This month marks the start of a nationwide experiment to give health care in rural America a $50 billion makeover.
The Trump administration, in a late December announcement, revealed how much each state will get under an ambitious 5-year initiative known as the Rural Health Transformation Program.
“This is a massive effort to change an unfortunate reality that has occurred to rural health care in America,” Dr. Mehmet Oz, head of the Centers for Medicare and Medicaid Services, told reporters as the awards went out, “which is that your zip code has started to predict your life expectancy.”
Research shows people are more likely to die younger in rural communities compared to cities, and the disparity has grown over the last three decades.
Congress created this new pot of money last summer. States were given just 52 days to pull together applications for how they would use the funding to improve outcomes, grow the rural health care workforce and drive innovation.
Each state is guaranteed $100 million a year over the next five years. The rest of the money was awarded based on a series of factors — including how rural a state is, what states propose to do with the money and whether the states adopt policies aligned with the administration’s Make America Healthy Again priorities.
There’s bipartisan excitement about rural health finally getting some attention and investment. Democrats and many health policy experts argue, however, that this temporary $50 billion infusion pales in comparison to the roughly $1 trillion in cuts to Medicaid and Obamacare, also passed by Congress last year. Critics also worry about a lack of transparency and the administration’s decision to give an edge to states that adopt White House policies.
“There’s a lot of great things in these proposals,” said Kevin Bennett, the director of the Center for Rural and Primary Healthcare at the University of South Carolina. “But I think if we really wanted to transform [rural health care], they would have gone a lot further.”
Bennett spoke on a panel about the new funding co-hosted by Tradeoffs and the Leonard Davis Institute of Health Economics at the University of Pennsylvania. The panel also included Paula Chatterjee, a physician and researcher at the University of Pennsylvania, and Sarah Jane Tribble, chief rural correspondent for KFF Health News.
Here are a few other key things to know about the Rural Health Transformation Program:
Why was the Rural Health Transformation Program created?
Congress added – and at the last minute, doubled – the rural funding as Republicans passed a sweeping domestic policy bill last July.
Its inclusion came out of fears from some Republicans that major cuts to federal Medicaid funding would threaten the viability of rural hospitals. Nearly 200 rural hospitals have closed since 2005, and another 432 are vulnerable to closure, according to a recent report.
“Susan Collins [of Maine], [Lisa] Murkowski in Alaska, they all talked about their rural hospitals,” Tribble said at the Tradeoffs and Penn LDI event. “The rhetoric was that this would help address those fears and concerns. Plenty of Republicans said it, but that’s not the reality of what was written in the bill.”
The reality is that states can only use up to 15% of this new funding for direct payments to providers, including hospitals.
“The purpose of this fund is not to pay operating expenses,” Oz told reporters in December. “The purpose of this $50 billion investment is to allow us to rightsize the system and to deal with the fundamental hindrances of improvement in rural health care.”
How much money did each state receive?
Awards for the first year range from New Jersey’s $147 million to $281 million for Texas.
Large rural states like Texas, Alaska, California and Montana got the most money, but according to an analysis from the health policy research group KFF, some small states like New Jersey, Rhode Island and Massachusetts got significantly more per rural resident.
Chatterjee did an analysis ahead of the awards being announced that found what she called a “mismatch” in how funds were targeted compared to where the greatest rural patient needs are.
“If you look at where funding per rural resident is going under this program, it’s not going to states that have the highest rural mortality rates,” Chatterjee said. “It’s not going to states that are projected to have the greatest reductions in federal Medicaid spending. It’s not going to places that are losing the most hospital beds.”
How do states plan to use this funding?
A number of states went after the new money to fund more telehealth, deploy artificial intelligence and expand the rural health care workforce.
States took on workforce shortages from many angles. Delaware asked for money to launch a new medical school. Alaska plans to spend funds on housing and child care for its health care workers. California wants to invest in a workforce mapping and planning tool. Many states said they would create more residency and fellowships for doctors and make it easier for nurses, pharmacists and other health workers to do more.
“A lot of the workforce proposals in these are tried and true methods,” Bennett said. “Pipeline development, incentive programs, loan repayment, all of those sorts of things we know can be effective.”
Will new rural funding make up for expected federal Medicaid cuts?
The same legislation that created the Rural Health Transformation Program also cut federal Medicaid spending by nearly $1 trillion over the next decade. A KFF analysis estimates that $137 billion of those cuts will hit rural areas — nearly triple the amount of the new rural health fund.
Rural health advocates say the looming cuts will leave hospitals struggling to survive, making it difficult to fully take advantage of the rural funding opportunity. “It’s really hard to think about transformation if you’re trying to keep your doors open and employees employed and patients served,” Bennett said.
What happens next?
CMS launched an Office of Rural Health Transformation, which will oversee the program and offer support to states, according to federal health officials. Most states are planning to have their departments of health or Medicaid offices manage their new initiatives.
States are expected to start work on their implementation immediately, with awards for 2027 due to be announced in October 2026.
Some of the money comes with strings. States could get bigger awards by promising to adopt health policies favored by the administration. But if states fail to pass those policies, they will receive less money in future years and could be forced to repay funds they already received.
Oz said he sees this as a tool for governors to push policies through potentially uncooperative legislatures.
“This is not a threat,” Oz said. “This is actually an empowering element of the One Big Beautiful Bill.”
According to federal health officials, 24 states promised to reinstate the Presidential Fitness Test in schools; thirty-three states said they already have or would add restrictions to their food assistance programs to make it harder for people to buy soda and other unhealthy items; and 18 states got points for repealing or limiting certificate of need laws, which require health care providers to prove to state regulators that new services or facilities are needed before they can open up shop.