The July 2025 price range reconciliation legislation, referred to as the One Huge Stunning Invoice, established the Rural Well being Transformation Program (referred to right here because the “rural well being fund”), which is able to distribute $50 billion to states with authorized functions. The agricultural well being fund was created to assist offset the impression on rural areas of the legislation—which incorporates an estimated $911 billion in federal Medicaid spending reductions over ten years, together with an estimated $137 billion in rural areas based mostly on KFF estimates. The fund was additionally motivated by ongoing considerations concerning the monetary vulnerability of many rural hospitals. CMS has indicated that the funds are supposed for use for investments in “system transformation” reasonably than for “perpetual working bills.” Funds can be utilized to assist rural areas in quite a lot of methods, together with by selling prevention and persistent illness administration interventions, supporting collaboration amongst rural well being services, and recruiting medical employees to rural areas. Nonetheless, funds to suppliers for care can’t exceed 15% of complete funds, although suppliers may benefit in different methods, comparable to by way of investments in present buildings and infrastructure (restricted to twenty% of complete funds).
The legislation states that half of the fund ($25 billion) will likely be distributed equally to states with authorized functions (i.e., with out regard to wish) whereas granting the Facilities for Medicare & Medicaid (CMS) broad discretion over the way to distribute the remaining funds. In September 2025, CMS launched a Discover of Funding Alternative (NOFO) explaining that the rest ($25 billion) can be distributed throughout authorized states based mostly on measures of state want ($12.5 billion), in addition to the standard of proposed initiatives, state coverage, and different elements. The state software deadline was on November 5, 2025. CMS is required to make award selections by the top of the 12 months and plans to distribute the primary $10 billion in January 2026.
This transient offers estimates of how $37.5 of the $50 billion fund may very well be distributed throughout states if all states are authorized for funding. This $37.5 billion contains the parts of the fund that may be calculated or estimated based mostly on obtainable knowledge, i.e., the $25 billion that will likely be distributed equally throughout states and the $12.5 billion that will likely be distributed based mostly on CMS’s analysis of measures of state want (comparable to the scale of a given state’s rural inhabitants). Estimates of the latter are based mostly on knowledge from the Sheps Center, that are based mostly on standards specified by CMS within the NOFO utilizing info obtainable to the general public. DC and Puerto Rico and the opposite U.S. territories are ineligible for funding and so have been excluded from the evaluation. Estimated awards in textual content are rounded to the closest $10 million or to the closest $10 per rural resident, as relevant. See Strategies for extra particulars.
Awards from the $37.5 billion (of the $50 billion) may vary from an estimated $550 million (in Rhode Island) to simply over $1 billion (in Texas) over 5 years if all states have been authorized for funding. These variations are comparatively modest in comparison with the broad variation throughout states in rural well being wants.
Precise awards based mostly on the primary $37.5 billion would differ if CMS doesn’t award funding to each state or if the company decides to cut back awards for a given state over time. Precise awards to states may additionally differ if CMS makes use of completely different knowledge to allocate funds or applies completely different standards when distributing funds than what was indicated within the NOFO. For instance, when evaluating the share of hospitals receiving Medicaid disproportionate share hospital (DSH) funds, CMS is anticipated to make use of extra present knowledge than can be found to the general public.
States may obtain greater than the estimates on this evaluation, as a result of totals will embrace their portion of the $12.5 billion that will likely be distributed based mostly on CMS’s discretionary scoring of state coverage, state initiatives, and different elements, and these scores will not be but recognized. State initiatives will likely be scored based mostly on their high quality by a advantage overview panel. This evaluation will likely be up to date after CMS declares the primary 12 months of funding.
Estimated Awards
Estimated Awards From $37.5 Billion of the $50 Billion Rural Well being Fund May Vary From $550 Million to Simply Over $1 Billion Over 5 Years if All States Have been Accredited for Funding
If the $37.5 billion is distributed to all states, states will obtain $750 million over 5 years, on common, with estimates starting from $550 million in Rhode Island to simply over $1 billion in Texas (Determine 1). Estimated awards for many states (32) are inside 10% of the $750 million common (i.e., between $675 million and $825 million), regardless of broad variation in rural well being wants.
Some states with comparatively small rural populations may obtain a disproportionate share of the $37.5 billion based mostly on different elements. For instance, Alaska has a small complete inhabitants and the fifth smallest rural inhabitants within the nation, but it surely may obtain the fifth largest award from the $37.5 billion ($940 million). Many of the additional {dollars} that Alaska is estimated to obtain from the $12.5 billion based mostly on state want mirror the truth that a portion would go solely to the 5 states with the most important land space. Alaska is the most important state within the nation and will obtain $260 million from that pool.
Determine 1
As famous above, the $37.5 billion evaluated on this transient contains the $25 billion that will likely be distributed equally throughout states and the $12.5 billion that will likely be distributed based mostly on measures of state want (Determine 2). Every state with an authorized software would obtain $500 million over 5 years from the $25 billion distributed equally throughout states if all states obtain funding. If not all states are authorized for funding, states with authorized functions will obtain extra.
