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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.