The state continued negotiations with the federal government on Wednesday in an effort to preserve funding for hospitals that treat large numbers of poor and uninsured patients.
Florida had previously relied on a pot of money known as the Low Income Pool, or LIP. But the $2.2 billion program is scheduled to expire later this year, under an agreement between the state and federal government.
On Tuesday, the Centers for Medicare and Medicaid Services, or CMS, said it "will not extend Florida's Low Income Pool in its current form beyond June 30," according to a statement issued by the agency.
But that doesn't mean the talks are off.
The CMS said it would work with the state "to develop payment approaches for Florida's Medicaid beneficiaries to ensure adequacy, equity, accountability and sustainability for Florida's Medicaid funding."
In other words, the federal government may be willing to approve a different funding system.
"We have not heard anything from them saying the LIP funding is going to go away in its entirety," said Justin Senior, the Medicaid director for the state Agency for Health Care Administration.
Senior said there were already several "areas of agreement" between the state and federal governments. "We're working with them," he said. "We have a good relationship."
If the LIP funding were to disappear altogether, it would blow a $1.3 billion hole in Florida's budget. Gov. Rick Scott's recommended budget assumes all of the funding will come through.
Senate Appropriations Chairman Tom Lee, R-Brandon, said Tuesday's announcement from the CMS had sent Florida lawmakers "back to the drawing board."
"We actually have already begun to organize some meetings with staff and key members in the process to try to determine what are our range of options because it's a problem we have to solve," Lee said Wednesday.
Those options, according to Lee, might include finding savings in the state budget or tapping into the $1 billion surplus.
"Whether it's by the name of LIP or some other name, a program might still exist," Lee said. "But we're going to have to work with CMS to modify our current operating mode so they can cooperate with us."
Contact Kathleen McGrory at kmcgrory@MiamiHerald.com. Follow @kmcgrory.