States will obtain $250 million over 5 years, on common, from the $12.5 billion to be allotted based mostly on state wants (once more, assuming all states are authorized for funding). Estimated awards from that $12.5 billion pool vary from $50 million in Rhode Island to $530 million in Texas.
The remaining $12.5 billion of the $50 billion fund—which relies on state initiatives, state coverage, and different elements—will end in further funds for some or all states with authorized functions, however can’t be estimated but due to uncertainty about how CMS will rating these elements (which, for instance, will rely partly on whether or not states decide to sure coverage modifications of their functions and comply with by way of over time).
Determine 2
Distribution Based mostly on State Want
A Quarter of the $50 Billion Fund, $12.5 Billion, Might be Distributed Based mostly Solely on Particular Measures of State Want
Of the $50 billion fund, 1 / 4 ($12.5 billion) will likely be distributed based mostly solely on particular measures of state want as outlined by CMS (see beneath). As well as, $8 billion will likely be distributed based mostly on the standard of state initiatives as decided by CMS (see beneath); that analysis might take state wants under consideration to a point, however the extent to which it should achieve this is unclear. State initiatives will likely be evaluated based mostly on technique, projected impression, sustainability past the funding interval, and different elements, in line with CMS.
Based mostly on standards revealed by CMS, the $12.5 billion based mostly solely on measures of state want will likely be distributed as follows:
- 40% of the $12.5 billion relies on the agricultural inhabitants and variety of rural well being care services in a state (20% every). CMS has revealed the way it plans to outline “rural” for functions of distributing these {dollars}, although there are numerous potential methods of doing so. For instance, CMS makes use of a broad definition of “rural hospitals” that features all hospitals in areas categorized as rural by the Well being Assets & Companies Administration (HRSA) (which itself is broader than some definitions) in addition to some other hospital that receives sure Medicare rural fee designations or that’s categorized by Medicare as city however reclassified as rural for sure fee functions.
- 20% of the $12.5 billion relies on uncompensated care as a p.c of working bills amongst all hospitals (i.e., not simply these in rural areas). Uncompensated care tends to be higher in states that haven’t expanded Medicaid beneath the Reasonably priced Care Act, comparable to Texas and Georgia. Additional, CMS is utilizing knowledge from 2021; uncompensated care might have dropped over time amongst states which have recently expanded Medicaid (like Oklahoma and Missouri in 2021 and North Carolina and South Dakota in 2023).
- 24% of the $12.5 billion relies on the share of the inhabitants in rural areas and the share in frontier areas (12% every). These elements don’t account for the entire dimension of the inhabitants in every state or the scale of rural well being care programs (which can be the case for 3 different elements, like land space). Because of this, states with a comparatively massive share of the inhabitants residing in rural and frontier areas however comparatively small rural populations and few rural hospitals should obtain a better than common share of those {dollars} (e.g., as is the case for Alaska, North Dakota, and Wyoming) whereas the reverse could also be true for states with massive rural populations and lots of rural hospitals (e.g., as is the case for California, Florida, and Texas). Nonetheless, as famous above, 20% of the $12.5 billion relies instantly on rural inhabitants and 20% on rural services.
- 10% of the $12.5 billion will likely be based mostly on land space and can solely go to the 5 largest states. These 5 states may every obtain massive allocations from this pool (starting from an estimated $240 to $260 million if all have been authorized for funding), whereas states simply exterior of the highest 5 and all different states is not going to obtain funds based mostly on land mass.
- 6% of the $12.5 billion relies on the share of all hospitals (not simply these in rural areas) receiving Medicaid disproportionate share hospital (DSH) funds. Medicaid DSH standing relies partly on the extent to which hospitals look after Medicaid and different low-income sufferers but in addition on particular standards that modify throughout states.
Largest and Smallest Awards
Texas, California, New Mexico, Montana, and Alaska Are Anticipated to Obtain the Largest Quantities From the $37.5 billion, Reflecting Variations Based mostly on CMS Standards of State Want
Estimated awards for these 5 states vary from $940 to $1,030 million over 5 years from the $37.5 billion (Determine 1). As famous, $25 billion of the $37.5 billion will likely be distributed equally throughout states, which means that any variations throughout states relate to the $12.5 billion distributed based mostly on measures of state want ($12.5 billion). Many of the additional {dollars} that these 5 states are estimated to obtain relative to others are attributable to the states’ comparatively massive land space, considered one of a number of elements used to allocate funds based mostly on state want (Determine 3). Estimated awards based mostly on this issue vary from $240 million in New Mexico to $260 million in Alaska. Solely the 5 largest states would obtain funding from this pool based mostly on their land space.
