SEC. 322. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.
Title[ Title III\Subtitle C Contents
(a) General Rule.--Paragraph (1) of section 213(d) (defining medical
care) is amended by striking ``or'' at the end of subparagraph (B), by
redesignating subparagraph (C) as subparagraph (D), and by inserting
after subparagraph (B) the following new subparagraph:
``(C) for qualified long-term care services (as
defined in section 7702B(c)), or''.
(b) Technical Amendments.--
(1) Subparagraph (D) of section 213(d)(1) (as redesignated
by subsection (a)) is amended by inserting before the period
``or for any qualified long-term care insurance contract (as
defined in section 7702B(b))''.
(2)(A) Paragraph (1) of section 213(d) is amended by adding
at the end the following new flush sentence:
``In the case of a qualified long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-term care
premiums (as defined in paragraph (10)) shall be taken into
account under subparagraph (D).''
(B) Paragraph (2) of section 162(l) is amended by adding at
the end the following new subparagraph:
``(C) Long-term care premiums.--In the case of a
qualified long-term care insurance contract (as defined
in section 7702B(b)), only eligible long-term care
premiums (as defined in section 213(d)(10)) shall be
taken into account under paragraph (1).''
(C) Subsection (d) of section 213 is amended by adding at
the end the following new paragraphs:
``(10) Eligible long-term care premiums.--
``(A) In general.--For purposes of this section, the
term `eligible long-term care premiums' means the amount
paid during a taxable year for any qualified long-term
care insurance contract (as defined in section 7702B(b))
covering an individual, to the extent such amount does
not exceed the limitation determined under the following
table:
``In the case of an individual
with an attained age before the The limitation
close of the taxable year of: is:
40 or less........................ $ 200
More than 40 but not more than 50. 375
More than 50 but not more than 60. 750
More than 60 but not more than 70. 2,000
More than 70...................... 2,500 .
``(B) Indexing.--
``(i) In general.--In the case of any taxable
year beginning in a calendar year after 1997, each
dollar amount contained in subparagraph (A) shall
be increased by the medical care cost adjustment
of such amount for such calendar year. If any
increase determined under the preceding sentence
is not a multiple of $10, such increase shall be
rounded to the nearest multiple of $10.
``(ii) Medical care cost adjust-
ment.--For purposes of clause (i), the medical
care cost adjustment for any calendar year is the
percentage (if any) by which--
``(I) the medical care component of
the Consumer Price Index (as defined in
section 1(f)(5)) for August of the
preceding calendar year, exceeds
``(II) such component for August of
1996.
The Secretary shall, in consultation with the
Secre-
tary of Health and Human Services, prescribe an
adjustment which the Secretary determines is more
appropriate for purposes of this paragraph than
the adjustment described in the preceding
sentence, and the adjustment so prescribed shall
apply in lieu of the adjustment described in the
preceding sentence.
``(11) Certain payments to relatives treated as not paid for
medical care.--An amount paid for a qualified long-term care
service (as defined in section 7702B(c)) provided to an
individual shall be treated as not paid for medical care if such
service is provided--
``(A) by the spouse of the individual or by a
relative (directly or through a partnership,
corporation, or other entity) unless the service is
provided by a licensed professional with respect to such
service, or
``(B) by a corporation or partnership which is
related (within the meaning of section 267(b) or 707(b))
to the individual.
For purposes of this paragraph, the term `relative' means an
individual bearing a relationship to the individual which is
described in any of paragraphs (1) through (8) of section
152(a). This paragraph shall not apply for purposes of section
105(b) with respect to reimbursements through insurance.''.
(3) Paragraph (6) of section 213(d) is amended--
(A) by striking ``subparagraphs (A) and (B)'' and
inserting ``subparagraphs (A), (B), and (C)'', and
(B) by striking ``paragraph (1)(C)'' in subparagraph
(A) and inserting ``paragraph (1)(D)''.
(4) Paragraph (7) of section 213(d) is amended by striking
``subparagraphs (A) and (B)'' and inserting ``subparagraphs (A),
(B), and (C)''.
(c) Effective <<NOTE: 26 USC 162 note.>> Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 1996.
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