Partnership for Long-Term Care Act of 1989 - Title I: Medicaid Program Improvements - Amends title XIX (Medicaid) of the Social Security Act to require States to cover certain primary care for pregnant women and children, and nursing facility services for other individuals, whose incomes are below the Federal poverty level.
Requires States to establish a subsidy program to assist individuals whose incomes are no less than the Federal poverty level and no more than twice such level in paying long-term care insurance premiums. Provides larger subsidies as individuals' incomes approach the Federal poverty level. Prohibits States from establishing a subsidy resource eligibility limit at less than twice the resource limit under title XVI (Supplemental Security Income) of the Act.
Title II: Medicaid Amendments Relating to Treatment of Payments Under Qualified Long-Term Care Insurance Policies - Subtracts long-term care insurance payments from an individual's assets in determining his or her Medicaid eligibility.
Title III: Financing - Amends the Internal Revenue Code to eliminate the limit on the wages or self-employment income subject to the hospital insurance tax.
Title IV: Tax Treatment of Long-Term Care Insurance - Requires that, for the purpose of determining the income tax liability of life insurance companies, qualified long-term care insurance be treated as accident or health insurance. Applies this provision to policies which provide coverage for at least 12 consecutive months of diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than the acute care unit of a hospital and for an individual's loss of functional capacity.
Provides that for the purpose of determining whether a tax exclusion applies to employer contributions to or an employee's receipt of benefits from qualified long-term care insurance, such contributions and benefits shall be considered to be for coverage under an accident or health plan.
Makes the penalty tax on early distributions from qualified retirement plans inapplicable when such distributions are used to pay for qualified long-term care insurance.
Excludes from gross income amounts used to pay qualified long-term care expenses that are received under an annuity, endowment, or life insurance contract.
Treats an individual's qualified long-term care expenses as deductible medical care expenditures.
Provides for the deduction of employer contributions to a reserve fund providing employees with post-retirement qualified long-term care benefits.
Makes the exchange of a life insurance, endowment insurance, or annuity contract for a qualified long-term care insurance contract a nontaxable exchange.
Permits the inclusion of qualified long-term care insurance in cafeteria plans. Excludes such insurance from a cafeteria plan participant's gross income.
HR 3632 IH 101st CONGRESS 1st Session H. R. 3632 To amend title XIX of the Social Security Act to improve coverage of nursing facility services under the medicaid program and to amend the Internal Revenue Code of 1986 to clarify the tax treatment of long-term care insurance. IN THE HOUSE OF REPRESENTATIVES November 9, 1989 Mrs. KENNELLY introduced the following bill; which was referred jointly to the Committees on Ways and Means and Energy and Commerce A BILL To amend title XIX of the Social Security Act to improve coverage of nursing facility services under the medicaid program and to amend the Internal Revenue Code of 1986 to clarify the tax treatment of long-term care insurance. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the `Partnership for Long-Term Care Act of 1989'. TITLE I--MEDICAID PROGRAM IMPROVEMENTS SEC. 101. REQUIRING MEDICALLY NEEDY PROGRAM FOR INDIVIDUALS WITH INCOMES BELOW THE POVERTY LEVEL. (a) IN GENERAL- Section 1902(a)(10) of the Social Security Act (42 U.S.C. 1396a(a)(10)) is amended-- (1) by striking `and' at the end of subparagraph (D), (2) by inserting `and' at the end of subparagraph (E), and (3) by inserting after subparagraph (E) the following new subparagraph: `(F)(i) for making medical assistance available under subparagraph (C) for all individuals-- `(I) whose income (taking into account the costs incurred for medical care or for any other type of remedial care recognized under State law) does not exceed 100 percent of the official poverty level (as defined by the Office of Management and Budget, and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of the size involved, and `(II) whose resources (as determined under section 1613 for purposes of the supplemental security income program) do not such level (at least equal to the maximum amount of resources that an individual may have and obtain benefits under that program) as the State establishes, and `(ii) for including in medical assistance under clause (i)-- `(I) for individuals described in subparagraph (C)(ii), at least the care and services listed in paragraphs (1) through (5) and (17) of section 1905(a), and `(II) for other individuals at least nursing facility services (and, to the extent applicable, services under a waiver under section 1915(c));'. (b) EFFECTIVE DATE- (1) The amendments made by this section