The Rural Health Transformation Program now has every state on board. The Centers for Medicare and Medicaid Services (CMS) approved all 50 state applications and announced the first-year awards on December 29, 2025, splitting the first $10 billion of a $50 billion fund that runs from fiscal year 2026 through 2030. Awards range from $147 million in New Jersey to $281 million in Texas, and they average about $200 million. A new KFF analysis published September 18 lays out where the money stands, and it lands at a busy moment: states must obligate their first-year dollars by October 30, and their first quarterly reports are due November 29. We will be updating this article monthly.
Behind the big number sits a debate. The fund was added to the 2025 reconciliation law as a compromise to ease rural hospital concerns about federal Medicaid cuts, but it pays for a much wider set of activities than hospital operations, and hospitals face limits on how they can benefit. KFF estimates the fund could offset about 37% of the roughly $137 billion in federal Medicaid cuts projected for rural areas over ten years, and unlike most of those cuts, it ends after five years. Below you will find the dates, how the money is divided, what it can and cannot buy, how providers can seek funds, and a calculator that turns a state award into spending limits.
Rural Health Plan Key Highlights and Dates
| Item | Latest detail |
|---|---|
| Total program funding | $50 billion, fiscal years 2026 through 2030 |
| Annual funding | $10 billion per year |
| Law creating the program | One Big Beautiful Bill Act, Public Law 119-21, signed July 4, 2025 |
| Application notice released | September 15, 2025 |
| State application deadline | November 5, 2025 (all 50 states applied) |
| First-year awards announced | December 29, 2025 (all 50 approved) |
| Smallest first-year award | $147 million (New Jersey) |
| Largest first-year award | $281 million (Texas) |
| Average first-year award | About $200 million |
| Guaranteed baseline per state, each year | $100 million |
| First annual report due | August 31, 2026 |
| Deadline to obligate first-year funds | October 30, 2026 |
| First quarterly report due | November 29, 2026 |
| Deadline to spend first-year funds | September 30, 2027 |
| CMS announces later-year awards by | October 31 of each fiscal year |
| All funds spent by | September 30, 2032 |
What is Rural Health Transformation Program?
The program is a five year grant fund that CMS runs through a new Office of Rural Health Transformation, created within the agency on December 18, 2025. Congress wrote it into the July 2025 budget law at the last minute, after senators from rural states raised alarms about what large federal health spending reductions might do to small hospitals. The law gives CMS wide latitude over how to distribute the money and how to set the terms.
CMS describes five strategic goals: making rural America healthy again through prevention and chronic disease work, sustainable access to care, workforce development, innovative care models, and technology innovation. States wrote plans around those goals and had less than two months to apply. Every state was approved, which means each is eligible for funding in all five years, although CMS can withhold, reduce, or recover money if a state falls short of program rules or shows unsatisfactory progress. The law says there is no administrative or judicial review of those decisions.
The District of Columbia and the U.S. territories were not eligible.
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How the $50 Billion Is Divided Among States
The formula is the part most people misunderstand. Only half the money is split evenly, and the rest depends on need, plans, and state policy.
| Share of the fund | Amount | How it is distributed |
|---|---|---|
| 50% | $25 billion | Equal shares to all approved states, $100 million per state per year |
| 25% | $12.5 billion | Measures of state need, such as rural population, rural facilities, land area, and uncompensated care |
| About 16% | $8.0 billion | Scores of each state’s proposed initiatives, reviewed again as states make progress |
| About 8% | $3.8 billion | State policy actions and commitments favored by the administration |
| About 1% | $0.7 billion | Other factors, such as Medicaid data quality and integrated care for people on both Medicare and Medicaid |
Within the need category, about 40% is tied to a state’s rural population and number of rural health facilities. Land area steers money to only the five largest states, which is why Alaska, Texas, and California land among the biggest awards. Alaska has one of the smallest rural populations in the country but received a large award partly because of land area and a strong initiative score.
The policy portion has drawn attention. Some of the policies are tied to the administration’s Make America Healthy Again agenda, such as requiring schools to bring back the Presidential Fitness Test, restricting SNAP purchases of items like soda and candy, and requiring nutrition content in continuing medical education. Others aim at competition among providers, such as not having certificate of need laws and allowing broader scope of practice for nurse practitioners. Supporters see these as ways to reward states that lower barriers to care. Critics note that the policies are statewide and not specific to rural areas. Either way, they affect roughly 8% of the pool.
