The Centers for Medicare & Medicaid Services awarded $10 billion in initial Rural Health Transformation funding to all 50 states in the latter half of 2025. Initial state funding allotments ranged from $147 million for New Jersey to $281 million for Texas.

The One Big Beautiful Bill Act established the Rural Health Transformation program in July 2025. The program will fund up to $50 billion to states over five years. The Rural Health Transformation program provides funding for activities such as recruiting clinicians to rural areas and providing training and technology to improve care delivery in rural hospitals.

The Centers for Medicare & Medicaid Services plans to allot up to $40 billion of remaining funds to states over the next four years based on their demonstration of satisfactory progress toward approved initiatives. The authorizing legislation limits states’ ability to appeal or challenge funding changes made by the Centers for Medicare & Medicaid Services. If states do not comply with award terms, the Centers for Medicare & Medicaid Services may withhold, reduce, or recover a portion of funding.

The Centers for Medicare & Medicaid Services monitoring activities include communicating with states, reviewing submitted information, and conducting audits and site visits. The Centers for Medicare & Medicaid Services and merit reviewers assessed state applications based on factors such as rural characteristics and the strength of states’ proposed initiatives.

Why It Matters

The CMS Office of the Actuary estimated Medicaid spent $19 billion on rural hospitals in 2024, compared to the Rural Health Transformation Program’s $10 billion annual allocation, representing a 53% increase in federal funding for rural healthcare. This shift marks a substantial expansion in federal support for rural healthcare infrastructure and staffing. Primary source: medicaid.gov

CMS has filled 15 of 30 new project officer positions to oversee state implementation of the Rural Health Transformation Program, with weekly check-ins between CMS staff and states to ensure compliance with funding requirements. The agency retains significant authority over fund distribution, with no provision for administrative or judicial review of decisions to withhold or reduce funding if performance metrics are not met. Primary source: medicaid.gov

Timeline

The initial funding budget period runs from December 29, 2025, through October 30, 2026. CMS’s Rural Health Transformation Program requires states to submit quarterly reports during the first year, with deadlines for obligating funding by October 30, 2026, and spending first-year awards by a date to be determined.

What's New

The $50 billion Rural Health Transformation Program’s funding is split 50% equally among all states and 50% based on metrics like rural population, hospital infrastructure, and proposed initiatives, as outlined in the Notice of Funding Opportunity. The Notice of Funding Opportunity (NOFO) for the Rural Health Transformation Program specifies that 50% of funds will be allocated based on factors including rural population density, proportion of rural health facilities, and state-specific healthcare challenges, with detailed metrics to be finalized by CMS. Primary source: medicaid.gov

A study titled "A Comparison of Compliance in Medicaid versus Non-Medicaid Orthodontic Patients" was published in 2012 in Figshare. A study titled Motivation in Medicaid programs for promoting preventive care compliance was published in 2012 in Texas ScholarWorks (Texas Digital Library).