Rural health transformation program won’t make up for federal budget cuts, experts agree

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Rural health transformation program won’t make up for federal budget cuts, experts agree

A new program touted to give $50 billion in federal funding to rural hospitals won’t necessarily keep rural hospitals from closing, according to several experts in rural health.

The funding is part of a compromise made in Congress to help rural communities after H.R. 1, the “One Big Beautiful Bill,” now being rebranded as the “Working Families Tax Cuts Law,” eliminated more than $911 billion from Medicaid. At the time, opponents to the bill argued it would hurt rural hospitals and force many already at risk to close.

In July, Congress members argued the compromise — $50 billion in temporary funding — would be a solution to ensure that rural communities have the funding they need to access care. Critics now say the funding won’t help rural hospitals stay open and won’t come close to the amount of money they will lose.

Because of the cuts from the Trump tax-cut plan, federal Medicaid spending in rural areas is expected to drop by $155 billion over 10 years, according to the Kaiser Family Foundation, or about $15.5 billion per year. The Rural Health Transformation Program will provide $50 billion over five years to help offset those losses, or about $10 billion per year. Many industry experts say that’s not enough.

“Fifty billion dollars over five years does not equate to $155 billion over 10 years,” Alan Morgan, president and CEO of the National Rural Health Association, said in an interview with The Daily Yonder.

“This particular issue was almost a shell game aspect of the legislation. It was put into the bill recognizing that rural hospitals could potentially close. The whole discussion on Capitol Hill was about ‘We’ve got to keep rural hospitals open.’ But the legislation itself specifically says (RHTP funds) cannot be used as an offset for Medicaid. And the administration in multiple avenues has specifically said this cannot be used to keep rural hospitals open, period.”

In fact, the legislation is quite clear. The $50 billion will be allocated to qualifying states, which can then disburse them, according to the U.S. Department of Health and Human Services (HHS). Half of the funding each year will be distributed evenly between states that qualify for the funding, and half will be provided proportionally to states that show the greatest need.

First, that means that $25 billion per year will be split evenly between the states. So, Connecticut, with four rural hospitals, two of which are at risk of closing, would get the same amount as Kentucky, with more than 60 rural hospitals, 35 of which are at risk of closing. And that’s if either of the states qualifies.

To qualify, states would have to present a “rural health transformation plan” that outlines how the state plans to improve health care access and outcomes, prioritize the use of new technologies, initiate collaboration between rural health care providers, improve the rural workforce pipeline, and outline strategies for the long-term financial solvency of rural hospitals while identifying risk factors for rural hospital closures.

Additionally, if a state is selected to receive funding, it will also be assessed for additional funding based on its population, the number of rural health facilities it has, and the situation of the hospitals in the state to receive additional funds. Those additional funds would also be allocated based on “how well state applications align with program strategic goals,” according to a statement provided by the HHS. Those goals include: “Making Rural America healthy again and supporting rural health initiatives to promote preventative health and address the root causes of diseases,” among others.

“They are pushing this legislation to be used to improve the health of communities. They’re talking about improving veterans’ care and improving emergency medical services. It’s the whole ‘Make America Healthy Again,’ preventive services. And that’s all great. At NRHA, we support that. We love the fact that we are focusing on the rural community,” Morgan said.

“But you can see there’s a huge disconnect here. The $50 billion cannot by legislation (and is not by the administration) going to be used to help rural hospitals keep their doors open. This $50 billion is about sustaining healthcare for the future. It has nothing to do with maintaining access today.”

For its part, HHS said the funding was intended to help rural communities in the long run, not provide just short-term solutions.

A spokesperson for the department wrote in an email to the Daily Yonder that the program is designed as a “catalytic investment” to support reforms and innovations that would strengthen rural health care systems beyond the life of the program.

“The Rural Health Transformation Program is designed as a catalytic investment,” the statement said. “The goal is to support reforms and innovations that strengthen rural health care systems — including hospitals, clinics, and providers — beyond the life of the program, creating models that are sustainable and better serve their communities in the long-term.”

Jason Griffin, managing director of digital health strategy and cybersecurity at Nordic Global, a healthcare staffing and technology solutions company, said what it all means and how it will all play out is still up in the air.

“I think we’re all still trying to figure that out, to be quite frank,” Griffin said in an interview with the Daily Yonder. “There’s a lot that foundationally could happen with those funds. Infrastructure is going to be key. I’m still hearing from organizations that just stable access to the internet is a problem. I’m hoping that’s where these funds go first — to attract and retain staff and establish a foundational infrastructure.”

Still, states aren’t even sure how to qualify for the funding, he said.

“There was no clear criteria for approval,” Griffin said. “That’s what makes me nervous, is that, in our political climate, we don’t start to pick and choose our favorites. I would hope that gets cleared up pretty quickly.”

The American Hospital Association (AHA) asked for as much in a letter to HHS in August.

As part of a letter to Mehmet Oz, Centers for Medicare and Medicaid Services administrator, on Aug. 11, 2025, the AHA asked that the RHTP funding prioritize payments to rural hospitals, as well as using the funds on workforce development and for infrastructure and telehealth services.

“Aging rural hospital infrastructure is a pressing challenge that threatens the quality and availability of health care in many communities,” the AHA wrote. “Most rural hospitals were constructed decades ago, often with funding from now-outdated federal initiatives like the Hill-Burton Act, and their physical plans have not kept pace with modern standards. Several are in need of significant maintenance, renovation, or even complete replacement, but rural hospitals face unique difficulties accessing capital for such investments since they operate on narrow or negative margins and are frequently excluded from traditional lending markets.”

“Moreover, rural hospitals have emerged as leaders in advancing telehealth and remote patient monitoring technologies that bring care closer to patients’ homes,” the AHA letter continued.

“These innovations not only expand the reach of skilled clinicians but also reduce unnecessary hospital admissions, improve patient satisfaction and help patients maintain better health outcomes in their own communities. With additional funding, more hospitals could invest in telehealth and digital health infrastructure to ensure that even those in the most remote areas receive timely, high-quality, and convenient care.”

Still, Oz, and HHS Secretary Robert F. Kennedy, Jr., said the money in the RHTP will change rural health for the better.

“This program is a historic investment that will catalyze needed change in rural health systems and improve lives for generations to come,” Oz said in a press release. “For too long, when it comes to health care access and infrastructure, we’ve left behind the backbone of America. That stops now with this program that will spark real change for rural health care.”

Applications from states for the funding are due on Nov. 5, with announcements regarding which states have been awarded funding expected on Dec. 31, 2025.

This story was produced by The Daily Yonder and reviewed and distributed by Stacker.