According to CMS Administrator Dr. Mehmet Oz, applications for a new round of the $50 billion rural health transformation program will open next month. However, with only weeks until applications open, health policy analysts still have many questions about the program's specific operating mechanisms, with disagreements on core issues ranging from eligibility requirements to the program's fundamental purpose.

The temporary program was a last-minute addition to President Donald Trump's "One Big Beautiful Bill," proposed by Republican congressional leaders during the final round of lobbying to win over a handful of wavering Republican swing lawmakers concerned that the spending package cuts Medicaid too deeply. According to an analysis by KFF, a nonprofit health policy research organization, the spending package is expected to cut rural Medicaid spending by $155 billion over 10 years. The rural health fund, which allocates $50 billion over five years starting in 2026, could partially fill that gap.

The program is seen as a victory in Congress because it secured key votes for the passage of the "One Big Beautiful Bill," including that of Republican Senator Lisa Murkowski of Alaska. However, health policy analysts point out that whether the program constitutes a victory for rural hospitals remains unclear.

"The legislative text is written very, very broadly, and that's one of the problems," said Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform. Experts believe that policies hastily cobbled together at the last minute often bear obvious signs of haste.

"Frankly, this rural transformation fund only emerged in the final moments of negotiations," noted Leighton Ku, director of the Center for Health Policy Research at the Milken Institute School of Public Health. "No one has put much thought into alternatives or structural design."

Basic framework of the program

On the surface, the program is not complicated: CMS will distribute funds to states to improve rural healthcare, with the money split into two parts and allocated by the states themselves—provided that state plans align with eight rural health topics listed in the legislative text. Half of the $50 billion will be distributed equally among states whose applications are approved, while the other half will be allocated at Oz's discretion, based on factors including the number of rural health centers in each state and more subjective metrics such as "the condition of hospitals in the state."

The program will run from fiscal years 2026 to 2030. States must submit a one-time funding application by the end of this year, accompanied by a detailed "transformation plan" explaining their intended use of the funds. Plans must cover eight elements, some of which are closely tied to the financial risks facing rural hospitals. For example, states must identify "specific reasons that accelerate the risk of closure, transformation, or service reduction for independent rural hospitals," and another element requires states to "improve hospital accessibility."

However, other elements are not clearly linked to specific healthcare institutions. States must detail how they will "improve health outcomes for rural residents" overall, invest in emerging technologies, and comprehensively recruit and retain more clinical personnel. According to a program analysis published in Health Affairs, CMS funding decisions are not subject to review, meaning states cannot seek judicial or administrative review if they are dissatisfied with the amount of their grants. If Oz is unhappy with how states use the funds, he can also "withhold, reduce, or recover payments already made to the state" under the law. Ku believes there is indeed a risk of CMS clawing back funds.

"Suppose a state says, 'We want to promote diversity, equity, and inclusion in rural health'—would CMS approve that?" Ku asked.

Where will the funds go?

Experts are divided on how the funds might be distributed. The legislative text does not explicitly require states to give any funds directly to hospitals, and experts disagree on how much money, if any, should go to hospitals at risk of closure. Some public policy experts hope most of the funds will support small rural hospitals hardest hit by Medicaid cuts, while others believe the funds should benefit a broader range of healthcare institutions.

Ku said lawmakers intentionally kept the program vague. Republicans may be reluctant to admit their Medicaid cuts would lead to the closure of small rural hospitals, so instead they tied the funds to addressing peripheral issues in rural healthcare, such as updating outdated IT systems. "The people who drafted this legislation didn't want to say, 'Look, we know we're making deep cuts to the healthcare system, let's do something to fill the gap'—they didn't want to reflect on it so directly," Ku said. "Their rhetoric was, 'There won't actually be any pain; we're just eliminating fraud and waste.'"

However, if the program is intended to offset Medicaid cuts, Tim McBride, a professor at the Brown School at Washington University in St. Louis, believes there could be serious problems with how the first half of the $50 billion is distributed. McBride, who has written analyses of the rural health program's potential impact, believes the government will distribute $25 billion equally among all states whose applications are approved. Under this distribution method, states with fewer rural hospitals would receive more funding than their projected Medicaid cut losses, giving them an advantage. For example, if all 50 states apply and are approved, Wyoming could receive $654 million—14.5 times its Medicaid cut losses. Meanwhile, states with large numbers of rural hospitals, such as Kentucky, Washington, and Oregon, would receive far less than their projected Medicaid cuts.

Other experts, such as McBride's colleague Abigail Barker, hold a different view. "He interprets this as an offset fund," Barker said of McBride's research. "I don't think that's really the intent of this money. When you read the details of how the funds can be used, it's actually not targeted at hospitals at all... It's aimed at investment." Barker, who has worked on rural health transformation projects in Missouri, believes lawmakers envisioned the fund as a means to improve the long-term state of rural health, rather than merely providing short-term financial relief to struggling hospitals to weather Medicaid cuts. Moreover, health needs vary greatly across states, and the funds could support other valuable projects such as local emergency services, home health, or doula services, she added.

Miller of the Center for Healthcare Quality and Payment Reform agrees that non-hospital entities may be eligible for funding, but he worries that large healthcare corporations are better positioned than resource-strapped rural hospitals to submit high-quality applications. Additionally, states have no incentive to prioritize hospitals in the application process. "If you read the bill, it talks about improving rural healthcare... but it doesn't say 'preserve' (the healthcare system)," Miller said. "The money could go to many places beyond hospitals and clinics." Meanwhile, Lisa Davis, director of the Pennsylvania Office of Rural Health, worries the funds could flow to large healthcare organizations that have acquired small rural health systems through consolidation and mergers.

Still not enough for rural healthcare

Regardless of whether states give all their grants to rural hospitals or only distribute a small portion, experts say it will not be enough to make up for the losses caused by the "One Big Beautiful Bill." According to a recent Chartis analysis, about half of rural hospitals are operating at a loss—nearly 10 percentage points higher than the rate for urban hospitals. According to a June report from the Center for Healthcare Quality and Payment Reform, more than 300 rural healthcare facilities face "imminent risk of closure" due to severe financial problems.

Miller said that if all $50 billion were given directly to these facilities, it could sustain their operations in the short term. However, states are unlikely to direct all funds to small healthcare facilities, and even if they did, the money would be exhausted within five years. "The fundamental issue is that this is one-time funding," Miller said. "The challenges facing hospitals are not one-time... You're delaying the problem, which isn't a bad thing... but delay just pushes the inevitable further down the road."

Barker said she hopes lawmakers will advocate for solutions that help rural healthcare institutions over the long term, such as supporting payment models that facilitate the transition to value-based care. Miller also noted that Medicare Advantage reforms would help, as rural healthcare facilities have long struggled with prior authorization, payment denials, and payer delays. Finding long-term solutions to protect rural healthcare is crucial, not only for the healthcare workers there but also for local communities.

"The short-term impact is bad enough, but the long-term impact on communities and their health is even more severe," Miller said. "If a community doesn't even have basic healthcare services, who would want to work or live there?""