apply (except as provided under paragraph (2)) to payments under title XIX of the Social Security Act for calendar quarters beginning on or after January 1, 1990, without regard to whether or not final regulations to carry out such amendments have been promulgated by such date. (2) In the case of a State plan for medical assistance under title XIX of the Social Security Act which the Secretary of Health and Human Services determines requires State legislation (other than legislation appropriating funds) in order for the plan to meet the additional requirements imposed by the amendments made by this section, the State plan shall not be regarded as failing to comply with the requirements of such title solely on the basis of its failure to meet these additional requirements before the first day of the first calendar quarter beginning after the close of the first regular session of the State legislature that begins after the date of the enactment of this Act. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature. SEC. 102. PREMIUM SUBSIDY PROGRAM. (a) REQUIRING- Section 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)) is amended-- (1) by striking `and' at the end of paragraph (51), (2) by striking the period at the end of paragraph (52) and inserting `, and', and (3) by inserting after paragraph (52) the following new paragraph: `(53) meet the requirements of section 1926 (relating to a premium subsidy program for low income individuals to purchase long-term care insurance).'. (b) PREMIUM SUBSIDY PROGRAM- Title XIX of such Act is amended by redesignating section 1926 as 1927 and by inserting after section 1925 the following new section: `PREMIUM SUBSIDY PROGRAM `SEC. 1926. (a) In order to meet the requirements of this section, a State must establish and maintain a program to assist low income individuals in the purchase of qualified long-term care insurance. `(b) Under the program, each low income individual (as defined in subsection (c)(1) is entitled to payment of a subsidy, expressed as a percentage of the premium otherwise required for a qualified long-term care insurance, equal to 50 percent minus 40 percent multiplied by the factor (P-100 percent)/100 percent, where `P' is the individual's family's income expressed as a percent of the official poverty level. `(c) In this section: `(1) The term `low income individual' means an individual in a family-- `(A) the income of which (as determined under section 1612 for purposes of the supplemental security income program) is at least 100 percent, but does not exceed 200 percent, of the official poverty level, and `(B) the resources of which (as determined under section 1613 for purposes of the supplemental security income program) do not exceed an amount established by the State. The resource level established by a State under subparagraph (B) may not be less than twice the maximum amount of resources that an individual may have and obtain benefits under the supplemental security income program under title XVI. `(2) The term `official poverty line' means such term as defined by the Office of Management and Budget, and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981. `(3) The term `qualified long-term care insurance' means insurance against the costs of nursing facility services and related long-term care services which meets requirements established by the State. In establishing such requirements, the State shall take into consideration model requirements established with respect to such insurance by the National Association of Insurance Commissioners as well as requirements imposed with respect to medicare supplemental policies under section 1882.'. (c) EFFECTIVE DATE- (1) The amendments made by this section apply (except as provided under paragraph (2)) to payments under title XIX of the Social Security Act for calendar quarters beginning on or after January 1, 1990, without regard to whether or not final regulations to carry out such amendments have been promulgated by such date. (2) In the case of a State plan for medical assistance under title XIX of the Social Security Act which the Secretary of Health and Human Services determines requires State legislation (other than legislation appropriating funds) in order for the plan to meet the additional requirement imposed by the amendments made by this section, the State plan shall not be regarded as failing to comply with the requirements of such title solely on the basis of its failure to meet this additional 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 date of the enactment of this Act. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature. TITLE II--MEDICAID AMENDMENTS RELATING TO TREATMENT OF PAYMENTS UNDER QUALIFIED LONG-TERM CARE INSURANCE POLICIES SEC. 201. PROTECTION OF ASSETS TO THE EXTENT OF PAYMENTS UNDER QUALIFIED LONG-TERM CARE INSURANCE POLICIES. (a) IN GENERAL- Section 1902 of the Social Security Act (42 U.S.C. 1396a), as amended by section 102(a) of this Act, is amended-- (1) by striking `and' at the end of paragraph (52), (2) by striking the period at the end of paragraph (53) and inserting `, and', and (3) by inserting after paragraph (53) the following new paragraph: `(54) notwithstanding paragraph (17), in determining the eligibility of an individual for medical assistance under the plan, provide for reducing the amount of assets the individual is considered to have by the amount of any payments made with respect to, and for the benefit of, the individual under a policy of qualified long-term care insurance (as defined in section 1926(c)(3)).'