In December, the U.S. Health and Human Services Secretary (HHS) Robert F. Kennedy, Jr. announced his office would begin rolling out the $50 billion Rural Health Transformation Program (RHTP) funding, but rural health advocates are divided on what it will mean for rural communities.
The RHTP funding aims to replace cuts from the One Big Beautiful Bill (OBBB) passed on July 4 of 2025. The bill cut an estimated $1 trillion in federal Medicaid spending over the next 10 years, with nearly $140 billion in cuts specifically affecting rural areas.
Parts of the law will make cuts to Medicaid, which will throw an estimated 1.8 million rural residents off Medicaid rolls by 2034. Additionally, the law imposes work requirements for Medicaid beneficiaries that could make it harder for rural patients to retain their coverage. Other parts of the law reduce federal Medicaid funding to rural hospitals, which could force more rural hospitals to shut down and restrict rural patients’ access to care.
During congressional negotiations, lawmakers inserted the RHTP to pay out $50 million over five years to help re-imagine rural health. Under the program, about half of that money would be distributed equally to each state every year. The other half would be allocated based on a formula created by the Centers for Medicare and Medicaid Services that looks at rural population size, the financial outlook for the state’s medical facilities, and the overall health of a state’s population.
“It’s going to be different by every state, but some states are going to see a much bigger impact on their finances,” Alan Morgan, CEO of the National Rural Health Association, saidin an interview with the Daily Yonder. “The transformation fund is not designed, and not intended, to offset these Medicaid cuts, and it won’t. The transformation fund is about literally what it says, transforming healthcare delivery in a rural context. It is not the ‘rural hospital preservation bill.’”
Morgan said the money in the fund will not replace the amount the OBBB cuts, which aren’t set to go into effect until next year, after the midterm elections. But the RHTP money will provide funding for innovations and new ways of implementing rural healthcare.
“The legislation specifically says this is not to offset Medicaid cuts,” Morgan said. “This is for each state to innovate and implement new approaches to deal with workforce recruitment and retention, the implementation of technology and telehealth, and new payment models.”
Morgan said the money would be spent on new public health programs like coordinating hospitals with school-based health and community-based meal delivery programs to ensure rural residents are healthy on the front end and out of the hospital. Those innovative programs are part of a bigger conversation on how to keep rural hospitals open, he said.
“Since I’ve been at NRHA, we always want to say, rural healthcare is not sustainable with the current model, and we need a way to deliver healthcare in a rural context,” Morgan said.
“But then at the end of the year, we’re struggling just to keep doors open. When you’re trying to keep the doors open, you’re not talking about innovative approaches to redesign the system. You’re talking about how we increase Medicare and Medicaid just so we can make payroll. Over the last 20 years, even with our best intentions, we end up just dealing with how do these facilities make payroll and keep the doors open?”
The formula also ties $12 billion of the five-year funding to the implementation of health policies prioritized within the Trump administration’s “Make America Healthy Again” initiative. Those policies require states to ensure healthcare providers have nutrition education based on HHS’s new dietary guidelines, that schools participate in the Presidential Fitness Test, and that states ban the use of SNAP benefits for junk food, CMS administrator Mehmet Oz has said.
“States are stepping forward with bold, creative plans to expand rural access, strengthen their workforces, modernize care, and support the communities that keep our nation running,” Oz said in a statement. “CMS is proud to partner with every state to turn their ideas into lasting improvements for rural families.”
But none of the funding will go directly to hospitals. Within the legislation, there are limits on how states can use the funds, and guidance for states to collaborate with rural healthcare providers to find ways it can be used. Once awarded to the state, the money can be used to help rural hospitals with continuity of care through short-term financial stabilization, but it can also be used to upgrade infrastructure and medical equipment, to expand or strengthen the rural health workforce, to address reimbursement and payment system challenges, and to develop plans that would address a rural hospital’s future in the long-term.
The nature of the funding process means that some states will receive more than others. Texas, with between 154 rural hospitals according to the Center for Healthcare Quality and Payment Reform (CHQPR), will receive more than $281 million, the most of all the states. Officials with CHQPR said 84 of the state’s hospitals (55%) are at risk of closure. New Jersey, with two rural hospitals and neither at risk of closure, will receive more than $147 million under the program.
In Texas, the state’s hospital association said the funding is a welcome addition to rural hospitals’ coffers.
“An earnest focus on getting dollars directly to rural hospitals gives us great hope,” John Hawkins, president and CEO of the Texas Hospital Association, said in a statement. New funding can only help, as rural hospitals constantly battle closure risks, tight margins and debt, limited reserves, payer roadblocks, and, now, significant cuts to Medicaid.”
But those funds need to get to the hospitals.
“That said, the proof will be in the details,” Hawkins said. “The dollars need to be focused on hospitals, which took the brunt of the Medicaid cuts. They need to come quickly without unnecessary administrative hurdles. They need to be self-sustaining, flexible, and not create new burdens. We’re grateful that Texas was prioritized in the allocation, given the vastness of our state’s rural geography and population.”
Timothy McBride, a health policy analyst and co-director of the Center for Advancing Health Services, Policy and Economics Research at Washington University in St. Louis, Missouri, said the RHTF program is ultimately a loss for rural hospitals.
“It’s obviously a negative (for the hospitals),” he said in an interview with the Daily Yonder. “How it plays out is really kind of dependent on the states. My impression is that they couldn’t just focus on hospitals, and I don’t think many of them did. (Hospitals will) get some of the money, but they’re certainly not going to get all of it.”
In Montana, hospitals are just one of five areas where the state will put its money. According to the Montana Hospital Association, $82 million of its $233 million in 2026 will be spent on rural hospital financial stability, while $21 million will be spent on workforce development, $29 million will be spent on innovative care delivery, $56 million on community health, and $33 million on technology modernization. An additional $12 million will be spent on administrative costs, the association said.
“Local hospitals and healthcare providers benefit everyone in Montana’s rural communities. Getting RHTP funding on the ground and into these facilities will provide important investments for long-term operational, financial, and workforce challenges facing Montana’s rural healthcare system,” MHA said in a statement.
As the impact of the RHTP funding plays out, NRHA’s Morgan said there is work still to be done to ensure rural hospitals and rural healthcare providers can better position themselves financially.
“Throughout this year we’re going to be lobbying Congress to delay or remove these pending Medicaid cuts from next year,” he said. “It’s hard to envision how many of these rural hospitals financially stay afloat moving ahead with all this.”
Top 20 states by the amount of RHTP funds they received
Texas$281,319,361Alaska $272,174,856California $233,639,308Montana $233,509,359Oklahoma $223,476,949Kansas $221,898,008Georgia $218,862,170Nebraska $218,529,075Missouri $216,276,818North Carolina$213,008,356Kentucky$212,905,591New York $212,058,208New Mexico $211,484,741Florida $209,938,195Iowa $209,040,064Arkansas $208,779,396Louisiana$208,374,448Indiana $206,927,897Tennessee $206,888,882Mississippi $205,907,220
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