By Joanne Kenen

The months-long controversy between Florida and the federal Medicaid program over funding for hospitals and clinics that serve uninsured low-income people drew attention to these uncompensated care pools. In Florida the arrangement is called the Low-Income Pool – better known as “LIP” (a gift to headline writers).

So what are these payments? And how do they differ from a Disproportionate Share Hospital (DSH) arrangement?

At least nine states, including Florida, have some kind of Medicaid waiver arrangement with the federal government that involves payments to safety net hospitals and, in at least some states, community health centers.

Florida’s original LIP dates back nearly a decade, to when the state was transitioning to Medicaid managed care and before the Affordable Care Act allowed Medicaid expansion. There was a lot of politicking and grandstanding between Florida and the feds over the latest extension. Ultimately Florida got part of the money it was seeking – and it still hasn’t expanded Medicaid. (Daniel Chang and his colleagues at The Miami Herald have covered the saga.) In this letter, CMS outlines its expectations of the state.

Eight other states have funding agreements like Florida’s, according to Christine Vestal’s reporting at Stateline. In addition to Florida, Texas and Tennessee have not expanded Medicaid under the ACA and could see their funds cut too. (All of the states’ programs are different, and may not cover the same kinds of providers or care for the same populations.)

In the other five states that expanded Medicaid – California, Arizona, Hawaii, New Mexico and Massachusetts – “actual reductions in uncompensated care will be taken into account when negotiating an extension of the funding,” Vestal wrote. If hospitals are getting Medicaid funds and/or have more of these patients getting subsidized coverage through the exchanges, the LIP funds presumably will be reduced. The deadlines vary from state to state, some in a few months and some not for a few more years.

The DSH situation is different. It’s Medicaid funds (there’s also Medicare DSH) assisting hospitals, particularly safety nets, that treat a disproportionate share of low-income uninsured. Because of coverage expansion, DSH is set to be trimmed but Congress has pushed back that start date a few times. Currently, DSH will drop by $2 billion in fiscal 2018 then, over the next few years, payments will be reduced by $18 billion. The formula for distributing those cuts is still being worked out. A workable and equitable formula is needed. According to a May 2015 presentation by the Medicaid and CHIP Payment and Access Commission (MACPAC), payments per uninsured person vary a lot, as little as $3 to as much as $1,500 per person. But clearly states that have not taken up the Medicaid expansion will be worse off than those that do expand, with significant federal funds.

If you are reporting in a state with an expiring uncompensated care pool, start asking health and hospital officials what they expect, what they hope, and what they can live with. In Tennessee and Texas, there could be some political conflict, though perhaps not quite as much as in Florida. In all states, there will be more adjustments – maybe we should be calling the ACA the “Adjusting to Change Act.”

For more background, see this issue brief from the Center on Budget and Policy Priorities. Also, Joan Alker of Georgetown’s Center for Children and Families recently blogged about the Florida situation.