The Rural Health Transformation Program, enacted as part of the newly passed budget law known as the One Big Beautiful Bill Act, allocates $50 billion over five years to support rural health initiatives. However, despite the headline investment, policy experts and rural hospital leaders are raising concerns about whether the funding will meaningfully benefit rural providers, according to Health Affairs.
Eight things to know:
1. Funds go to states, not hospitals. Unlike past federal relief efforts, this program does not provide direct payments to rural hospitals. Instead, CMS will issue grants to states, which must seek the agency’s approval to access and spend the funds. States are not legally required to direct any of the money to rural hospitals specifically.
2. CMS Administrator has sweeping discretion. CMS Administrator Mehmet Oz, MD has broad authority to approve or deny state applications and decide how funding from the program’s discretionary pool is allocated, according to the report. The law gives him the ability to define eligible activities, including uses that may have little to no direct connection to rural hospitals.
3. No performance accountability required. States must submit a rural health transformation plan and report annually, but continued funding is not contingent on performance or rural health outcomes. Once a state’s plan is approved, funding continues through 2030, regardless of results.
4. Half of the funds are distributed equally. Of the $50 billion, $25 billion will be divided equally among all states with approved applications, potentially granting the same allotment to small states such as Vermont and large states like Texas, according to KFF Health News. Each would receive $100 million annually for five years, assuming all are approved.
5. The other half is discretionary. The remaining $25 billion is at the CMS Administrator’s discretion. Although the law requires consideration of factors such as the proportion of rural health facilities and rural population, it does not require allocation based on those criteria, which could allow other factors to dominate the distribution.
6. Short-term program, permanent Medicaid cuts. The rural program ends after five years, while the legislation implements permanent Medicaid cuts expected to total $1 trillion over the next decade. The Congressional Budget Office projects nearly 12 million people will lose coverage, and rural areas may be particularly hard hit, with rural Medicaid funding estimated to drop by $155 billion over 10 years, according to KFF Health News.
7. Funding may not reach rural providers. Eligible funding activities include broad categories such as chronic disease prevention, telehealth expansion and mental health support. States can fulfill program requirements without allocating funds to rural hospitals. This opens the door to funding large national vendors or technology firms over local providers, according to Health Affairs.
8. States face planning and execution challenges. States must submit applications by Dec. 31, and begin obligating funds soon after, with initial allotments potentially arriving in early 2026. However, CMS may claw back unspent funds as early as September 2027, giving states limited time to plan and implement effective programs.
