States will share $10 billion next year for rural health care 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 has requested money from the Rural Health Transformation Program, it won’t be distributed equally. And critics fear that funding could be pulled if a state’s policies don’t match the administration’s.
Officials said the average award for 2026 is $200 million, and the fund is investing 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 officers to support each state, said agency administrator Dr. Mehmet Oz.
“This fund was created as part of the One Big Beautiful Bill, signed into law just six months ago, to push states to be creative,” Oz said on a call with reporters Monday.
Under the program, half of the money is distributed equally to each state. The other half is allocated based on a formula developed by CMS that took into account the size of the rural population, 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 funding over five years 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 providers, having schools participate in the presidential fitness test or banning the use of SNAP benefits for so-called junk food, Oz said.
Several Republican-led states — including Arkansas, Iowa, Louisiana, Nebraska, Oklahoma and Texas — have already passed rules banning the purchase of foods like candy and juice with SNAP benefits.
The money states receive will be recalculated annually, Oz said, allowing the administration to “withdraw” funds if, for example, state leaders don’t enact promised policies. Oz said clawbacks are not punishments, but levers that governors can use to advance policies, 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, policy director at the National Rural Health Association, said she has heard from a number of Democratic-led states that have 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 the fund is inadequate in the face of other cuts
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 affect 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 make up for the losses rural hospitals will face as the law cuts $1.2 trillion in federal spending over the next decade, mostly from Medicaid. Millions are also expected to lose Medicaid benefits.
Estimates suggest that rural hospitals could lose about $137 billion over the next decade because of the budget measure. About 300 rural hospitals were at risk of closing because of the GOP 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 in comparison to the $50 billion for the Rural Health Transformation Fund, you know — the math just doesn’t add up,” Cochran-McClain said.
She also said there was no guarantee the funding would 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 hard for rural hospitals to innovate when they were struggling to break even before Congress’s Medicaid cuts.
“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, meeting the paychecks at the end of the month,'” she said. “So when you’re in that kind of crisis mode, I’d say it’s almost impossible to do real innovation.”
___
The Associated Press Department of Health and Science receives support from the Department of Science Education of the Howard Hughes Medical Institute and the Robert Wood Johnson Foundation. AP is solely responsible for all content.