Trump administration rolls out rural health funding, with strings attached

States will share $10 billion for rural health care next year as part of a program to offset the Trump administration’s massive budget cuts to rural hospitals, federal officials announced Monday.

But even though every state has requested money from the Rural Health Transformation Program, that money will not be distributed equally. And critics worry that funding could be cut if a state’s policies don’t match those of the administration.

Officials said the average grant for 2026 was $200 million and the fund would inject a total of $50 billion into rural health programs over five years. States propose how to spend their awards, and the Centers for Medicare and Medicaid Services assigns project officers to support each state, said agency administrator Dr. Mehmet Oz.

“This fund was created as part of the One Big Beautiful Bill, signed into law only six months ago, to push states to get creative,” Oz said in a call with reporters Monday.

Under this program, half of the money is distributed equally to each state. The other half is allocated based on a formula developed by CMS that takes into account the size of the rural population, the financial health of a state’s medical facilities, and the health outcomes of a state’s population.

The formula also ties $12 billion in funding over five years to whether states implement health policies prioritized by the Trump administration’s “Make America Healthy Again” initiative. Examples include requiring nutrition education for health care providers, requiring schools to take the presidential fitness test or banning the use of SNAP benefits for so-called junk food, Oz said.

Several Republican-led states — including Arkansas, Iowa, Louisiana, Nebraska, Oklahoma and Texas — have already passed rules banning the purchase of foods like candy and soda that qualify for SNAP benefits.

The money states receive will be recalculated each year, Oz said, allowing the administration to “claw back” the funds if, for example, state leaders don’t enact promised policies. Oz said clawbacks are not punishments, but governors can use leverage to move policies forward by highlighting the potential loss of millions of dollars.

“I’ve already heard governors express the feeling that this is not a threat, but is actually a strengthening part of the One Big Beautiful Bill,” he said.

Carrie Cochran-McClain, policy manager for the National Rural Health Association, said she has heard from a number of Democratic-led states refusing to include such restrictions on SNAP benefits, even though it could hurt their chances of getting more money from the fund.

“That’s not where the state’s leadership is,” she said.

Oz and other federal officials touted the program as a 50 percent increase in Medicaid investments in rural health care. Rep. Don Bacon, a Nebraska Republican who has criticized many of the administration’s policies but voted for the budget bill that cut Medicaid, highlighted the fund when recently asked about how budget cuts would hurt rural hospitals.

“That’s why we added a $50 billion rural hospital fund, to help any hospital that’s struggling,” Bacon said. “This money is intended to keep hospitals afloat.”

But experts say that won’t be enough to offset the losses struggling rural hospitals will face because of the $1.2 trillion cut to the federal budget over the next decade, driven primarily by Medicaid. Millions of people are also expected to lose their Medicaid benefits.

Estimates suggest that rural hospitals could lose about $137 billion over the next decade because of this budget measure. According to an analysis by the Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill, as many as 300 rural hospitals were at risk of being closed because of the GOP spending plan.

“When you compare that to the $50 billion for the Rural Health Transformation Fund, you know, those math don’t add up,” Cochran-McClain said.

She also said there is no guarantee the funding will go to rural hospitals in need. For example, she noted, one state’s application included a proposal to provide healthier, locally sourced school lunch options in rural areas.

And while innovation is a goal of the program, Cochran-McClain said it’s difficult for rural hospitals to innovate as they struggled to break even before Congress’s Medicaid cuts.

“We talk to rural providers every day who say, ‘I’d really like to do x, y, z, but I’m concerned, you know, about being able to pay the salaries at the end of the month,'” she said. “So when you’re in this kind of crisis, it’s, I would say, almost impossible to do real innovation.”

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