The Centers for Medicare & Medicaid Services has awarded grants to all fifty states under the Rural Health Transformation Program. The average grant for 2026 is $200,000, with grants ranging from $147 million to $281 million. The states receiving the highest amount of grants were Texas at $218 million, Alaska at $272 million, and California and Montana with $234 million each.
The Rural Health Transformation Program was created as part of the Administration’s omnibus tax and spending cut bill (“the bill”) in an effort to attenuate some (but certainly not all) of the negative impacts of the bill’s significant cuts to Medicaid on rural hospitals. The bill appropriated $50 billion to the Program, $10 billion each year for fiscal years 2026 – 2030. Only the 50 states were eligible to apply. Fifty percent of the annual funds, “the baseline funds,” were required to be distributed by CMS equally among all states with approved applications, without regard to a state’s rural population or rural healthcare needs.
The bill granted broad discretion to CMS to allocate the remaining 50% of the available funds. CMS evaluated grant applications under 23 factors, some of which were based on data about a state, including data about a state’s rural population, and others of which were based on whether a state’s current or proposed policies aligned with Administration priorities.
Not all of the factors used to evaluate grant proposals looked solely at circumstances affecting rural healthcare in a state, and not all of the awarded grants were designed to specifically address issues faced by rural hospitals and other providers in rural areas. For example, although Alabama has not yet specified the grant recipients, it does not appear that much, if any, of the funding will go to independent rural hospitals in Alabama, which are the ones most likely to close or to reduce services for financial reasons. As a result, the grants are not likely to compensate rural hospitals for the loss of Medicaid coverage by millions of patients under the bill and millions of others who are expected to drop insurance coverage due to the expiration of enhanced Affordable Care Act subsidies.
Whatley Kallas, LLP’s earlier article on the Rural Health Transformation Program is linked here. CMS’s press release announcing the grants is linked here.