DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-14-26 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
Disabled and Elderly Health Programs Group (DEHPG) 
 
December 18, 2006 
 
 
Dear State Medicaid Director, 
 
The purpose of this memorandum is to give you an update on two important developments in the 
Medicare Part D Low-Income Subsidy (LIS) Program.  The Centers for Medicare & Medicaid 
Services (CMS) is (1) releasing updated resource standards for 2007 for the purposes of making 
LIS eligibility determinations, and (2) informing you of the maximum co-payments that LIS 
eligible beneficiaries, including full-benefit dual eligible and partial dual eligible individuals, 
will pay as enrollees of Medicare prescription drug plans.  States making LIS determinations 
should be prepared to begin using the updated resource standards in 2007.  The updated income 
standards (Federal Poverty Level tables) are expected to be released in late January. 
 
2007 Resource Standards 
 
Section 1860 D-14(a)(3) of the Social Security Act (the Act) provides the methodology for 
recalculating the resource standards each year and the percentages of the Federal Poverty Level 
that indicate income eligibility for LIS.  In order to qualify for LIS, Medicare beneficiaries must 
have resources no greater than the resource limits established under the Act.  In 2006, to qualify 
for the full low-income subsidy, Medicare beneficiaries are required to have resources equal to 
or below $6,000 ($9,000 if married and living together).  In 2006, to qualify for other low-
income subsidies, Medicare beneficiaries are required to have resources equal to or below 
$10,000 ($20,000 if married).  These resource limits are increased by $1,500 per person if the 
beneficiary indicates that s/he expects to use his/her $1,500 allowable for burial expenses. 
 
The statute directs CMS to update the resource limits for LIS each year.  Provided below are (i) 
the methodology for updating the resource limits, and (ii) the 2007 low-income subsidy resource 
limits.   
 
I.  Calculation Methodology 
 
Section 1860D-14(a)(3)(D) of the Act requires CMS to use the annual percentage increase in the 
Consumer Price Index CPI), All Urban Consumers (all items, U.S. city average) as of September 
of the previous year (rounded to the nearest multiple of $10) to update the resource limits for the 
low-income subsidy.  CMS used the September, 2005 and the September, 2006 CPI values from 
the Bureau of Labor Statistics to calculate the annual percentage increase.  The annual 
percentage increase in CPI for contract year 2007 is calculated as follows: 
 
September 2006 CPI 202.9
      or =1.0206      
September 2005 CPI 198.8 Pag e 2  State Medicaid Director 
 
(Source: Bureau of Labor Statistics, Department of Labor) 
 
Thus, the 2007 increase factor for the low-income subsidy resource limits is 2.06%.  This means 
that the resource limit required for beneficiaries to qualify for the full low-income subsidy is 
increased from $6,000 ($9,000 if married) to $6,120 ($9,190 if married) for 2007.  The resource 
limit required to qualify for partial low-income subsidies is increased from $10,000 ($20,000 if 
married) to $10,210 ($20,410 if married) for 2007. 
 
II.  Table of Resource Limits Used to Determine Eligibility for Low-income Subsidy 
 
LIS Level  Marital Status  2006 LIS Resource  2007 LIS Resource 
Limit*  Limit* 
Full Subsidy LIS  Single  $7,500  $7,620 
Married  $12,000  $12,190 
All Other LIS  Single  $11,500  $11,710 
Married  $23,000  $23,410 
*These resource limits include $1,500 per person for burial expenses. 
 
Availability of New SSA Applications 
 
SSA will revise its applications accordingly.   Please contact the Directors of Communications in 
the following SSA regions if you need LIS applications with the new resource levels: 
 
ATL.ORC.RPA@ssa.gov
BOS.RCD@ssa.gov
CH.RPA@ssa.gov
DA.RPA@ssa.gov
DEN.RCD@ssa.gov
KC.RPAO@ssa.gov
NY.RPA@ssa.gov
PHI.RPA@ssa.gov
SEA.ORC.RPA@ssa.gov
SF.RPA@ssa.gov
 
2007 Copayments  
 
As required by statute, the Medicare prescription drug benefit parameters are updated each year 
using one of two indexing methods, either the annual percentage increase in average 
expenditures for Part D drugs per eligible beneficiary, or the annual percentage increase in the 
Consumer Price Index (all items, U.S. city average).  Thus, effective January 1, 2007, the 
maximum cost-sharing amounts for LIS eligible beneficiaries, including full-benefit dual 
eligibles, are as follows:  Pag e 3  State Medicaid Director 
Maximum LIS Eligible Cost-Sharing* 
 
Copayment 
Copayment up to  above 
Out-of-Pocket  Out-of-pocket 
Income Category  Deductible Limit ($3,850)  Limit 
Institutionalized Full-Benefit Dual  $0  $0  $0 
Eligible 
Full-Benefit Dual Eligible  100% FPL  $0  $1 generic,   $0 
$3.10 brand 
Full-Benefit Dual Eligible > 100% FPL;   $0  $2.15 generic,  $0 
Medicare Saving Program Participant  $5.35 brand 
(QMB-only, SLMB-only, or QI);  
Supplemental Security Income (but not 
Medicaid) Recipient;  
Applicant < 135% FPL with resources  
$7,620 ($12,190 if married)** 
Applicant < 150% FPL with resources bet.  $53  15%  $2.15 generic, 
$7,620-$11,710 ($12,190-$23,410 if  $5.35 brand 
married)** 
*Please note that only the $1 copayment for full-benefit dual eligible individuals with income at or below 100% FPL 
and the $0 copayment for institutionalized full benefit dual eligibles are unchanged from 2006 to 2007. 
** Resource limits displayed include $1,500 per person for burial expenses. 
 
Point of Contact 
For questions pertaining to the methodology for updating the resource standards, please contact: 
Meghan Elrington at meghan.elrington@cms.hhs.gov or (410) 786-8675.  
 
For questions pertaining to LIS eligibility, please contact: 
Kay Pokrzywa   katherine.pokrzywa@cms.hhs.gov  410-786-5530 
Jill Gotts    jill.gotts@cms.hhs.gov    410-786-7794 
 
            Sincerely, 
 
                /s/ 
 
Gale P. Arden 
Director