DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
    SMDL #03-009 
 
 
              October 7, 2003 
 
 
 
Dear State Medicaid Director: 
 
Enactment of a Medicare endorsed prescription drug program will have an impact on the 
administration of your states Medicaid program. While Congress continues its progress on this 
important legislation, it is likely that the prescription drug discount card with a transitional low income 
assistance program (referred to jointly as drug card activities) will become operational in the Spring 
of 2004. The purpose of this letter is only to alert you to the need for your attention to data-related 
activities to support the drug card and its related provisions. This letter does not address any non-drug 
card provisions of the legislation. We also ask you to identify a contact from your state so that we can 
begin preparations for your states training and information needs related to the Medicare-endorsed 
prescription drug discount card and transitional low-income assistance program, and so we can collect 
your preferred referral information to be provided to our 1-800-MEDICARE operators for those 
beneficiaries who inquire about state-funded pharmacy assistance programs. 
 
Data Systems Implications 
 
Based on what the bipartisan, bicameral Congressional Conference Committee has shared about its 
preliminary agreements on the drug card and low-income assistance program, there will likely be data 
systems process implications for your state. Implementation of the provisions being considered might 
require that states provide the Centers for Medicare & Medicaid Services (CMS) with potentially four 
pieces of information on a monthly basis, as follows: 1) the type of dual eligibility status for all 
Medicaid eligibles (including those participating in section 1115 waiver programs) also eligible for 
Medicare (full dual eligibles, QMB, SLMB, QI-1 and QDWI); 2) whether the dually eligible 
individual is receiving prescription drug coverage under Medicaid; 3) the dually eligible persons 
unique Social Security Number (SSN); and 4) that individuals date of birth (DOB) and gender.  The 
DOB, SSN, and gender are required to perform a match with CMS Medicare systems, which is 
needed as part of the process to determine whether a Medicare beneficiary who is also eligible for 
Medicaid is or is not eligible for the prescription drug discount card.  
 
We have explored with members of the Medicaid Systems Technical Advisory Group (S-TAG) 
several approaches to how states could most efficiently and effectively provide CMS with 
needed data to identify which dually eligible individuals would and would not be eligible for the 
prescription drug discount card. From those discussions, it would appear that one approach 
would be for states to prepare a separate monthly file containing only those dual eligibles 
(including those participating in section 1115 waiver programs) for whom the state is paying for  
  Page 2  State Medicaid Director 
 
prescription drugs and submit it electronically to CMS.  CMS would then match that file with the 
Medicare Beneficiary Database in order to identify the remainder of the duals who would be 
eligible for the Medicare-endorsed prescription drug discount card (e.g., those duals for whom the 
state is NOT paying for prescription drugs).  As part of this approach, it will be necessary for 
each state to ensure that it is accurately and completely populating the existing eligibility type code 
within the Third Party Medicare Premium Billing and Collection System.  This will be necessary 
so that CMS will be able to distinguish the income levels of those dual eligibles who are not 
receiving full Medicaid (including drugs) in order for any co-insurance amounts to be properly 
determined.  This step would require no new coding; it would be a quality check on the 
existing data.       
 
However, there are other more complex, labor-intensive approaches (for both the states and CMS) that 
are also possible, and we need to know from each state whether or not the above-mentioned approach 
is workable for you or if another approach is better for your state.  Based on your feedback, we will 
decide how best to proceed from a systems perspective.  
 
Therefore, in an effort to act quickly when the final legislation is enacted, we ask that you complete 
the attached form and fax a copy to Mr. Harvey Heyman of my staff at (410) 786-0390 by 
October 15. 
 
Our current estimate based on legislative enactment in Fall 2003 is that we would need to test files 
from all states in December 2003 and receive live files starting in late January 2004.  If there are any 
states that would be willing to work with CMS on systems testing earlier in anticipation of the 
legislation being enacted, we would greatly appreciate knowing that as well. 
 
While this letter is not intended to direct the states to make changes now (we will need the final 
legislation first), we do want to alert you to what we think will be systems and resources challenges 
immediately after the legislation is passed in order for the states to be ready to implement any 
provisions establishing the prescription drug discount card by the implementation date specified in the 
legislation. 
 
Please meet with your staff who are expert in these areas and begin the process of evaluating what 
data systems readiness activities you may need in order to prepare for a rapid implementation of the 
Medicare-endorsed prescription drug discount card and its transitional low-income assistance program 
if it is adopted in the final legislation. 
 
