The Trump administration on Monday doled out billions to states from a fund Congress created to “transform” rural health care. The funds, however, will be lavished more generously on small states and states that adopt administration friendly policies.
“The purpose of this $50 billion investment in rural health care is not to pay off the bills,” Dr. Mehmet Oz, head of the Centers for Medicare and Medicaid Services, told reporters Monday. “The purpose of this $50 billion investment is to allow us to rightsize the system and to deal with the fundamental hindrances of improvement in rural health care.”
He said disbursements for states are between $145 million and $281 million for 2026, amounts largely driven by how large a state’s rural population is. Annual allotments will be reassessed based on states’ ability to meet the criteria laid out in their applications.
The national reaction to the program has been mixed since it was announced this summer.
Some lawmakers and rural health advocates are upset that states are receiving billions more in funding for passing policies favored by the Trump administration.
Officials in some Democrat-led states accused the Trump administration of using the program to punish its perceived rivals and reward allies.
Others take issue with the fact that the program administered by the Centers for Medicaid and Medicaid Services divided much of the fund evenly among states, giving those with small populations a much bigger per-capita windfall. Montana and California, for instance, will receive near equal amounts in 2026, despite their massive size disparity.
And even fans of the program stress that it won’t come close to making up for the deep cuts to Medicaid that states are bracing for in 2026.
In Arizona, “we expect the impact of just the Medicaid cuts alone to be $34 billion over the next 10 years,” the state’s Democratic Gov. Katie Hobbs told reporters in November, adding that the state will receive at most $5 billion from the Rural Health Transformation Program. “The math doesn't work there, but it will do a lot to help mitigate some of the impact, especially as we're going to see a decline in access to health care in rural communities.”
Complaining, however, is likely all that state officials will be able to do. The program, created this summer as part of Republicans’ megabill that cut taxes and the social safety net, explicitly bars states from appealing to the Trump administration for more money or suing over their allotment.
And if states fail to adopt the promised policies, CMS can reduce future funding amounts. On the call with reporters, Oz said the funding clawback mechanism isn’t meant to penalize states. Rather, he sees it as a bargaining chip for governors to use in power clashes with their state legislatures.
For example, he said, a governor may want to make the Presidential Fitness Test mandatory in schools, but can't get the state legislature to pass a law implementing it.
“He can now say, ‘Guys, we're going to lose millions of dollars because CMS has been authorized by Congress to pull back part of our funding. We don't want to do that, so let's just get this thing out of our state legislature.”
Size matters
Over the next five years, half of the $50 billion Rural Health Transformation Fund will be distributed evenly among states, meaning Texas and California will receive far less per-person than states with tiny populations.
Leaders of those smaller states, on both sides of the aisle, are defending that setup. Divvying up the money according to state population size, they argue, would have screwed them over. The U.S. health system generally pays according to the number of patients a doctor or hospital sees or the number of services they provide, but tiny rural clinics and hospitals don’t get the volume of patients needed to keep the lights on under such a formula.
“As a relatively small state, this will help us a lot to keep our hospitals open, to make sure there are providers available to have telehealth available,” Hawaii Democratic Gov. Josh Green told POLITICO.
Green, who worked for decades as a physician before entering politics, said the favorable structure for smaller states was no accident. In the weeks leading up to the votes on the bill that created the program, he and the GOP governors of Arkansas and Indiana advised the Trump administration on how it should be administered.
“I was already working with Dr. Oz, and he invited us in to have a kind of a mini summit where we spoke for several hours about what could be done for rural health care in general,” he said. “That meeting, which was with me, Governor Braun and Governor Huckabee, in addition to Oz and both of our teams, was a heart to heart about what will happen if Medicaid cuts occur — what will happen to rural hospitals.”
Hawaii will receive nearly $189 million for its plan, which it had not made public as of Monday.
Another quarter of the funds is being disbursed based on the size of a state’s rural population, how much free health care its providers give to people who can’t afford to pay, and how large its land area is — factors that some Democratic governors are criticizing as unfair.
“Significant portions of the funding will be allocated exclusively to the five states with the greatest land areas. Arizona is the sixth,” Arizona Democratic Gov. Katie Hobbs complained to Health Secretary Robert F. Kennedy Jr. at the Western Governors’ Association’s annual gathering in November. “We are 110 times larger than Rhode Island, but the grant will give Arizona no more points on land area than Rhode Island. So this five-state land area [rule] seems arbitrary and it will punish Western states with significant land areas.”
Arizona will receive nearly $167 million in 2026 for its plan to improve maternal mortality and tackle other pressing health issues.
A ticking clock
Oz praised the program for giving states just a few years to make good on the promises in their applications, telling reporters Monday that the time crunch would “push states to be creative.”
“That short time frame is important because it pushes governors to pull the trigger on many needed programs and reforms, and to target those initiatives and cut out all the other discussions that sometimes will muddy the water,” he said, adding that CMS has set up an office that will help states meet their goals and share lessons learned.
But even states and health care advocates who are grateful for the infusion of cash for their struggling rural health care systems are anxious about the program’s strict timeline, which requires them to spend billions of dollars and show tangible improvements in just a few years.
“It was a fast timeline for states to apply. It's a fast timeline for CMS to get the money out the door. And it's a fast timeline to spend the money,” Carrie Cochran-McClain, the chief policy officer for the National Rural Health Association, said at a December POLITICO event.
The big structural changes that would actually “move the needle on health,” she added, “don't happen overnight.”
“There is this push-pull that states are feeling between making the kind of investment that will really help rural hospitals long-term and what can we get done in the time frame that CMS has put forward to us,” she said.
This is especially true for policies that states have debated for decades, like “scope of practice” changes that would empower physician assistants, nurse practitioners and other providers to deliver health services that only doctors are currently allowed to offer — from delivering babies to administering anaesthesia to basic primary care checkups.
State and federal officials on both sides of the aisle have long called for those reforms, arguing they make care cheaper and more accessible, especially in rural parts of the country where the nearest physician may be hours away.
The Trump administration tried to incentivize states to pass scope of practice laws by conditioning some of the Rural Health Transformation Fund on that and other favored policies. But the push faced fierce opposition from the American Medical Association, which argued as it fought against such bills in more than 40 states over the last few years that patients would receive less safe and lower-quality care than they would from a doctor.
Robyn Preacher, the head of state government relations for the American Nurses Association, praised the Trump administration for pushing states to expand what services their members can provide, but cautioned that few may be able to do so within the program’s strict timeline.
“Texas has been trying for years and years to get full practice authority, and they’re also a state that's only in session every other year, so they can't even bring it up next year. And North Carolina has had pending legislation for over a decade,” she said. “This is one of those situations where asking for changes so quickly kind of put some states at a disadvantage.”
Liz Crampton contributed to this report.
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