
__(F) features common to many private long-term care insurance
policies; and
__(G) pitfalls to avoid when purchasing a long-term care
insurance policy.
__(3) Activities._An application for a grant under this section
shall indicate the activities the State or organization would
carry out under such grant, which activities may include_
__(A) coordination of the activities of State agencies and
private entities as necessary to carry out the State's program
under this section;
__(B) collection, analysis, publication, and dissemination of
information,
__(C) conducting or sponsoring of consumer education, outreach,
and information programs,
__(D) providing (directly or through referral) counseling and
consultation services to consumers to assist them in choosing
long-term care insurance coverage appropriate to their
circumstances, and
__(E) other appropriate activities.
__(4) Priority for innovation._In awarding grants under this
section, the Secretary shall give priority to applications
proposing to use innovative approaches to providing information,
counseling, and other assistance to individuals who might benefit
from, or are considering the purchase of, long-term care
insurance.
__(c) Period of Grants._Grants under this section shall be for
not longer than 3 years.
__(d) Evaluations and Reports._
__(1) By grantees to the secretary._Each recipient of a grant
under this section shall annually evaluate the effectiveness of
its program under such grant, and report its conclusions to the
Secretary.
__(2) By the secretary to the congress._The Secretary shall
annually evaluate, and report to the Congress on, the
effectiveness of programs under this section, on the basis of
reports received under paragraph (1) and such independent
evaluation as the Secretary finds necessary.
__(e) Authorization of Appropriations._There are authorized to be
appropriated, for grants under this section_
__(1) $10,000,000 for each of fiscal years 1995 through 1997 for
grants to States, and
__(2) $1,000,000 for each of fiscal years 1995 through 1997,
for grants to eligible organizations.
PART 4_TAX TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES
SEC. 2401. REFERENCE TO TAX PROVISIONS.
__For amendments to the Internal Revenue Code of 1986 relating to
the treatment of long-term care insurance and services, see
subtitle G of title VII.
PART 5_TAX INCENTIVES FOR INDIVIDUALS WITH DISABILITIES WHO WORK
SEC. 2501. REFERENCE TO TAX PROVISION.
__For amendment to the Internal Revenue Code of 1986 providing
for a tax credit for cost of personal assistance services
required by employed individuals, see section 7901.
PART 6_DEMONSTRATION AND EVALUATION
SEC. 2601. DEMONSTRATION ON ACUTE AND LONG-TERM CARE INTEGRATION.
__(a) Program Authorized._The Secretary of Health and Human
Services shall conduct a demonstration program to test the
effectiveness of various approaches to financing and providing
integrated acute and long-term care services described in
subsection (b) for the chronically ill and disabled who meet
eligibility criteria under subsection (c).
__(b) Services and Benefits._
__(1) In general._Except as provided in paragraph (2), the
following services and benefits shall be provided under each
demonstration approved under this section:
__(A) Comprehensive benefit package._All benefits included in the
comprehensive benefit package under title I of this Act.
__(B) Transitional benefits._Specialized benefits relating to the
transition from acute to long-term care, including_
__(i) assessment and consultation,
__(ii) inpatient transitional care,
__(iii) medical rehabilitation,
__(iv) home health care and home care,
__(v) caregiver support, and
__(vi) self-help technology.
__(C) Long-term care benefits._Long-term care benefits,
including_
__(i) adult day care,
__(ii) personal assistance services,
__(iii) homemaker services and chore services;
__(iv) home-delivered meals;
__(v) respite services;
__(vi) nursing facility services in specialized care units;
__(vii) services in other residential settings including
community supported living arrangements and assisted living
facilities; and
__(viii) assistive devices and environmental modifications.
__(D) Habilitation services._Specialized habilitation services
for participants with developmental disabilities.
__(2) Variations in minimum benefits._
__(A) In general._Subject to the requirement of subparagraph (B),
demonstrations may omit specified services listed under
subparagraphs (C) and (D) of paragraph (1), or provide additional
services, as found appropriate by the Secretary in the case of a
particular demonstration, taking into consideration factors such
as_
__(i) the needs of a specialized group of eligible beneficiaries;
__(ii) the availability of the omitted benefits under other
programs in the service area; and
__(iii) the geographic availability of service providers.
__(B) Breadth requirement._In approving variant demonstrations
pursuant to subparagraph (A), the Secretary shall ensure that
demonstrations under this section, taken as a group, adequately
test financing and delivery models covering the entire array of
services and benefits described in paragraph (1).
__(c) Eligibility Criteria._The Secretary shall establish
eligibility criteria for individuals who may receive services
under demonstrations under this section. Under such criteria, any
of the following may be found to be eligible populations for such
demonstrations:
__(1) Individuals with disabilities who are entitled to services
and benefits under a State program under part 1 of this subtitle.
__(2) Individuals who are entitled to benefits under parts A and
B of title XVIII of the Social Security Act.
__(3) Individuals who are entitled to medical assistance under a
State plan under title XIX of the Social Security Act, and are
also_
__(A) individuals described in paragraph (2), or
__(B) individuals eligible for supplemental security income under
title XVI of that Act.
__(d) Application._
__(1) In general._Each entity seeking to participate in a
demonstration under this section shall submit an application, in
such format and containing such information as the Secretary may
require, including the information specified in this subsection.