. (b) EFFECTIVE DATE- (1) The amendments made by this section apply (except as provided under paragraph (2)) to payments under title XIX of the Social Security Act for calendar quarters beginning on or after January 1, 1990, without regard to whether or not final regulations to carry out such amendments have been promulgated by such date. (2) In the case of a State plan for medical assistance under title XIX of the Social Security Act which the Secretary of Health and Human Services determines requires State legislation (other than legislation appropriating funds) in order for the plan to meet the additional requirement imposed by the amendments made by this section, the State plan shall not be regarded as failing to comply with the requirements of such title solely on the basis of its failure to meet this additional 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 date of the enactment of this Act. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature. TITLE III--FINANCING SEC. 301. ELIMINATION OF LIMIT ON WAGES OR SELF- EMPLOYMENT INCOME SUBJECT TO HOSPITAL INSURANCE TAX. (a) IN GENERAL- Section 230 of the Social Security Act (42 U.S.C. 430) is amended by adding at the end the following new subsection: `(e) Notwithstanding any other provision of this Act or of the Internal Revenue Code of 1986, this section shall not have the effect of limiting the total amount of any individual's net earnings from self-employment or remuneration for employment which is subject to the hospital insurance tax under section 1401(b), 3101(b), or 3111(b) of the Internal Revenue Code of 1986; and sections 1402(b)(1) and 3121(a)(1) of such Code shall not apply in determining the amount of any individual's wages and self-employment income for purposes of that tax.'. (b) CONFORMING AMENDMENTS- (1) Section 1402(b) of the Internal Revenue Code of 1986 (defining self-employment income) is amended by striking `except that such term shall not include' in the matter preceding paragraph (1) and inserting `except that (subject to section 230(e) of the Social Security Act) such term shall not include'. (2) Section 3121(a) of such Code (defining wages) is amended by striking `except that such term shall not include' in the matter preceding paragraph (1) and inserting `except that (subject to section 230(e) of the Social Security Act) such term shall not include'. (3) Section 3231(e)(2)(A) of such Code (relating to compensation in excess of applicable base excluded for Railroad Retirement Tax Act) is amended by adding at the end the following new clause: `(iii) EXCEPTION FOR PORTION ATTRIBUTABLE TO HOSPITAL INSURANCE TAX- `(I) IN GENERAL- Clause (i) shall not apply to the applicable portion of the tier I taxes under section 3201(a), 3211(a), and 3221(a). `(II) APPLICABLE PORTION DEFINED- For purposes of this clause, the term `applicable portion' means, for purposes of sections 3201(a), 3211(a), and 3221(a), respectively, the portion of the rate under the respective section that corresponds to the rate specified in sections 3101(b), 1401(b), and 3111(b), respectively.' (c) TECHNICAL AMENDMENT- Paragraph (3) of section 6413(c) of such Code is amended to read as follows: `(3) EXCEPTION FOR HOSPITAL INSURANCE PORTION OF TAXES- This subsection shall not apply to-- `(A) the tax imposed by section 3101(b), and `(B) the applicable portion (as defined in section 3231(e)(2)(A)) of the tax imposed by section 3201(a).' (d) EFFECTIVE DATE- The amendments made by this section shall apply with respect to remuneration paid after December 31, 1989, and with respect to earnings from self-employment attributable to taxable years beginning after such date. TITLE IV--TAX TREATMENT OF LONG-TERM CARE INSURANCE SEC. 401. QUALIFIED LONG-TERM CARE INSURANCE DEFINED AND TREATED AS ACCIDENT OR HEALTH INSURANCE. (a) IN GENERAL- Section 818 of the Internal Revenue Code of 1986 (relating to definitions) is amended by adding at the end thereof the following new subsection: `(g) QUALIFIED LONG-TERM CARE INSURANCE TREATED AS ACCIDENT OR HEALTH INSURANCE- For purposes of this subchapter-- `(1) IN GENERAL- Any reference to noncancellable accident or health insurance contracts shall be treated as including a reference to qualified long-term care insurance. `(2) QUALIFIED LONG-TERM CARE INSURANCE- For purposes of this subsection-- `(A) IN GENERAL- Subject to subparagraphs (B) and (C), the term `qualified long-term care insurance' means insurance under a policy or rider, issued by a qualified issuer, to be advertised, marketed, offered, or designed to provide coverage-- `(i) for not less than 12 consecutive months for each covered person, `(ii) on an expense incurred, indemnity, prepaid or other basis, `(iii) for 1 or