Training, Information and Referral Information 
 
While we anticipate that most eligible Medicare beneficiaries will receive information regarding 
the prescription drug discount card through Medicares toll-free number and Web site, or through 
the assistance of a State Health Insurance Program counselor, the state will have an opportunity 
to provide information and a referral to those individuals who are applying for a dual eligible 
program and may also qualify for the prescription drug discount card.  Additionally, states will 
play a key educational role for those Medicare beneficiaries who may also be eligible for a 
state-funded pharmacy assistance program.  Therefore, we would like each state to identify one  
representative we can contact in order to begin discussing the training needs for your program 
managers and case managers, as well as the tools, resources, and information that we can help provide   Page 3  State Medicaid Director 
 
in order to assist you and beneficiaries.  Accordingly, please include this contact information on the 
bottom of page 2 of the enclosed state response form, or e-mail Gina Clemons at 
gclemons@cms.hhs.gov with the state contacts name, phone number, address, e-mail, and fax 
number. 
 
We are working with the National Association of State Medicaid Directors (NASMD) to prepare for 
the work states will face as the prescription drug discount card is quickly implemented. Feel free to be 
in touch with Kathy Kotula at NASMD (202-682-0100, kkotula@aphsa.org), or you are welcome to 
contact Ginni Hain (410-786-6036, ghain@cms.hhs.gov) or Wayne Smith (410-786-2583, 
wsmith1@cms.hhs.gov) directly to discuss this further.   
 
Thank you for your immediate attention to this new data-related activity and for your identification of 
a state contact for training and education purposes. 
 
            Sincerely, 
 
            /s/ 
             
            Dennis G. Smith 
            Director 
 
Enclosure 
 
cc: 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
     for Medicaid and State Operations 
 
Kathy 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  Page 4  State Medicaid Director 
 
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 
 
 
 
 
 
According to the Paperwork Reduction Act of 1995, no persons are required to respond to a collection of 
information unless it displays a valid OMB control number.  The valid OMB control number for this information 
collection is 0938-0909.  The time required to complete this information collection is estimated to average two hours 
per response, including the time to review instructions, search existing data resources, gather the data needed, and 
complete and review the information collection.  If you have comments concerning the accuracy of the time 
estimate(s) or suggestions for improving this form, please write to: CMS, 7500 Security Boulevard, Attn: PRA 
Reports Clearance Officer, Baltimore, Maryland 21244-1850.   
  Enclosure 
 
Medicare-Endorsed Prescription Drug Discount Card and Transitional Low Income Assistance 
Program Response Form 
(Please use additional pages if needed) 
 
 
STATE:  _______________________ 
 
From your states perspective please outline the Pros and Cons for the following approach: 
 
The state would prepare a separate monthly file, unrelated to any other current data exchange with CMS, 
consisting of only dual eligibles for whom Medicaid is paying for prescription drugs.  The file would 
contain CMS-specified identifiers (e.g., SSN, birthdate, gender), and list only those individuals receiving 
prescription drug coverage under Medicaid.  Our assumption in this approach is that the state would draw 
this file from its pharmacy billing system, NOT the eligibility files.  Our further assumption is that this 
file would be virtually 100 percent accurate because the state knows which duals they accept prescription 
drug claims for, and which they do not.  (Note:  CMS would then match this file with the Medicare 
Beneficiary Database to identify both those eligible and those not eligible for the discount card and low-
income subsidy.) 
 
Pros: 
 
 
 
 
Cons: 
 
 
 
 
Further Comments: 
 
 
 
 
If the above approach is not workable for you, what approach would be better?  For example, other 
approaches which we considered, but which are likely more complex and resource intensive, 
include:  (1) use of the finder file process described in the January 8, 2002 State Medicaid Director 
letter, which 29 states currently use with varying degrees of frequency to identify whom their dual 
eligible beneficiaries are; (2) accurately and completely populating a new eligibility type field (using 
MSIS eligibility type codes) on the Third Party Medicare Premium Billing and Collection data exchange 
record, which is currently not required; or (3) submitting a separate file (not associated with the Third 
Party Medicare Premium Billing and Collection System or MSIS) to CMS with all dually eligible 
Medicaid beneficiaries identified by eligibility type (e.g., QMB+, QMB, SLMB+, SLMB, QI1, QDWI).   
Would any of these approaches be better for your state to use? 
 
Which approach?____________________________________________________________________ 
 
__________________________________________________________________________________  
 
 
  Page 2 
 
Pros: 
 
 
 
Cons: 
 
 
 
Further Comments: 
 
 
 
 
Is there any other approach which would work for you that has not been mentioned?   Please describe. 
 
 
 
 
 
 
 
 
Volunteer for early systems testing?:      Yes                 No 
 
Data Systems Contact 
 
State Lead Data Systems Contact: _____________________________    Tel. Number: (    )___-_____            
 
e-mail address:___________________________________ 
 
Certifying State Officials Signature: __________________________   Date: _______________ 
 
Title:         ______________________________________ 
 
Training and Education Contact 
 
State Lead Training and Education Contact:____________________________ 
 
Tel. Number: (___)____-______  
 
Fax Number: (___)____-______  
 
e-mail address:_________________________________