How The New $50 Billion Rural Health Care Fund Could Fall Short

Key Takeaways
The “One Big Beautiful Bill” includes a new funding program, the Rural Health Transformation Program, which will allocate $50 billion nationwide over five years.The program is designed to help soften Medicaid cuts that will uniquely impact rural communities. However, experts say the funding will only offset about one-third of the costs that Medicaid covers in rural areas.Cuts to Medicaid will impact critical access to hospitals, emergency rooms, nursing homes, and other care facilities, which could force them to close, making it harder for rural patients to access health care.

Upcoming cuts to Medicaid are expected to impact 60 million Americans living in rural communities, and many are wondering if a new program meant to soften that blow will really help. 

The Rural Health Transformation Program is a new feature in the “One Big, Beautiful Bill” designed to provide funding for rural communities’ health care needs. The bill’s cuts to Medicaid are projected to disproportionately affect these communities, and this program is designed to cover some of that shortfall.

The program will allocate $50 billion to all states over five years. However, estimates show that the program will fall short, and hospitals, nursing homes and other related facilities may close, making it harder for rural residents to access care.

What’s in the Bill

The “One Big, Beautiful Bill” will reduce federal Medicaid spending by $1 trillion over 10 years. In rural areas, that reduction is expected to total $155 billion over that same time frame. That means the Rural Health Transformation Program will only offset about one-third of the costs that will no longer be covered by Medicaid, according to health care think tank KFF.

Additionally, the rural funding program will only be temporary, while cuts to Medicaid are expected to be permanent.

The first half of the program’s funding will be spread equally across states with approved applications for the program. These state applications must include a plan detailing how they will use the funding that must be approved by the end of the year.

Each state will receive the same amount of money, regardless of the size of its rural population, the number of rural hospitals and other providers it has in the state, or their financial standing, according to KFF.

Making Up For Medicaid Cuts

The other half of the funding will then be distributed by the Centers for Medicare and Medicaid Services (CMS) administrator based on a state’s rural population and need. According to KFF, CMS must distribute these funds to at least a quarter of states with approved applications, but the agency could choose to restrict this pool of funds to a subset of states. 

The funding will cover various health-related services for states, including payments to health care providers, recruitment and workforce training, the purchase of new technology and more, according to the Bipartisan Policy Center.

However, health care workers say overall, the program will likely provide far less funding than what is being cut.

“It is a drop in the bucket in terms of the losses that hospitals are going to experience from these cuts,” said Rich Rasmussen, the president and CEO of the Oklahoma Hospital Association.

Services Will Be Reduced

Cuts to Medicaid will impact critical access hospitals, clinics, emergency rooms, and nursing homes. Because the Rural Health Transformation Program won’t cover all those losses, states will have to make critical decisions about health care access.

“Because Medicaid is a federal-state partnership, any reductions in the federal contribution generally require states to make decisions on whether or how much to raise revenues, reduce benefits, or live with reductions in the amount of Medicaid spending used to support beneficiaries and providers in the state,” according to a written statement emailed to Investopedia from the Bipartisan Policy Center. 

Pregnant women, their babies, seniors, and those with a chronic illness or disability will likely be most affected by these cuts. Without access to critical care in their community, they could be forced to travel long distances for the care they need, a barrier some say may prove deadly.

“There is not enough funding in [the Rural Health Transformation Program] to be able to sustain hospitals or replace what we are losing,” Rasmussen said. “In the end, we will have a dramatic reduction in services all across the rural footprint of America.”