States will provide $10 billion next year for rural health care under a program aimed at offsetting Trump administration spending. Massive budget cuts for rural hospitalsfederal officials announced Monday.
But while every state has applied for money under the Rural Health Transformation Program, it won't be distributed equally. Critics fear funding could be cut off if state policies do not align with the administration's.
Officials said the average award for 2026 will be $200 million, and the fund will invest a total of $50 billion in rural health programs over five years. States propose how to spend their awards, and the Centers for Medicare and Medicaid Services assigns project specialists to support each state, according to the agency's administrator. Dr. Mehmet Oz.
“This fund was created as part of the One Big Beautiful Bill that was signed into law just six months ago to push states to get creative,” Oz said on a call with reporters Monday.
The program distributes half the money equally to each state. The other half is allocated based on a formula developed by CMS that takes into account the size of the rural population, the financial health of the state's health care facilities and the health status of the state's population.
The formula also ties $12 billion in five-year funding to whether states implement health policies prioritized by the Trump administration's Make America Healthy Again initiative. Examples include requiring nutrition education for health care workers, school participation in Presidential Fitness Test or ban on the use of SNAP benefits for so-called junk food– said Oz.
Several Republican-led states, including Arkansas, Iowa, Louisiana, Nebraska, Oklahoma and Texas, have already passed rules prohibiting the purchase of items such as candy and soda through SNAP.
The money states receive will be recalculated annually, Oz said, allowing the administration to “claw back” the funds if, for example, state leaders don't implement promised policies. Oz said the refunds are not a punishment but a lever that governors can use to push policies forward, pointing to the potential loss of millions of people.
“I've already heard governors express the view that this is not a threat, but in fact it is an empowering element of one big beautiful bill,” he said.
Carrie Cochran-McClain, chief policy officer for the National Rural Health Association, said she has heard from a number of Democratic-led states that have refused to include such restrictions in SNAP benefits, even though it could hurt their chances of getting more money from the fund.
“This is not where their state leadership is,” she said.
Oz and other federal officials touted the program as a 50 percent increase in Medicaid investment in rural health care. Rep. Don Bacon, a Nebraska Republican who has criticized many of the administration's policies but voted for the budget bill that cut Medicaid, pointed to the fund when asked recently about how the cuts would hurt rural hospitals.
“That's why we added a $50 billion rural hospital fund to help any hospital that is struggling,” Bacon said. “This money is intended to keep hospitals afloat.”
But experts say that won't come close to offsetting the losses that struggling rural hospitals will suffer due to $1.2 trillion in federal budget cuts over the next decade, led by Medicaid. Millions of people are also expected to lose Medicaid benefits.
It is estimated that rural hospitals could lose approximately $137 billion over the next decade due to budgetary measures. About 300 rural hospitals are at risk of closing due to the GOP spending package, according to the GOP. analysis Cecil Scheps Center for Health Research at the University of North Carolina at Chapel Hill.
“When you compare that amount to the $50 billion for the Rural Health Transformation Fund, the math doesn't add up,” Cochran-McClain said.
She also said there is no guarantee the funds will go to rural hospitals in need. For example, she noted, one state's application included a proposal for healthier, locally produced school lunch options in rural areas.
And while innovation is a goal of the program, Cochran-McClain said it's difficult for rural hospitals to innovate when they struggled to break even before Congress cut Medicaid.
“We talk to rural service providers every day who say, 'I'd really like to do x, y, z, but I'm worried about, you know, paying payroll at the end of the month,'” she said. “So when you're in a crisis mode like this, I would say it's almost impossible to do real innovation.”
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