CMS is dispersing the rural health fund, but experts say it doesn’t offset Medicaid cuts

Rural providers are among the more vulnerable care sites in the US.

Remote areas often struggle with staffing levels and distance between facilities and patients’ homes. These challenges can sometimes lead to closures, and as we reported in March, 768 rural hospitals in the US were at risk of shutting down.

Hospitals with a large population of Medicaid patients are also more likely to struggle financially, according to health policy research firm KFF, meaning additional cuts could create bigger problems.

So when the One Big Beautiful Bill Act passed in July and estimates put it at cutting $1+ trillion in Medicaid spending over 10 years, the rural health community started sounding the alarm on how services might be impacted. (States have already gotten started on those cuts, despite federal cuts not being in effect yet.)

Following the bill, the American Hospital Association reported 1.8 million people in rural areas could lose their Medicaid coverage by 2034.

‘Fabulous’ fund. To get the bill passed, Congress agreed to fund a $50 billion Rural Health Transformation Program, announced on Sept. 15. Funds are meant to help strengthen the rural healthcare workforce, boost technology and telehealth, and encourage payment reform, per the Centers for Medicare and Medicaid Services (CMS).

CMS announced the first round of funding on Dec. 29, with all 50 states getting a piece of the pie at an average of $200 million each starting in 2026.

Carrie Cochran-McClain, chief policy officer at the National Rural Health Association, told us the investments were “fabulous.”

“We are very hopeful that they will move the needle on some of the long-term challenges we’ve had around health outcomes,” she said.

But due to the Medicaid cuts, rural facilities may struggle to keep their doors open before they even get a chance to make these improvements, Katherine Hempstead, senior policy officer at health nonprofit the Robert Wood Johnson Foundation, told us.

“I don’t think that this fund is an adequate response to what’s going to happen to the Medicaid program as a result of the One Big Beautiful Bill Act,” she said.

‘Apples and oranges.’ For one, it’s much less money than Medicaid would have provided. KFF estimated in August that the $50 billion fund would only offset 37% ($137 billion over the next 10 years) of the projected Medicaid cuts in rural areas.

The rural health fund is also temporary in contrast to long-term, continued funding under Medicaid, Hempstead said.

The rural health fund and traditional Medicaid funding are “apples and oranges," Cochran-McClain added. She gave an analogy: The transformation fund is like a 401(k) investment fund, she said, but “you would still need a salary,” or Medicaid reimbursements, to sustain hospital operations, she said.

The fund is “too small, too temporary, and…it’s targeted at coming up with solutions that might make it cheaper or more efficient to deliver healthcare in rural areas, but it would take awhile for those ideas to bear fruit,” Hempstead added.

It also doesn’t address immediate needs of the rural health community, like basic financial stability, Hempstead said, adding she’s concerned about facilities closing as a result of the cuts.

In December, the Center for Healthcare Quality and Payment Reform reported that 756 rural hospitals were still at risk of closure.

“All of us have a vested interest in making sure that these funds are used accountably. It’s a lot of money, and it’s not money that’s likely to be offered to rural America again,” Cochran-McClain said.