This proposal would revise current Medicaid rules for determining financial eligibility for an individual who is no longer eligible for benefits under title XVI of the Social Security Act, the Supplemental Security Income (SSI) Program, due to receipt of cost of living increases (COLAs) under section 215(i) of the Social Security Act. This change would affect categorically needy eligibility in all States by requiring that any individual who would still be entitled to benefits under the SSI program but for receipt of a section 215(i) COLA after April 1977 must be treated as if he or she were still receiving those SSI benefits. This proposal would not apply in Puerto Rico, Guam, the Virgin Islands, and American Samoa, where the SSI program is not in effect. This proposed revision is made pursuant to a decision of the United States District Court for the Northern District of California. That decision invalidated the existing provision of the Medicaid regulations under which individuals who were no longer eligible for SSI benefits qualified for Medicaid only when a section 215(i) COLA was the specific cause of the loss of SSI benefits.