The standoff between the state of Florida and the Obama administration was settled Thursday when Governor Rick Scott announced a dismissal of his suit against the administration in exchange for certain hospital funds that had been withheld. 

The lawsuit arose after CMS announced it would not renew Florida’s “Low-Income Pool” (LIP) funding, which aids safety net hospitals through a Section 1115 waiver and was set to expire on June 30. Florida had received about $1.3 billion annually through the waiver. 

Florida alleged the federal government was coercing the state into expanding Medicaid by withholding the funds. 

Under Thursday’s settlement, Florida will receive $1 billion in LIP funds for the 2015-16 budget year, slightly less than the state has received in the past. But, in 2016-17 CMS will reduce the funding to $600 million. No promises were to made as to subsequent years. 

While the settlement is a near-term victory for Florida, shortfalls await both providers and patients if the state does not expand Medicaid or take other action to offset the impending cuts.