more necessary or medically necessary diagnostic services, preventive services, therapeutic services, rehabilitation services, maintenance services, or personal care services, `(iv) for the loss of functional capacity, and `(v) provided in a setting other than an acute care unit of a hospital. `(B) QUALIFIED ISSUER- For purposes of subparagraph (A), the term `qualified issuer' means any of the following provided they are subject to the jurisdiction and regulation of at least one State insurance department: `(i) Private insurance company. `(ii) Fraternal benefit society. `(iii) Nonprofit health corporation. `(iv) Nonprofit hospital corporation. `(v) Nonprofit medical service corporation. `(vi) Prepaid health plan.' (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1989. SEC. 402. QUALIFIED LONG-TERM CARE INSURANCE TREATED AS ACCIDENT AND HEALTH INSURANCE FOR PURPOSES OF EXCLUSION FOR BENEFITS RECEIVED UNDER SUCH INSURANCE AND FOR EMPLOYER CONTRIBUTIONS FOR SUCH INSURANCE. (a) IN GENERAL- Section 105 of the Internal Revenue Code of 1986 (relating to amounts received under accident and health plans) is amended by adding at the end thereof the following new subsection: `(j) SPECIAL RULES RELATING TO QUALIFIED LONG-TERM CARE INSURANCE- For purposes of section 104, this section, and section 106-- `(1) BENEFITS TREATED AS PAYABLE FOR SICKNESS, ETC- Any benefit received through qualified long-term care insurance (as defined in section 818(g)) shall be treated as amounts received through accident or health insurance for personal injuries or sickness. `(2) EXPENSES FOR WHICH REIMBURSEMENT PROVIDED UNDER QUALIFIED LONG-TERM CARE INSURANCE TREATED AS INCURRED FOR MEDICAL CARE OR FUNCTIONAL LOSS- Expenses incurred by an individual to the extent of benefits paid under qualified long-term care insurance (as defined in section 818(g)) shall be treated for purposes of subsection (b) as incurred for medical care (as defined in section 213(d)) and for purposes of subsection (c) as payment for the permanent loss or loss of use of a member or function of the body or the permanent disfigurement of the taxpayer, his spouse, any dependent of the taxpayer, or any parent of the taxpayer of his spouse. `(3) REFERENCES TO ACCIDENT AND HEALTH PLANS- Any reference to an accident or health plan shall be treated as including a reference to a plan providing qualified long-term care insurance (as defined in section 818(g)).' (b) CURRENT DEDUCTION FOR EMPLOYER PREMIUMS FOR LONG-TERM CARE POLICIES- Subparagraph (B) of section 404(b)(2) of such Code (relating to plans providing certain deferred benefits) is amended by striking `or' at the end of clause (i), by striking the period at the end of clause (ii) and inserting `, or', and by adding at the end thereof the following new clause: `(iii) any benefit provided under a policy of qualified long-term care insurance (as defined in section 818(g)) through the payment (in whole or in part) of premiums by an employer pursuant to a plan for its active or retired employees, but only if any refund of premiums is applied to reduce the future costs of the plan or increase benefits under the plan.' (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1989. SEC. 403. EARLY DISTRIBUTION PENALTY TAX NOT TO APPLY TO AMOUNTS WITHDRAWN FROM QUALIFIED PLANS, INDIVIDUAL RETIREMENT PLANS, ETC. FOR QUALIFIED LONG-TERM INSURANCE. (a) IN GENERAL- Paragraph (1) of section 72(t) of the Internal Revenue Code of 1986 (relating to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end thereof the following new subparagraph: `(D) DISTRIBUTIONS FOR QUALIFIED LONG-TERM CARE INSURANCE PREMIUMS- Any distribution to the extent used during the taxable year to pay premiums for any policy of qualified long-term care insurance (as defined in section 818(g)) or to pay for services described in section 818(g)(2)(A)(iii) (relating to services provided under long-term care insurance) for the benefit of the payee or distributee, the spouse of the payee or distributee, any dependent of the payee or distributee, or any parent of the payee or distributee or such spouse.' (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1989. SEC. 404. DEDUCTION OF EXPENSES RELATING TO QUALIFIED LONG-TERM CARE. (a) IN GENERAL- Paragraph (1) of section 213(d) of the Internal Revenue Code of 1986 (relating to the definition of medical care) is amended-- (1) by striking ` or' at the end of subparagraph (B), and (2) by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph: `(C) for those services described in section 818(g)(2)(A)(iii) (relating to services provided under qualified long-term care insurance), or'. (b) TECHNICAL AMENDMENTS- (1) Subparagraph (D) of section 213(d)(1) of such Code, as redesignated by subsection (a), is amended by striking `subparagraphs (A) and (B)' and inserting `subparagraphs (A), (B), and (C)'. (2) Paragraph (6) of section 213(d) of such Code is amended-- (A) by striking `subparagraphs (A) and (B)' and inserting `subparagraphs (A), (B), and (C)', and (B) by striking `paragraph (1)(C)' and inserting `paragraph (1)(D)'. (3) Paragraph (7) of section 213(d) of such Code is amended by