This story was originally published by KFF Health News.
Wyoming officials say they have a plan to make five years of upcoming grants from a new $50 billion federal rural health program last “forever.”
The state could tackle rural health issues long into the future by investing its awards from the Rural Health Transformation Program, the director of Wyoming’s health department, Stefan Johansson, told state lawmakers.
But it’s unclear whether the maneuver will pass muster with the federal government.
If approved, Wyoming’s Rural Health Transformation Perpetuity fund could provide $28.5 million for the state to spend every year, according to materials presented to lawmakers.
Wyoming would spend the money on scholarships for health students and incentive payments to help keep small hospitals and rural ambulance services afloat.
“I have lots of questions. It seems very clever,” said Kevin Bennett, director of the South Carolina Center for Rural and Primary Healthcare. “It’s a wild idea.”
Bennett said the big question is whether the federal Centers for Medicare & Medicaid Services, which manages the new program, will approve of Wyoming’s plan.
If it does, he said, “it’s really an interesting way to keep things going” — one with potential benefits as well as risks.
Congressional Republicans created the Rural Health Transformation Program as a last-minute sweetener in their One Big Beautiful Bill Act last summer. The funding was intended to offset concerns about the outsize fallout anticipated in rural communities from the new law, which is expected to reduce Medicaid spending by nearly $1 trillion over the next decade.
Since 2010, 152 rural hospitals in the U.S. have shuttered completely or stopped offering inpatient services, according to the Sheps Center for Health Services Research at the University of North Carolina. The guidelines for the federal rural health program say states can use only 15% of their funding for direct payments to providers, including hospitals.
CMS officials announced first-year funding on December 29 after scoring states’ applications. States had until January 30 to submit revised budgets and other documents that align with their grant awards. CMS has until March 1 to review and approve the updated material.
Wyoming — the least populous state, with about 588,000 residents — will receive $205 million in the program’s first year, $5 million more than it asked for.
States must spend each year’s grants by the end of the following fiscal year, according to CMS rules. If they don’t, unused money will be redistributed to other states. The final deadline for all spending is October 1, 2032, with leftover funds being returned to the federal government.
Given those rules, “how do you square that with squirreling money away in an account?” state Representative Ken Pendergraft, a Republican, asked during a hearing on Wyoming’s plan.
Johansson said that depositing the federal grants into the perpetuity fund counts as expending them.
He said that CMS called in December to specifically ask questions about the fund and that he believes the agency has formally approved it. But “the devil’s always in the details,” he said, as the state works with CMS during the budget review period.
Emails obtained by KFF Health News through public records requests show CMS told officials in some states in early November that the grant money can’t “fund an endowment, capital fund, or other vehicle resembling an investment fund with the purpose of generating income.”
Wyoming officials wrote in the state’s application that the perpetuity fund won’t be making or keeping any profit.
“All program income from these investments will directly fund” rural health programs, they wrote.
CMS spokesperson Catherine Howden did not directly comment on whether Wyoming’s perpetuity idea is allowed. Instead, she said states must follow regulations related to the program and federal grants.
The Trump administration gave states a mandate to spend their money by fall 2032, but on projects that will continue to help rural patients even after the federal program ends.
The perpetuity fund would ensure just that, said Patrick Hardigan, dean of the College of Health Sciences at the University of Wyoming.
“Rather than spend out now,” Hardigan said, “we would have this available to help fund us over a longer time period.”
The state health department has already presented lawmakers with a bill to create the perpetuity fund and approve other parts of its rural health plan.
The legislation says Wyoming would put 80% of this year’s award — $164 million — and 69.5% of the funding it receives over the next four years into the fund. The state treasurer’s office would invest the fund in equities, including stocks. The health department plans to spend 4% of the fund’s money — in line with its expected return — each year, according to materials presented to lawmakers.
About 41% of the annual fund distribution would be spent on incentive payments for qualifying small hospitals, the bill says. The assistance could include one-time grants, medical debt relief for patients, and ongoing payments to offset fixed costs. This funding could amount to 2.5% to 10% of these hospitals’ annual operating expenses, according to an estimate in Wyoming’s application.
Bennett said it’s unclear whether all those types of payments are allowed under the federal rules.
“I think that states will try to do a lot of creative things like this, and CMS will approve or not on a case-by-case basis,” he said.
The bill says around 27% of annual spending would go to incentive payments to encourage coordination or consolidation among rural ambulance services. The funding could be ongoing or grants that help pay for ambulances, communications equipment, and regional dispatch services.
But these incentives would come with strings attached. Hospitals and ambulance services could receive payments only if they reduce “unprofitable, duplicative or nonessential” services and participate in “cost-containment arrangements,” such as regional collaborations and shared services.
About 22% of the annual spending would provide scholarships to help Wyomingites afford nursing, behavioral health, emergency medical services, and physician education. In exchange, recipients would have to work in the state for five years.
The remaining spending, around 11%, would be for scholarships to help doctors in training afford medical school, residency programs, and fellowships if they agree to work in an “underserved” Wyoming county for five years. The state health department would prioritize scholarships for people pursuing family medicine, obstetrics, or other high-demand specialties.
Johansson told Wyoming lawmakers that CMS could claw back money if a future state legislature decides to spend the fund in ways not allowed under the federal rural health program. He said this “check and balance” could last for decades.
“I can’t predict the future,” Johansson said, but “I think they have the authority to go look at the appropriate use of those funds through their audit parameters.”
Other states proposed funds in their applications, but Wyoming’s appears unique, according to a KFF Health News review of state applications.
For example, Kentucky wants to create a rural health endowment to continue its work once the federal program ends. But it would be backed by charitable donations, not seed money and investments from the federal funding.
Several states mention putting some of their federal award money into what they call rural health “catalyst funds.” But these funds, sometimes augmented with private contributions, would be invested in rural health technology.
Bennett said he’s never heard of a state investing any other federal health grant the way Wyoming wants to.
He said that in setting aside significant portions of its Rural Health Transformation Program awards, Wyoming would have much less money for rural health care in the short term in exchange for an ongoing revenue stream that could last decades.
“Everything has trade-offs,” Bennett said.
The Wyoming House Appropriations Committee unanimously approved the bill on February 12, sending the legislation to the House floor.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF— the independent source for health policy research, polling, and journalism.
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