States will share $10 billion for rural health care next year in a program that aims to offset the Trump administration’s massive budget cuts to rural hospitals, federal officials announced Monday.
But while every state applied for money from the Rural Health Transformation Program, it won’t be distributed equally. And critics worry that the funding might be pulled back if a state’s policies don’t match up with the administration’s.
Officials said the average award for 2026 is $200 million, and the fund puts a total of $50 billion into rural health programs over five years. States propose how to spend their awards, and the Centers for Medicare and Medicaid Services assigns project officers to support each state, said agency administrator Dr. Mehmet Oz.
“This fund was crafted as part of the One Big Beautiful Bill, signed only six months ago now into law, in order to push states to be creative,” Oz said in a call with reporters Monday.
Under the program, half of the money is equally distributed to each state. The other half is allocated based on a formula developed by CMS that considered rural population size, the financial health of a state’s medical facilities and health outcomes for a state’s population.
The formula also ties $12 billion of the five-year funding to whether states are implementing health policies prioritized by the Trump administration’s “Make America Healthy Again” initiative. Examples include requiring nutrition education for health care providers, having schools participate in the Presidential Fitness Test or banning the use of SNAP benefits for so-called junk foods, Oz said.
Several Republican-led states — including Arkansas, Iowa, Louisiana, Nebraska, Oklahoma and Texas — have already adopted rules banning the purchase of foods like candy and soda with SNAP benefits.
The money that the states get will be recalculated annually, Oz said, allowing the administration to “claw back” funds if, for example, state leaders don’t pass promised policies. Oz said the clawbacks are not punishments, but leverage governors can use to push policies by pointing to the potential loss of millions.
“I’ve already heard governors express that sentiment that this is not a threat, that this is actually an empowering element of the One Big Beautiful Bill,” he said.
Carrie Cochran-McClain, chief policy officer with the National Rural Health Association, said she’s heard from a number of Democratic-led states that refused to include such restrictions on SNAP benefits even though it could hurt their chance to get more money from the fund.
“It’s not where their state leadership is,” she said.
Experts say fund is inadequate in face of other cuts
Oz and other federal officials have touted the program as a 50% increase in Medicaid investments in rural health care. Rep. Don Bacon, a Republican from Nebraska who has been critical of many of the administration’s policies but voted for the budget bill that slashed Medicaid, pointed to the fund when recently questioned about how the cuts would hurt rural hospitals.
“That’s why we added a $50 billion rural hospital fund, to help any hospital that’s struggling,” Bacon said. “This money is meant to keep hospitals afloat.”
But experts say it won’t nearly offset the losses that struggling rural hospitals will face from the federal spending law’s $1.2 trillion cut from the federal budget over the next decade, primarily from Medicaid. Millions of people are also expected to lose Medicaid benefits.
Estimates suggest rural hospitals could lose around $137 billion over the next decade because of the budget measure. As many as 300 rural hospitals were at risk for closure because of the GOP’s spending package, according to an analysis by The Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill.
“When you put that up against the $50 billion for the Rural Health Transformation Fund, you know — that math does not add up,” Cochran-McClain said.
She also said there’s no guarantee that the funding will go to rural hospitals in need. For example, she noted, one state’s application included a proposal for healthier, locally sourced school lunch options in rural areas.
And even though innovation is a goal of the program, Cochran-McClain said it’s tough for rural hospitals to innovate when they were struggling to break even before Congress’ Medicaid cuts.
“We talk to rural providers every day that say, ‘I would really love to do x, y, z, but I’m concerned about, you know, meeting payroll at the end of the month,’” she said. “So when you’re in that kind of crisis mode, it is, I would argue, almost impossible to do true innovation.”
Story by Devi Shastri and Margery A. Beck, Associated Press
