MainStreet Independent previously reported that the $50B rural health fund faced scrutiny over whether it could offset losses for rural hospitals as hospitals confront Medicaid cuts.
The Trump administration on Monday announced how it will channel federal funding to rural health programs through a new Rural Health Transformation Program, a plan federal officials say is designed to offset budget reductions that they have said will hit rural hospitals through Medicaid.
In remarks to reporters, Dr. Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, said the program would give states access to $10 billion next year, with average awards of about $200 million. Oz said the program’s structure would require states to submit plans for how they will spend the money, with CMS project officers assigned to work with each state.
Oz said the funding plan “was crafted as part of the One Big Beautiful Bill” signed into law about six months earlier, and he described it as a mechanism meant to push states to design their own approaches. Under the program, he said, half of the money would be distributed equally among states, while the other half would be allocated using a CMS-developed formula.
The formula, Oz said, looks at rural population size, the financial health of a state’s medical facilities, and health outcomes for the state’s population. He said the approach also links $12 billion of the five-year total to whether states implement health policies prioritized under the administration’s “Make America Healthy Again” initiative.
Officials described the policy linkages as part of the funding calculation, and they pointed to examples already adopted by some Republican-led states. The administration said several states—including Arkansas, Iowa, Louisiana, Nebraska, Oklahoma and Texas—have adopted rules banning the purchase of foods such as candy and soda with SNAP benefits.
Oz said the funding amounts would be recalculated annually, which would allow the administration to reclaim money if state leaders do not pass promised policies. Oz characterized the possibility of “claw[ing] back” funds as leverage rather than punishment, saying governors could use the prospect of losing money tied to the fund to push for policy changes.
Carrie Cochran-McClain, chief policy officer with the National Rural Health Association, said the arrangement has prompted concerns from some states about whether accepting restrictions tied to the initiative could affect their ability to receive funding. She said she has heard from a number of Democratic-led states that declined to include SNAP-related restrictions even though she said those restrictions could help their chances for more money.
Experts also questioned whether the program’s scale is enough to counteract the impact of broader federal cuts. Oz and other officials said the fund represents a 50% increase in Medicaid investments in rural health care, and Rep. Don Bacon, a Nebraska Republican who voted for the budget bill that cut Medicaid, pointed to the new $50 billion rural hospital fund as intended to “keep hospitals afloat.”
Cochran-McClain, however, said the arithmetic does not match up against the overall federal reductions. She said the $50 billion fund would not nearly offset losses that rural hospitals are expected to face from a federal spending law that, she said, includes a $1.2 trillion cut over the next decade primarily from Medicaid, along with expectations that millions could lose Medicaid benefits.
Cochran-McClain also cited estimates that rural hospitals could lose around $137 billion over the next decade and said an analysis by the Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill found as many as 300 rural hospitals were at risk of closure. She said “when you put that up against the $50 billion for the Rural Health Transformation Fund, you know — that math does not add up.”
She added that the program offers no guarantee that money will reach the rural hospitals most in need. As an example, she pointed to a state application she said included a proposal for healthier, locally sourced school lunch options in rural areas, illustrating what she portrayed as the challenge of directing the funds where hospitals are struggling most.
Cochran-McClain also said the fund’s emphasis on innovation may be unrealistic for facilities under financial strain, telling reporters that rural providers she spoke with say they would like to pursue changes but worry about meeting payroll. She said rural providers described the situation as crisis mode, which she said makes it “almost impossible to do true innovation.”