DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
SMDL #04-001 
 
January 28, 2004                     
                   
 
Dear State Medicaid Director: 
 
This is to advise you that Section 103(f) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Pub. L. No. 108-173) extends the Qualifying Individuals (QIs) 
benefit through September 30, 2004.  The new law was enacted December 8, 2003.  This means 
that there is 100 percent Federal funding for States to pay the Medicare Part B premiums for 
existing QIs, without interruption, and to enroll new QIs up to each States allocation.  The QIs, 
described in section 1902(a)(10)(E)(iv) of the Social Security Act (the Act), are persons entitled 
to Part A of Medicare with incomes of at least 120 percent, but less than 135 percent, of the 
official Federal poverty line and resources that do not exceed twice the standard used in the 
Supplemental Security Income program, and not otherwise eligible for Medicaid.  Authority for 
benefits for these individuals had been scheduled to expire on March 31, 2004. 
 
Section 401 of Pub. L. No. 108-89 amended section 1902(a)(10)(E)(iv) of the Act to eliminate 
reference to the QI-2 benefit that had sunset on December 31, 2002, and extended the QI-1 
benefit for persons with incomes of at least 120 percent, but less than 135 percent, of the official 
Federal poverty line (now referred to as QIs) through March 31, 2004.  Section 401 also 
amended section 1933 of the Act to set the total amount available for allocation for the QI 
program at $400,000,000 for each of fiscal years (FYs) 2002 and 2003, and $100,000,000 from 
January 1, 2004, through March 31, 2004, and to change the formula for determining the State 
allocations to eliminate the inclusion of the QI-2 program.  Under the new provisions, the 
amount allocated for the QI Program for January 1, 2004, through September 30, 2004, is 
$300,000,000. 
 
We are currently in the process of revising the formula as specified in the statute in order to 
eliminate calculations attributable to the QI-2 individuals.  This revised formula will be used to 
determine the State allocations under the new program extension.  The allocations will be for the 
period beginning January 1, 2004, and ending September 30, 2004.  We will be communicating 
each respective State allocation through the CMS Regional Offices in the next few weeks.  If 
you have any questions regarding the extension or change in State allocations, you may contact 
Glenn Stanton of my staff at (410) 786-6768.  
 
Sincerely, 
 
            /s/ 
           
 
  Dennis G. Smith, Director   
 
  Page 2  State Medicaid Director 
 
cc: 
CMS Regional Administrators 
 
CMS Associate Regional Administrators  
    for Medicaid and State Operations    
 
Kathryn Kotula 
Director, Health Policy Unit 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Brent Ewig 
Senior Director, Access Policy 
Association of State and Territorial Health Officials 
 
Jim Frogue 
Acting Director, Health and Human Services Task Force 
American Legislative Exchange Council 
 
Trudi Matthews 
Senior Health Policy Analyst 
Council of State Governments