First-Year Awards: Who Got the Most and the Least
The equal share means differences between states are modest compared with the very large differences in rural populations.
| Measure | Result |
|---|---|
| Largest awards | Texas, Alaska, and California |
| Smallest awards | New Jersey, Connecticut, and Rhode Island |
| Texas rural population | About 4.3 million |
| New Jersey rural population | About 140,000 |
| Texas award per rural resident | About $66 |
| Alaska award per rural resident | About $990 |
| New Jersey award per rural resident | About $1,069 |
| Rhode Island award per rural resident | About $6,305 |
| States under $100 per rural resident | Ten |
| States over $500 per rural resident | Eight |
Texas has about thirty times as many rural residents as New Jersey but received only about twice as much money. That gap explains why per person figures look so uneven. It is also why some rural advocates argue the formula favors small states, while others say the equal split is a deliberate feature that guarantees every state a foundation.
What States Can Spend the Money On?
States must use their funds for at least three of eleven permitted uses. The list gives a sense of how broad the program is.
Consumer technology for prevention and chronic disease management, such as remote monitoring and health apps. Information technology upgrades, including telehealth, cybersecurity, and health information exchange. Training and technical assistance so rural hospitals can adopt new technology. Recruiting and keeping clinical workers, with a five year rural service commitment for people who directly benefit. Prevention and chronic disease programs, from mobile cancer screening to nutrition education. Matching local services to local need, including emergency medical services, mobile units, and transportation. Payments to health care providers. New models of care, including value based payment and global budgets. Investment in existing facility buildings. Collaboration among providers through hub and spoke networks and shared services. Behavioral health and substance use treatment.
Examples show the range. Alabama is funding remote ultrasounds using telerobotics. Alaska is putting money toward drone delivery of medications to remote areas. California is building networks that link regional hospitals with small critical access hospitals and clinics. Michigan is expanding home based care for older adults. North Carolina is pushing farm to hospital food programs and mobile food markets. Montana is helping hospitals right size, which could mean dropping services that cannot be sustained. Nevada is offering incentives to recruit rural providers. Utah’s first year plan included tens of millions for programs it named PATH and SHIFT, according to its state webinar.
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Spending Limits: What the Money Cannot Do
| Rule | Limit |
|---|---|
| Payments to providers | No more than 15% of a state’s award in a budget period |
| Investment in existing buildings and infrastructure | No more than 20% |
| Replacing electronic health record systems | No more than 5% |
| Administrative expenses | Up to 10% |
| New construction, building expansion, or purchasing buildings | Not allowed |
| Short-term relief or perpetual operating costs | Not allowed |
| Supplanting existing funding, including Medicaid payments | Not allowed |
| Gender-affirming care and most abortion services | Not allowed |
CMS says it expects states to invest in long term improvements, not to fund ongoing operating expenses. Hospitals that are not in rural areas can receive money, as long as the spending benefits rural residents. There are also limits related to citizenship documentation for payments made on behalf of an individual, which may require some hospitals to collect information they do not currently gather.
How the Fund Compares With Medicaid Cuts?
The fund is large, but it sits next to bigger numbers. KFF’s analysis estimates the same law will cut federal Medicaid spending by $911 billion over ten years, including about $137 billion in rural areas. The $50 billion covers roughly 37% of the rural cuts and about 5% of the total. It does not account for other revenue losses, such as the expiration of enhanced Affordable Care Act subsidies, which are expected to raise the number of uninsured people.
Timing matters too. The fund arrives first, from 2026 through 2030, while about 64% of the Medicaid reductions occur after fiscal year 2030 and many persist. New legislation would be needed to continue rural support after the fund ends. Supporters argue the money gives rural communities a head start to redesign care before larger cuts arrive. Skeptics say a temporary fund cannot replace a permanent reduction.
Pressure to Focus More on Hospitals
The hospital industry has pushed back on the current design. In comments filed in early August, the American Hospital Association and the Federation of American Hospitals urged CMS to give rural hospitals more priority, including by lifting some limits on provider payments and capital investment. In June, a bipartisan group of senators that included Michael Bennet and Susan Collins pressed CMS for more flexibility and voiced concern that small rural providers will struggle to compete with larger systems for funds.
Increasing hospital funding would speak directly to the financial worries that led to the program, but it would mean less money for competing priorities like workforce, technology, and prevention. CMS has not announced a change to the limits.
How Hospitals, Clinics, and Communities Can Apply for Funds?
There is no national application for providers. The state application window closed in November 2025. Money now moves through state agencies, which design their own processes for grants, contracts, and subawards.
- Find your state’s rural health transformation page. Many state health departments or Medicaid agencies have one, and they post funding opportunities and webinars.
- Read the state’s approved plan and budget so your proposal matches an initiative the state has already committed to.
- Watch for requests for applications, which some states began releasing in spring 2026.
- Register in any state procurement system required to receive funds, and confirm you meet requirements such as HRSA rural definitions.
- Submit a proposal that shows sustainable impact beyond the program period, since CMS discourages ongoing operating support.
- Report on progress if funded, because states must send CMS annual and quarterly reports and pass along requirements.
Residents can also engage. Ask your state agency how funds are being used locally, attend public webinars, and check tracking tools from KFF Health News and the UNC Sheps Center linked below. CMS releases state progress reports to the public on request and does not plan to post them proactively, so transparency depends on states and outside trackers.