striking `subparagraphs (A) and (B)' and inserting `subparagraphs (A), (B), and (C)'. (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1989. SEC. 405. TREATMENT OF PREFUNDED LONG-TERM CARE BENEFITS. (a) IN GENERAL- (1) Paragraph (2) of section 419A(c) of the Internal Revenue Code of 1986 (relating to additional reserve for post-retirement medical and life insurance benefits) is amended by striking `or' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, or', and by adding at the end thereof the following new subparagraph: `(C) post-retirement long-term care benefits (as defined in section 818(g)) to be provided to covered employees.' (2) The paragraph heading for such paragraph (2) is amended by inserting `, LONG-TERM CARE,' after `MEDICAL'. (b) RESERVE FOR LONG-TERM CARE BENEFITS MUST BE NONDISCRIMINATORY- (1) Paragraph (1) of section 419A(e) of such Code (relating to special limitations on reserves for medical benefits or life insurance benefits provided to retired employees) is amended by inserting `, long-term care benefits,' after `medical benefits' each place it appears. (2) The subsection heading for section 419A(e) of such Code is amended by inserting `, LONG-TERM CARE BENEFITS,' after `MEDICAL BENEFITS'. (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1989. SEC. 406. EXCLUSION FROM GROSS INCOME FOR AMOUNTS RECEIVED UNDER AN ANNUITY, ENDOWMENT OR LIFE INSURANCE CONTRACT USED TO PAY FOR QUALIFIED LONG-TERM CARE EXPENSE AND INSURANCE. (a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 136 as section 137 and by inserting after section 135 the following new section: `SEC. 136. AMOUNTS RECEIVED UNDER ANNUITY, ENDOWMENT OR LIFE INSURANCE CONTRACTS AND USED TO PAY FOR QUALIFIED LONG-TERM EXPENSES. `(a) IN GENERAL- Amounts received under an annuity, endowment, or life insurance contract which (but for this section) would be includible in gross income, shall not be included in gross income during the taxable year to the extent used during such year to pay premiums for qualified long-term care insurance (as defined in section 818(g)) or used during such year to pay for services described in section 818(g)(2)(A)(iii) (relating to services provided under qualified long-term care insurance) for the benefit of the taxpayer, his spouse, any dependent of the taxpayer, or any parent of the taxpayer or such spouse. `(b) AMOUNTS RECEIVED- Subsection (a) shall apply whether the amounts are received -- `(1) through a withdrawal of cash value, or `(2) pursuant an agreement with the contract issuer that the issuer will pay for the services described in section 818(g)(2)(A)(iii) in exchange for a reduction in the death benefit under the policy.' (b) CLERICAL AMENDMENT- The table of sections for such part III is amended by striking the last item and inserting the following new items: `Sec. 136. Amounts received under annuity, endowment or life insurance contracts and used to pay for qualified long-term care expenses. `Sec. 137. Cross references to other Acts.' (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1989. SEC. 407. EXCHANGES OF CERTAIN INSURANCE CONTRACTS FOR LONG-TERM CARE CONTRACTS. (a) IN GENERAL- Subsection (a) of section 1035 of the Internal Revenue Code of 1986 (relating to certain exchanges of insurance contracts) is amended by striking the period at the end of paragraph (3) and inserting `; or' and by adding at the end thereof the following new paragraph: `(4) a contract of life insurance or endowment insurance or an annuity contract for a contract of qualified long-term care insurance (as defined in section 818(g)).' (b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to exchanges of contracts in taxable years beginning after December 31, 1989. SEC. 408. QUALIFIED LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED IN CAFETERIA PLANS. (a) IN GENERAL- Paragraph (2) of section 125(c) of the Internal Revenue Code of 1986 (relating to the exclusion of deferred compensation) is amended by adding at the end thereof the following new subparagraph: `(D) EXCEPTION FOR LONG-TERM CARE INSURANCE- For purposes of subparagraph (A), a plan shall not be treated as providing deferred compensation by reason of providing qualified long-term care insurance (as defined in section 818(g)) if-- `(i) the employee may not surrender such insurance for cash, and `(ii) the terms of the plan permits, the employee may elect to continue the insurance upon cessation of participation in the plan.' (b) LONG-TERM CARE INSURANCE INCLUDED AS QUALIFIED BENEFIT- Paragraph (2) of section 125(e) of such Code (defining qualified benefits) is amended by striking `and' at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting `, and', and by adding at the end thereof the following new subparagraph: `(C) qualified long-term care insurance (as defined in section 818(g)).' (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1989.
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Referred to the House Committee on Energy and Commerce.
Referred to the Subcommittee on Health.
Referred to the Subcommittee on Health and the Environment.
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