CMS distributes $10 billion for states to use to improve rural healthcare

CMS awarded states $10 billion in rural health funding for 2026, implementing a widely anticipated provision of the legislation known as the One Big Beautiful Bill Act (OBBBA).

The Rural Health Transformation Program (RHTP) funding is intended to help rural healthcare providers succeed amid the projected cutbacks in federal Medicaid funding over the next decade under the OBBBA. Specifically, CMS wants RHTP stakeholders to undertake initiatives to revamp rural healthcare.

RHTP funding amounts to $50 billion over five years through 2030. Each annual disbursement includes $5 billion to be doled out equally to all 50 states, and up to $5 billion in discretionary funding that’s based on state proposals. States will distribute their funding to healthcare providers and other stakeholders as described in their applications.

States that came out ahead (and behind)

In a hypothetical scenario where the $10 billion is dispensed equally, states would receive $200 million each. In fact, allocations varied, ranging from $147 million (New Jersey) to $281 million (Texas), CMS said in a Dec. 29 announcement.

“Applications were evaluated using a structured scoring framework outlined in the Notice of Funding Opportunity and aligned with statutory goals, ensuring a fair and consistent process across all 50 states,” the agency said.

Among other states with above-average disbursements were Alaska ($272 million), California ($233 million), Montana ($233 million), Oklahoma ($223 million), Kansas ($222 million), Georgia ($219 million) and Nebraska ($218.5 million).

“The Nebraska Department of Health and Human Services (DHHS) will build a prevention-first, tech-enabled sustainable rural healthcare system,” per a statement from the Nebraska governor’s office after the funding announcement.

“The project will prevent chronic disease, regionalize care and advance Make America Healthy Again priorities. To achieve this vision, DHHS will implement seven integrated initiatives to strengthen the State’s rural health infrastructure, address workforce gaps, and ensure access to care through consumer-facing technology.”

States that came in under the $200 million mark included Maryland ($168 million), Massachusetts ($162 million), Delaware ($157 million), Rhode Island ($156 million) and Connecticut ($154 million).

How CMS determined the funding

In the formula for awarding the discretionary funding, 50% was based on characteristics such as the size of the state’s rural population, amount of uncompensated care provided, and rural geographical footprint, said Mehmet Oz, MD, administrator of CMS. In addition, 30% was based on the improvement plans described in state applications.

The remaining 20% hinged on pledges to implement state policies favored by the Trump administration, among them blocking the use of Supplemental Nutrition Assistance Program benefits for the purchase of certain items (e.g., candy) and repealing Certificate of Need laws that govern regulatory approvals of new healthcare facilities.

While the 2026 allocations are a baseline indicator of what states will get in the four subsequent years, CMS will determine precise funding levels annually based on performance metrics, progress reports and state policy actions. 

“If the state says they’re going to do these things as part of their policy, and they don’t do [them], we do have the ability to claw back the financial commitment that would have accompanied those state policy actions,” Oz said during a media call.

Oz also reiterated prior statements that the funding is not a matter of helping struggling providers shore up their balance sheets.

“The purpose of this $50 billion investment in rural healthcare is not to pay off the bills,” he said. “The purpose is to allow us to right-size the system and to deal with the fundamental hindrances of improvement in rural healthcare.”

How states will use funding

Initiatives commonly proposed in state applications included:

• Expanding telehealth and digital infrastructure
• Bolstering workforce recruitment, training and retention
• Establishing regionalized care through hub-and-spoke models to better link rural providers
• Integrating mental-health and substance-use disorder services in holistic care models
• Investing in population health tools to prevent and manage chronic disease
• Enhancing the transition to value-based payment models

Some states described ways to help hospital business operations. For example, Arkansas noted 79% of its rural hospitals operate at a loss on patient services. In response, the state will use some of its $209 million in 2026 funding to stabilize vulnerable facilities by incorporating shared service agreements, regional staffing partnerships and coordinated surveillance systems.

Florida will look to use its nearly $210 million in first-year funding to “implement value-based payment models and promote [an] integrated Medicare-Medicaid plans initiative to stabilize rural hospitals and strengthen provider solvency through more streamlined billing for providers.”

Maine said one of its RHTP goals would be to see “at least 75% of Maine’s rural hospitals achieving annual operating margins sufficient to make ongoing investments to improve operations and care.” The state defines that threshold as an operating margin of at least 1%.

North Carolina will look to accelerate “the broad implementation of state-of-the-art AI-based technology to support documentation and real-time expert clinical decision support to drive down business costs for rural providers and improve sustainability.”

Will it be enough?

A big question looming over the RHTP is whether the transformative push spawned by the funding can help stakeholders succeed amid the cutbacks imposed by the OBBBA.

Federal Medicaid spending is projected to drop by more than $900 billion over a decade, including by $137 billion for rural healthcare. Some of the fall-off would be linked to a projected rise of more than 10 million in the number of uninsured.

While describing the RHTP as an “unprecedented federal investment in rural health to strengthen sustainable access to care and improve health outcomes,” the National Rural Health Association (NRHA) said “the onetime funding, while significant, cannot by itself secure the long-term stability of rural providers.”

“CMS has been very clear that they want to use the RHTP for longer-term rural health transformation ­­— but without continued policies that guarantee sustainable reimbursement, rural hospitals and clinics will remain at risk,” Carrie Cochran-McClain, chief policy officer with the NRHA, said in a blog post. “This program is an important step forward, but it must be paired with durable reforms that ensure rural Americans have reliable access to care for years to come.”

In acknowledging its $213 million RHTP funding award for 2026, North Carolina’s Department of Health and Human Services said more support is needed.

“North Carolina is eager to maximize the funding awarded by the Rural Health Transformation Program, but the state will need to overcome significant funding losses as a result of federal reconciliation law H.R. 1 [the OBBBA], including the loss of nearly $50 billion in federal funds to North Carolina’s Medicaid program over the next 10 years and critical funding to hospitals in our state,” the department said in a news release.

Continued CMS efforts

CMS intends to partner closely with states on implementing their funding, including by assigning RHTP project officers to each state. Federal coordination of the RHTP will take place in a newly announced Office of Rural Health Transformation within CMS.

An annual summit, with the inaugural installment scheduled for March 2026, will be designed to promote interstate collaboration on lessons learned and ways to spark further innovation in rural healthcare.

“States will submit regular updates so CMS can track progress, identify proven approaches, support successful execution of their plans, and ensure strong oversight throughout the program,” according to the allocation announcement.