Federal officials announced Monday that states will share $10 billion in rural health care next year in a program designed to offset the Trump administration’s massive budget cuts to rural hospitals.
But while each state applies for funding from the Rural Health Transformation Program, the money won’t be distributed evenly. Critics worry that funding could be withdrawn if a state’s policies don’t align with the government’s.
With an average award size of $200 million in 2026, the fund has committed a total of $50 billion to rural health programs over five years, officials said. States make recommendations on how to spend their bonuses, and the Centers for Medicare and Medicaid Services assigns program officers to support each state, said Dr. Mohammad Oz, the agency’s director.
“This fund was created as part of the Big Beautiful Act, which was signed into law just six months ago and is now designed to push states to be creative,” Oz said on a conference call with reporters on Monday.
Under the plan, half of the funding is distributed 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 medical facilities and the health of the state’s population.
The formula also ties $12 billion in five-year funding to whether states are implementing health policies prioritized by the Trump administration’s “Make America Healthy Again” initiative. Oz said examples include requiring health care providers to provide nutrition education, making schools take the Presidential Physical Fitness Test or banning SNAP benefits from being used for so-called junk food.
Several Republican-led states — including Arkansas, Iowa, Louisiana, Nebraska, Oklahoma and Texas — have passed rules banning the purchase of foods such as candy and soda with SNAP benefits.
Olds said the money states receive will be recalculated annually and the government can “claw back” the money if state leaders don’t pass promised policies. Olds said clawbacks are not punishment but rather levers that governors can use to push policy using the potential losses of millions of people.
“I’ve heard governors express the view that this is not a threat, this is actually an empowering element of the Big Beautiful Act,” he said.
Carrie Cochran-McClain, chief policy officer at the National Rural Health Association, said she has heard from many Democratic-led states that have resisted imposing such restrictions on SNAP benefits, even though it could hurt their chances of receiving more money from the fund.
“That’s not where their national leadership is,” she said.
Experts say funding is insufficient in the face of other cuts
Oz and other federal officials touted the plan as increasing Medicaid investment in rural health care by 50 percent. Rep. Don Bacon, a Republican from Nebraska who has been critical of many of the administration’s policies but voted for budget bills that cut Medicaid, recently mentioned the fund when asked how cuts would hurt rural hospitals.
“That’s why we increased the Rural Hospital Fund by $50 billion to help any struggling hospital,” Bacon said. “This money is to keep the hospital open.”
But experts say that will barely offset the cost to struggling rural hospitals of the $1.2 trillion the federal spending law will cut from the federal budget over the next decade, mostly from 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 budget measures. As many as 300 rural hospitals are at risk of closing due to the Republican spending plan, according to an analysis by the Cecil Shepps Center for Health Services Research at the University of North Carolina at Chapel Hill.
“When you compare that to the $50 billion in the Rural Health Transformation Fund, you know the math doesn’t add up,” Cochran-McLean said.
She also said there’s no guarantee the money will go to rural hospitals in need. For example, she noted that one state’s application included a proposal to provide healthier, locally sourced school lunch options in rural areas.
While innovation is a goal of the program, Cochran-McLean said it’s difficult for rural hospitals to innovate as they struggle to break even before Congress cuts Medicaid.
“We talk to rural providers every day who say, ‘I’d really love to do x, y, z, but I’m worried about, you know, making payroll at the end of the month,'” she said. “So I think it’s almost impossible to really innovate when you’re in this crisis mode.”
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