States to Share $10 Billion in Rural Health Funding as Critics Warn It Falls Short of Medicaid Cuts

By Blessing Nweke

States will split $10 billion next year through a new Rural Health Transformation Program aimed at softening the blow of sweeping budget cuts to rural hospitals under the Trump administration, federal officials announced Monday. But the funding will not be distributed evenly, and critics warn it may be reduced for states that do not align with the administration’s policy priorities.

Every state applied for the money, which averages about $200 million per state in 2026 and totals $50 billion over five years. States will propose how to use their awards, while the Centers for Medicare and Medicaid Services assigns project officers to oversee implementation, CMS Administrator Dr. Mehmet Oz said.

Oz said the program, created under the “One Big Beautiful Bill” signed into law six months ago, is designed to push states toward innovation in rural health care. Half of the funding will be distributed equally among states, while the other half will be allocated using a CMS formula that considers rural population size, the financial health of medical facilities and statewide health outcomes.

About $12 billion of the five-year funding is tied to whether states adopt health policies favored by the administration’s “Make America Healthy Again” initiative. These include nutrition education requirements, school participation in the Presidential Fitness Test and restrictions on using SNAP benefits to purchase foods such as candy and soda. Several Republican-led states, including Texas and Oklahoma, have already adopted SNAP restrictions.

Funding levels will be recalculated annually, allowing the federal government to reclaim money if states fail to enact promised policies. Oz described this as leverage rather than punishment.

Some Democratic-led states declined to include SNAP restrictions despite the risk of receiving less funding, said Carrie Cochran-McClain of the National Rural Health Association.

While officials tout the program as a 50% boost in Medicaid investments for rural care, experts say it pales in comparison to the projected $137 billion loss rural hospitals could face over a decade from broader federal spending cuts, primarily to Medicaid.

“When you put that against $50 billion, the math does not add up,” Cochran-McClain said, warning that many rural hospitals remain at risk of closure.