Tucked within the hundreds of pages of Republican-backed cuts to taxes and the social safety net known as the “big, beautiful bill” is a $50 billion fund called the Rural Health Transformation Program.
The fund is being touted as a solution to long-standing health disparities in rural communities and a way to offset provisions in President Donald Trump’s megabill that cut Medicaid by nearly $1 trillion. Roughly 12 million people are projected to lose health insurance over the next decade as a result of the newly signed legislation. Experts say it amounts to the largest cut to Medicaid and rollback in health care coverage in history that would disproportionately harm residents in rural areas.
For decades, rural Americans have been more likely to rely on Medicaid than people in more densely populated areas, and the health care providers and facilities those patients turned to often need Medicaid reimbursements to stay open.
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Nearly half of all rural hospitals are not profitable, said Alan Morgan, CEO of the National Rural Health Association. According to a June report by the Center for Healthcare Quality and Payment Reform, more than 300 such facilities are already at “immediate risk of closing due to the severity of their financial problems.”
An estimate from KFF predicted that cuts to federal Medicaid spending in rural areas would exceed $155 billion over 10 years under the Senate-passed version of the bill. Lawmakers on Capitol Hill, especially those representing rural states, were assured that it was possible to make up for those losses.
But the $50 billion Congress set aside for the Rural Health Transformation Program covers less than a third of the funding rural communities are expected to lose in Medicaid cuts.
“It is just a fig leaf,” said Edwin Park, a research professor at Georgetown University’s Center for Children and Families.
Here’s what to know about the program, how it is intended to work and what’s next for states and rural communities trying to access the funds.
What does the program aim to do?
According to the legislation, funding must be used to address eight issues and strategies in rural health care systems:
- Improve access to hospitals, health care providers and services
- Improve health care outcomes
- ”Prioritize the use of new and emerging technologies that emphasize prevention and chronic disease management”
- Launch or boost local and regional partnerships between rural hospitals and other care providers to “promote measurable quality improvement, increase financial stability, maximize economies of scale, and share best practices in care delivery”
- Recruit and train more health care clinicians
- “Prioritize data and technology driven solutions” to bring high-quality health care closer to where rural patients live
- Develop strategies that produce “long-term financial solvency” for hospitals
- Identify specific causes “driving the accelerating rate of stand-alone rural hospitals becoming at risk of closure, conversion, or service reduction”
Rural health care providers and patients have struggled with these issues for decades. But multiple experts told PBS News that the program’s stated goals are broad and vague, while the problems that have blunted rural health outcomes remain complex.
Keith J. Mueller, a professor of health management and policy at the University of Iowa, said the fund is “a potential source of support for creative ideas about how to sustain essential services,” but added that “there’s a lot to be discussed and a short time to do it.”
People in rural communities report higher rates of uninsurance compared to urban areas and are less likely to have an employer who offers health insurance, said Timothy McBride, co-director of the Center for Advancing Health Services, Policy and Economics Research at Washington University.
How the federal government decides who gets what may become clearer once states apply for these funds, said Mueller, who is also director of the Rural Policy Research Institute.
How will states access funds?
All 50 states have until Dec. 31 at the latest to apply for funds by submitting a “detailed rural health transformation plan” that addresses the program’s aims, according to the legislation. The federal government will distribute half of the program’s $50 billion allotment equally among all states with an approved application over the next five years.
If Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz does not like how states are using their funds, the law says he then “may withhold payments to, or reduce payments to, or recover previous payments from, the State.”
The remaining $25 billion in the fund will be doled out to states as Oz sees fit, taking into consideration:
- The percentage of state residents who live in a rural area
- The proportion of rural health facilities compared to those nationwide
- The “situation of hospitals in the State” that serve a disproportionate number of low-income patients with special needs
- Other factors “that the Administrator determines appropriate”
What happens next?
States must act now to apply for these limited dollars, as well as to figure out how the loss of federal Medicaid funding will affect their state budgets. Prior to these cuts, the federal government had covered at least 50% of Medicaid funding, and states paid in what they could, based on funding formulas.
Congressional lawmakers and the White House designed cuts to Medicaid in ways that leave state politicians holding the blame, Park said, by forcing states to make very difficult decisions.
Those choices could include implementing mandatory work requirements for certain individuals to receive Medicaid. While Republicans have pushed the idea for years, critics point to extensive research that shows most people who receive Medicaid already work, but earn too little to afford private insurance. In addition, work requirements often result in qualified people losing their health care coverage because of bureaucratic red tape.
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States may have to make deep cuts to Medicaid or find money elsewhere in their budgets, Park said. That could include reducing funding for education and infrastructure, or raising income taxes for residents.
Estimates from the Congressional Budget Office about the law’s actual cost are expected to arrive in the coming days, Park said. Those numbers will give a better picture of the “actual magnitude of the cut,” he said.
Experts are skeptical about the scope and design of the Rural Health Transformation Program. Two days before the bill passed the House in its final form, Morgan warned in a written statement that the program’s intent to offset the effects of Medicaid cuts on rural communities “will fall short of addressing the other provisions in this legislation. We urge our partners in the House to reject these massive cuts and protect rural healthcare.”
WATCH: Exploring the health care challenges rural Americans face across 5 states
Morgan told PBS News it is encouraging that Democrats, Republicans and the Trump administration all recognize the challenges facing rural health. But people often do not appreciate the threat the funding shortfall poses if the fund is not carefully distributed, he added, especially for rural parts of the country where hospitals and health care systems serve as economic engines and often are the largest employers.
“The public sees this as a Medicaid issue,” Morgan said. “I don’t think they recognize this is a rural community issue.”
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