The rural health transformation program, explained

In response to fears from some Republican lawmakers that Medicaid cuts included in President Trump’s One Big Beautiful Bill (OBBB) Act would lose rural constituent support, Congress created the Rural Health Transformation Program.

Under the program, the Centers for Medicare and Medicaid Services (CMS) agreed to pay states $50 billion over the course of five years (2026 to 2030) to use toward improving their rural healthcare systems.

However, despite a common misconception that the money will go straight to rural hospitals, which notoriously operate on small margins, only a portion of the fund (15%) will go to hospitals for patient care. Instead, a majority of the money is intended to go toward initiatives like bringing health tech into rural facilities.

So, to clear up any confusion, Healthcare Brew broke down how much money states are getting, where that money is going, and what it can be used on.

How much money are states getting?

CMS, which set up the Office of Rural Health Transformation to administer the fund in December, plans to distribute $10 billion per year, split between the 50 states. 

States had to apply for funding by November 2025, including detailed proposals for how they’d use the money. CMS announced how much each state would get in December and began distributing the first round of funds in January. Funds for 2027 are expected to be announced in late October, KFF Health News reported.

Half of the total fund, or $25 billion, will be divided evenly among states, meaning each gets at least $100 million per year.

The other $25 billion will be divided among the states based on a “complicated formula” including a scoring system for a state’s initiatives and how much progress they’ve made on their initiatives, according to Zachary Levinson, project director of the KFF project on hospital costs.

Overall, states received an average of $200 million for 2026, according to KFF.

Who gets the money?

The funds go directly to state governors’ offices, which then designate an agency to oversee their state’s rural health initiatives, Kevin Bennett, director of the center for rural and primary healthcare at the University of South Carolina, told Healthcare Brew.

There are no restrictions written into the law on what type of entity can receive the funding, according to Alexa Abel, government affairs and policy director at the National Rural Health Association (NRHA), a trade group that represents roughly 21,000 members working in rural health. Since the money can be used for a range of purposes, in addition to hospitals and clinics, it could go to technology firms, consulting groups, universities, and more, Levinson said.

“At this point it’s still kind of unclear how much hospitals in particular are going to benefit, either directly or indirectly from the fund,” Levinson said.

What can the money be used for?

CMS provided states with a list of approved use cases for the money, including leveraging technology to prevent and manage chronic diseases, training staff in rural hospitals to use health technology like robotics and AI, and recruiting more workers to rural areas. States are required to use the funds for at least three of the purposes on the list.

Health tech can be particularly useful in rural areas, as services such as telehealth can greatly increase access to healthcare. Rural patients travel twice as far on average to get to the doctor compared to urban and suburban patients, according to data from the Pew Research Center.

According to an analysis from the NRHA, many states are using the funds for initiatives surrounding stabilizing rural health workforces, substance use disorder treatments, behavioral health services, and forming local partnerships. Rural patients often struggle to find access to specialist care because it’s hard for a hospital to sustain specialists financially when they treat such a small population, as Healthcare Brew has previously reported.

The law also states that CMS has the authority to reduce or take back funding from states if they’re not following through or they’re not following through on the initiatives laid out in their applications or the government decides to discontinue the program, according to Levinson.

What are some concerns about the program?

Despite the fund’s name, there’s concern the money won’t strictly be used to boost rural providers and companies, Bennett said. There’s no definition of “rural” included in the law, per KFF, so the funds could be given to an urban hospital system that does rural health work, he added.

“We as rural advocates would want the funds to be spent locally in rural places…but that’s just not possible or practical in a lot of ways,” he said.

For example, rural workforce training programs can be difficult because most universities are in urban settings, “so you’ll have to establish rural training tracks…and trust that the graduates of the urban centers are going to go work in rural areas,” Bennett said. “My biggest concern is how much the funds will actually be spent in rural communities to prop up those economies and keep them sustainable.”