Rural Health Transformation Program: Overview of the $50 Billion Fund
- The Rural Health Transformation Program will distribute $50 billion in state grants over a five-year period following its creation under the 2025 budget reconciliation law, according to federal...
- The Centers for Medicare & Medicaid Services oversees the Rural Health Transformation Program through its newly established Office of Rural Health Transformation.
- Funds under the program are distributed to states via a two-part formula.
The Rural Health Transformation Program will distribute $50 billion in state grants over a five-year period following its creation under the 2025 budget reconciliation law, according to federal program overviews. The funding mechanism was added to the reconciliation package as a political compromise during Senate negotiations to address concerns regarding the impact of federal spending cuts on rural hospitals.
Program Structure and CMS Oversight
The Centers for Medicare & Medicaid Services oversees the Rural Health Transformation Program through its newly established Office of Rural Health Transformation. The agency holds substantial leeway to determine state funding distributions, expand permitted uses, and set terms and conditions. CMS awards $10 billion in grants annually to approved states from fiscal years 2026 through 2030. States may spend received funds through the end of the following fiscal year, and CMS will redistribute any unused funds over time, requiring all monies to be spent by the end of fiscal year 2032. While the program functions as a cooperative agreement requiring substantial CMS project involvement after awards are made, states had a one-time opportunity to apply and all states received approval for the five-year duration. However, CMS retains the authority to withhold, reduce, eliminate, or recover funding if a state fails to comply with program rules, misses satisfactory progress markers, or if funding is no longer deemed in the government’s best interest. The legislation specifies that these funding decisions by CMS are not subject to administrative or judicial review.
Funding Distribution and State Allocations
Funds under the program are distributed to states via a two-part formula. One half of the total funds is allocated equally among approved states, resulting in each state receiving $100 million for the first year. The remaining half is allocated by CMS based on factors such as the percentage of a state’s population living in rural areas and other relevant considerations. Total awards for fiscal year 2026 varied significantly by jurisdiction. Texas and Alaska secured the largest total awards at $281,319,361 and $272,174,856, respectively. When evaluated on a per capita basis for rural residents, however, funding density shifted. Texas allocated $66 per rural resident, compared to $6,305 per rural resident in Rhode Island. Oregon received $197,271,578, amounting to $172 per rural resident, while Washington secured $181,257,515, equating to $162 per rural resident, both tracking slightly above the national average of $157 per rural resident.
Permitted Uses and State Initiatives
Despite its origins in mitigating rural hospital concerns, the program supports a broad set of activities rather than exclusively targeting rural hospitals. Permitted uses allow rural healthcare providers to collaborate more effectively, implement advanced electronic health records and data modernization, prevent disease, manage chronic conditions, strengthen workforce capacity, and support tribal health. Individual states have tailored their spending plans accordingly. Oregon is focusing on regional partnerships, healthy communities, workforce resilience, and technology modernization. Washington is directing funds toward hospital innovation, care management, native family health, behavioral health systems, and data solutions. Alaska is prioritizing maternal and child health, foundational services across road-connected and off-road communities, preventative care, value-based reimbursement models, and workforce development.