Processing Time and Deadlines to Watch
States have moved at very different speeds. Some released grant applications months ago, while others are still building procurement systems. The main federal deadlines are fixed.
| Deadline | What is due |
|---|---|
| August 31, 2026 | First of five annual reports from states |
| October 30, 2026 | States must obligate first-year funds |
| November 29, 2026 | First of thirteen quarterly reports |
| September 30, 2027 | States must spend first-year awards; CMS redistributes unused money in fiscal 2028 |
| October 31 each year | CMS announces awards for fiscal years 2027 through 2030 |
| February 27, 2031 | Final report due |
| September 30, 2032 | All remaining funds must be spent |
| October 1, 2032 | Unused funds return to the Treasury |
The first annual report matters because it feeds the scoring that helps set second year awards. States that fell behind on initiatives may see their share shift. For a local applicant, the practical takeaway is that first-year funds must be committed by the end of October, so late fall could bring a burst of announcements.
Payment Schedule and How the Money Flows
CMS awards $10 billion a year, and each state’s share arrives as a grant under a cooperative agreement that requires substantial CMS involvement. States can spend funds through the end of the following fiscal year, with any unused amounts redistributed later. After a state receives money, it passes funds to recipients through its own contracts and subawards, and some money flows downstream through contractors to hospitals and other providers.
CMS will track where the money goes. Recipients are grouped into categories such as different types of providers, government agencies, tribal entities, educational organizations, and technology vendors. First-year obligations to direct recipients should show up in the first quarterly report in late November, which will offer the earliest real picture of who is getting paid.
Use the Rural Health Fund Planner
Pick a state preset or enter your own award and rural population. The calculator shows the award per rural resident, a five year projection if awards stayed flat, and the dollar ceilings on provider payments, building investments, electronic record replacements, and administration.
Rural Health Fund Planner
Estimates only. Population figures are approximate. Later-year awards can change based on state progress and CMS decisions. Limits reflect CMS guidance described in this article.
Official Resources and Links
FAQs
What is the Rural Health Transformation Program?
It is a $50 billion federal grant fund, run by CMS, that gives states money over five years to improve rural health care access, quality, and outcomes.
Did all 50 states get approved?
Yes. CMS approved all 50 state applications and announced first-year awards on December 29, 2025.
How much did each state get in the first year?
Awards ranged from $147 million in New Jersey to $281 million in Texas, with an average of about $200 million.
Is the money guaranteed for all five years?
States are eligible for all five years, but CMS can withhold, reduce, or recover funds if a state does not comply or make satisfactory progress.
Can rural hospitals use the money?
Yes, but with limits. Provider payments are capped at 15% of a state’s award, building investments at 20%, and the money cannot fund temporary relief or new construction.
Does the fund replace Medicaid cuts?
No. KFF estimates it offsets about 37% of the projected rural Medicaid cuts over ten years, and it is temporary.
How do I apply as a hospital or clinic?
Apply through your state. States design their own grant and subaward processes, so check your state health department’s rural health transformation page.
When must states spend the first-year money?
They must obligate it by October 30, 2026, and spend it by September 30, 2027.
Why is Texas getting a small amount per rural resident?
Texas has about 4.3 million rural residents, so its $281 million works out to about $66 each, while smaller states receive much more per person because half the fund is split equally.
Will the public be able to see where the money goes?
CMS will provide progress reports on request but does not plan to release them on its own. Outside groups are tracking state plans and spending.
How much money is in the rural health fund?
There is $50 billion over five fiscal years, with $10 billion available each year from 2026 through 2030.
Who runs the Rural Health Transformation Program?
CMS, through its Office of Rural Health Transformation.
What can states use the funds for?
Technology, workforce, prevention, behavioral health, new care models, provider collaboration, and limited payments and facility investments, among other uses. States must choose at least three permitted uses.
Are rural hospitals getting the money directly?
Not automatically. States decide how to divide funds among hospitals, clinics, universities, technology vendors, and other groups.
What happens after 2030?
The fund ends, and new legislation would be needed for more rural support. States must spend all funds by the end of fiscal year 2032.
Is the program part of the One Big Beautiful Bill Act?
Yes. It was created in Section 71401 of Public Law 119-21, signed July 4, 2025.
Conclusion
The Rural Health Transformation Program is now moving from approvals to real spending. All 50 states have their first awards, ranging from $147 million to $281 million, and the first big test comes at the end of October, when states must commit those dollars. The fund is large, flexible, and short lived, and it comes with tight limits on how hospitals can use it. Whether it becomes a lasting boost or a partial patch for coming Medicaid cuts will depend on what states do with it and how CMS enforces the rules. If you work in rural health, check your state’s program page now, and if you live in a rural community, watch the late November reports for the first clear look at where the money goes.