Determine 4
Missouri, Mississippi, North Carolina, Georgia, and Oklahoma may obtain the subsequent largest awards from the $37.5 billion, with estimates starting from $820 to $840 million over 5 years. These states are estimated to obtain extra funds than common as a result of they’ve comparatively massive rural populations and numbers of rural services and had comparatively excessive ranges of hospital uncompensated care within the 12 months evaluated, amongst different elements. Regardless of these variations, their estimated awards are solely roughly 10 p.c greater than the typical award throughout all states ($750 million over 5 years) from the $37.5 billion.
Rhode Island, Massachusetts, Delaware, Connecticut, and New Jersey may have the bottom awards from the $37.5 billion, with estimates starting from $550 to $610 million over 5 years. These are all comparatively small states in or close to the Northeast that rank comparatively low on most elements, together with rural inhabitants and the variety of rural services.
Funds Per Rural Resident May Differ Broadly
Ten States May Obtain Much less Than $375 Per Rural Resident Over 5 Years Whereas 11 States May Obtain Extra Than $1,500, Earlier than Disbursements Based mostly on State Coverage, Initiatives, and Different Components
Estimated awards from the $37.5 billion are partially, however not intently, tied to rural inhabitants, leading to massive variations within the quantity every state may obtain per rural resident. Assuming all states obtain funds, the typical award per rural resident throughout all states can be $590, however this quantity per rural resident would fluctuate broadly throughout states. Texas may obtain the least quantity per rural resident ($240) whereas Rhode Island may obtain the most important quantity ($22,150, an outlier) (Determine 3). This partly displays the truth that estimated state awards fluctuate a lot lower than variations in rural populations, principally as a result of equal distribution of the primary $25 billion throughout all states with authorized functions but in addition reflecting the construction of the $12.5 billion distributed based mostly on measures of want (solely 20% of which is instantly based mostly on rural inhabitants).
Extra Components Affecting Awards
Many of the Remaining $12.5B Might be Distributed Based mostly on State Coverage and CMS’s Analysis of States’ Proposed Initiatives
Of the remaining $12.5 billion, $8 billion (64%) is anticipated to be distributed throughout states based mostly on the standard of their proposed initiatives, $3.75 billion (30%) based mostly on state insurance policies, and $0.75 billion (6%) based mostly on different elements. It isn’t but clear how, and the way a lot, this portion of the award will differ throughout states, or the extent to which these funds will align with completely different measures of rural well being wants.
In response to CMS, the primary bucket ($8 billion) will likely be distributed based mostly on a qualitative overview of a state’s proposed initiatives and, in later years, the state’s progress in implementing their plan. Proposed initiatives will likely be scored by a advantage overview panel chosen by CMS. Panel members haven’t been introduced to the general public.
The second bucket ($3.75 billion) will likely be distributed based mostly on whether or not a state has adopted, made progress in direction of adopting, or dedicated to adopting sure insurance policies. A few of these insurance policies goal to advertise competitors amongst well being care suppliers, comparable to by increasing scope of observe for nurse practitioners and different non-physicians. Amongst different elements, three measure states’ progress in implementing sure Make America Well being Once more (MAHA) insurance policies.
The remaining funds ($750 million) will likely be distributed based mostly on different elements, such because the share of twin eligibles in built-in care plans and the standard of Medicaid and Youngsters’s Well being Insurance coverage Program (CHIP) knowledge reporting to CMS.
Trying Forward
CMS will resolve which states to fund by the top of the 12 months, and the way to allocate the primary 12 months of funding throughout states. The company will allocate $10 billion per 12 months to states with authorized functions over a five-year interval (fiscal years 2026 by way of 2030), and it plans to distribute the primary spherical of $10 billion in January 2026. CMS will use the identical funding formulation for annually, however the distribution of funds throughout states will seemingly change over time. That is partly as a result of 1 / 4 of the funds—i.e., the $12.5 of $50 billion excluded from analyses on this transient—relies on elements which can be prone to change over time, together with states’ progress in implementing coverage modifications and their proposed initiatives. The distribution may additionally change over time relying on whether or not CMS chooses to withhold, scale back, or recuperate funds from a given state for noncompliance or different causes.
It isn’t clear what share of the $50 billion fund will go to rural hospitals and different rural well being care suppliers or the extent to which any direct and oblique advantages of the fund will offset their losses beneath the reconciliation legislation. Whereas some policymakers promoted the agricultural well being fund as a solution to assist rural hospitals, the funds may also be used for a lot broader purposes. CMS has indicated that the funds are supposed for use for investments in “system transformation” reasonably than “perpetual working bills.” CMS has stipulated that funds to hospitals and different suppliers for affected person care can’t exceed 15% of complete funds, although suppliers may benefit in different methods, comparable to by way of investments in present buildings and infrastructure (that are restricted to twenty% of complete funds). Evaluating the implications for rural hospitals will rely upon how CMS allocates funds to states and the way a lot of those funds states distribute to rural hospitals, different suppliers, and for different state initiatives.
This work was supported partly by Arnold Ventures. KFF maintains full editorial management over all of its coverage evaluation, polling, and journalism actions.