__(2) Service delivery._The application shall state the services
to be provided under the demonstration (either directly by the
applicant or under other arrangements approved by the Secretary),
which shall include services specified pursuant to subsection (b)
and_
__(A) enrollment services;
__(B) client assessment and care planning;
__(C) simplified access to needed services;
__(D) integrated management of acute and chronic care, including
measures to ensure continuity of care across settings and
services;
__(E) quality assurance, grievance, and appeals mechanisms; and
__(F) such other services as the Secretary may require.
__(3) Consumer protection and participation._The applicant shall
provide evidence of consumer participation_
__(A) in the planning of the demonstration (including a showing
of support from community agencies or consumer interest groups);
and
__(B) in the conduct of the demonstration, including descriptions
of methods and procedures to be used_
__(i) to make available to individuals enrolled in the
demonstration information on self-help, health promotion and
disability prevention practices, and enrollees' contributions to
the costs of care;
__(ii) to ensure participation by such enrollees (or their
designated representatives, where appropriate) in care planning
and in decisions concerning treatment;
__(iii) to handle and resolve client grievances and appeals;
__(iv) to take enrollee views into account in quality assurance
and provider contracting procedures; and
__(v) to evaluate enrollee satisfaction with the program.
__(4) Applicant qualifications._Applicants for grants under this
section shall meet eligibility criteria established by the
Secretary, including requirements relating to_
__(A) adequate financial controls to monitor administrative and
service costs,
__(B) demonstrated commitment of the Board of Directors or
comparable governing body to the goals of demonstration,
__(C) information systems adequate to pay service providers, to
collect required utilization and cost data,  and to provide data
adequate to permit evaluation of program performance, and
__(D) compliance with applicable State laws.

__(e) Payments to Participants._An entity conducting a
demonstration under this section shall be entitled to receive,
with respect to each enrollee, for the period during which it is
providing to such enrollee services under a demonstration under
this section, such amounts as the Secretary shall provide, which
amounts_
__(1) may include risk-based payments and non-risk based payments
by governmental programs, by third parties, or by project
enrollees, or any combination of such payments, and
__(2) may vary by project and by enrollee.
.
__(f) Number and Duration of Demonstration Projects._
__(1) Request for applications._The Secretary shall publish a
request for applications under this section not later than one
year after enactment of this Act.
__(2) Number and duration._The Secretary shall authorize not more
than 25 demonstrations under this section, each of which shall
run for 7 years from the date of the award.
__(g) Evaluation and Reports._The Secretary shall evaluate the
demonstration projects under this section, and shall submit to
the Congress_
__(1) an interim report, by three years after enactment,
describing the status of the demonstration and characteristics of
the approved projects; and
__(2) a final report, by one year after completion of such
demonstration projects, evaluating their effectiveness (including
cost-effectiveness), and discussing the advisability of including
some or all of the integrated models tested in the demonstration
as a benefit under the comprehensive benefit package under title
I of this Act, or under the programs under title XVIII of the
Social Security Act.
__(h) Authorization of Appropriations._
__(1) For secretarial responsibilities._
__(A) In general._There are authorized to be appropriated
$7,000,000 for fiscal year 1996, and $4,500,000 for each of the 6
succeeding fiscal years, for payment of costs of the Secretary in
carrying out this section (including costs for technical
assistance to potential service providers, and research and
evaluation), which amounts shall remain available until expended.
__(B) Set-aside for feasibility studies._Of the total amount
authorized to be appropriated under subparagraph (A), not less
than $1,000,000 shall be available for studies of the feasibility
of systems to provide integrated care for nonaged populations
(including physically disabled children and adults, the
chronically mentally ill, and individuals with disabilities, and
combinations of these groups).
__(2) For covered benefits._There are authorized to be
appropriated $50,000,000 for the first fiscal year for which
grants are awarded under this section, and for each of the four
succeeding fiscal years, for payment of costs of benefits for
which no public or private program or entity is legally obligated
to pay.
SEC. 2602. PERFORMANCE REVIEW OF THE LONG-TERM CARE PROGRAMS.
__(a) In General._The Secretary of Health and Human Services
shall prepare and submit to the Congress_
__(1) an interim report, not later than the end of the seventh
full calendar year beginning after the date of the enactment of
this Act, and
__(2) a final report, not later than two years after the date of
the interim report,
evaluating the effectiveness of the programs established and
amendments made by this subtitle (and including at a minimum the
elements specified in subsection (b)).
__(b) Elements of Assessment._The evaluations to be made, and
included in the reports required pursuant to subsection (a),
include at least the following:
__(1) State service delivery programs._An evaluation of States'
effectiveness in meeting the needs for home and community-based
services (including personal assistance services) of individuals
with disabilities (including individuals who do, and who do not,
meet the eligibility criteria for the service program under part
1, individuals of different ages, type and degree of disability,
and income levels, members of minority groups, and individuals
residing in rural areas).
__(2) Service access._An evaluation of the degree of (and
obstacles to) access of individuals with disabilities to needed
home and community-based services and to inpatient services.
__(3) Quality._An evaluation of the quality of long-term care
services available.
__(4) Private insurance._An evaluation of the performance of the
private sector in offering affordable long-term care insurance
that provides adequate protection against the costs of long-term
care, and of the effectiveness of Federal standards and State
enforcement, pursuant to part 3, in adequately protecting
long-term care insurance consumers.
__(5) Cost issues._An evaluation of the effectiveness of
amendments made by this subtitle in containing the costs of
long-term care, and in limiting the share of such costs borne by
individuals with lower incomes.
__(6) Service coordination and integration._An evaluation of the
effectiveness of the programs established or amended under this
subtitle in achieving coordination and integration of long-term
care services, and of such services with acute care services and
social services, and in ensuring provision of services in the
least restrictive setting possible.