By Arielle Zionts, Sarah Jane Tribble
March 3, 2026 / 5:00 AM EST / KFF Health News
In the final days of 2025, governors touted the hundreds of millions of federal dollars their states won from a new $50 billion Rural Health Transformation Program. But many approved plans are meeting resistance at the state level.
The five-year program, run by the Centers for Medicare & Medicaid Services, aims to seed innovative projects and technologies in rural health. States received large first-year awards — ranging from about $147 million for New Jersey to $281 million for Texas — after submitting applications scored by CMS. Federal officials will begin evaluating progress in late summer and announce 2027 allocations at the end of October.
CMS has warned states they could lose money or face delays if they make major changes to the plans approved in their applications. “During the application period, states were advised to only propose initiatives and state policy actions that the state deemed feasible,” said CMS spokesperson Catherine Howden, noting the agency will work with states on a case-by-case basis.
The funding was created by congressional Republicans as a late addition to the One Big Beautiful Bill Act to offset harms expected from the same law’s nearly $1 trillion cut to Medicaid over a decade. That disconnect — a program framed by some as a rural hospital rescue even though only up to 15% of a state’s award can be used to pay providers for patient care — has prompted criticism from elected officials, hospital associations and rural health advocates.
“Rural Health Transformation will not save a single hospital in our state,” said Jed Hansen, executive director of the Nebraska Rural Health Association. Sen. Ron Wyden (D-Ore.) called the program “a complete sham” at a rural policy conference in February. Medicaid serves roughly one in four rural residents, and many rural hospitals rely on it for financial stability; critics argue the program’s focus on innovation won’t replace the lost Medicaid revenue.
State-level pushback shows a mix of objections: some lawmakers want to scrap parts of their approved plans; others want to repurpose funds or ensure money reaches the most remote communities. Carrie Cochran-McClain, chief policy officer of the National Rural Health Association, said tension stems from plans being approved by the federal government while state lawmakers and health leaders want more input amid tight deadlines. Many states must pass legislation or otherwise authorize spending before funds are used, she said.
Examples of the disputes:
– Wyoming: Lawmakers killed one proposed initiative called “BearCare,” a state-sponsored insurance plan intended for use after medical emergencies. The Wyoming Department of Health said it will not proceed with BearCare without explicit legislative authority, though other parts of the state’s plan were approved.
– Ohio: Rep. Kellie Deeter and other Republican lawmakers asked the governor to allocate the maximum allowed 15% of the state’s award for provider payments to support 13 independent rural hospitals, arguing those hospitals operate on narrow margins and need direct support.
– North Dakota: Rep. Bill Tveit proposed a bill to reserve Rural Health Transformation funds for programs located more than 35 miles from urban areas. Lawmakers were sympathetic but rejected the proposal, with one senator warning that major changes could jeopardize federally approved funding.
– Michigan and North Carolina: Republican lawmakers criticized their states’ definitions of “partially rural” or “rural,” saying counties with urban population centers could compete for funds meant for lower-density counties.
Hospital associations have also weighed in. The Colorado Hospital Association sent a letter denouncing how the state crafted its plan and opposing two proposed initiatives, saying rural hospitals’ recommendations were disregarded and some plan elements could harm communities. Colorado’s health department responded by adding rural health leaders to its funding approval committee.
In Michigan and Nebraska, health groups complained their states’ applications lack specific funding streams for rural hospitals. Lauren LaPine-Ray of the Michigan Health & Hospital Association said many rural hospitals have never applied for state grants and may be ill-equipped to compete with larger academic centers and clinics for transformation dollars.
State officials have pushed back in other cases, saying details are still being worked out and emphasizing the fast rollout. Ken Gordon, a press secretary responding for Ohio’s governor and health department, said the process is “very early” and many details remain unresolved. In North Dakota, a state senator said the health department had already committed to prioritizing the most pressing rural needs.
Some critics argue the federal program’s scale and design were oversold. While the White House declared that “President Trump secured $50 billion in funding for rural hospitals,” federal guidance limits direct patient-care funding and prioritizes innovation, care delivery redesign, and technology — approaches that may not immediately stabilize hospital finances.
CMS officials and state leaders will face a test as they balance federal commitments, legal and legislative requirements, local health needs and political pressures. Changes to approved plans could risk funding or slow projects, potentially undermining states’ ability to demonstrate timely progress to CMS.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF, the independent source for health policy research, polling
