In the final days of 2025, governors around the country trumpeted the hundreds of millions of federal dollars they won from a new, $50 billion rural health fund.
But plans to spend those nine-digit awards aren’t all warmly received.
At least one group of Republican state lawmakers appears to have scuttled an initiative preapproved by federal officials. And at least one hospital association persuaded its state health leaders to alter who greenlights spending. Other critics are taking a more cautious approach.
That’s because the Centers for Medicare & Medicaid Services, which manages the five-year Rural Health Transformation Program, says states could lose money if they make major changes to the plans approved in their applications. Changes could also delay states’ ability to get projects rolling in time to show the agency that they’re meeting progress deadlines.
“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, who noted that the agency will work with states case by case.
The recent pushback reflects “tension” over state plans — which were approved by the federal government — from state lawmakers and health leaders who want more input amid tight deadlines, said Carrie Cochran-McClain, chief policy officer of the National Rural Health Association, the largest organization representing rural hospitals and clinics.
Cochran-McClain said many states must pass a bill to allow federal dollars to be spent and added that because the program rolled out so quickly “there’s important work that still needs to be done in some states between the legislatures and the governors.”
State lawmakers want to have a say, she said, in “how the funding is being allocated — how the implementation will go.”
Congressional Republicans created the program as a last-minute sweetener to include in their One Big Beautiful Bill Act, signed into law last summer. The funding was intended to offset concerns about the outsize fallout anticipated in rural communities from the law, which is expected to slash Medicaid spending by nearly $1 trillion over a decade.
CMS officials announced first-year funding — ranging from $147 million for New Jersey to $281 million for Texas — on Dec. 29, after scoring applications. Federal officials will begin evaluating progress in late summer and announce 2027 allocations at the end of October.
A chorus of critics say the program won’t make up for harm caused by Medicaid cuts.
The program is “a complete sham,” Sen. Ron Wyden (D-Ore.) said at a rural policy conference in February.
Medicaid, a joint federal-state program for low-income and disabled Americans, serves nearly 1 in 4 rural residents, and many rural hospitals depend on it to stay afloat.
But the rural health program tilts toward seeding innovative projects and technologies, not shoring up rural hospital finances. States can use only up to 15% of their funding to pay providers for patient care.
That hasn’t stopped some federal officials and lawmakers from framing the program as a rural hospital rescue.
For example, the White House website says, “President Trump secured $50 billion in funding for rural hospitals.”
Now that applications have been approved, some state Republican lawmakers — who are more likely to represent rural voters than Democrats are — and hospital associations are upset that the political rhetoric doesn’t match what they see.
They’re also lobbing criticisms at specific aspects of their states’ plans, including the proposed projects, what’s not included, and the spending approval process.
In Wyoming, lawmakers didn’t just criticize an initiative from their state’s application. They moved to kill it.
State Rep. John Bear, a Republican, said he and other lawmakers declined to fund “BearCare,” a proposed state-sponsored health insurance plan that patients could use only after medical emergencies. But they did approve other aspects of the rural health program.
The Wyoming Department of Health won’t “proceed with BearCare without express legislative authority to do so,” said spokesperson Lindsay Mills.
While Wyoming lawmakers removed an initiative from their state’s rural health plan, a group in Ohio wants to add something.
Ohio Rep. Kellie Deeter and other Republican lawmakers asked their governor to use the maximum allowed funding for provider payments — 15% — to support 13 independent, rural hospitals.
“We understand that the rural transformation fund is not designed to be given directly to prop up hospitals,” Deeter said. “We just want to capitalize on the mechanism of the fund that can be utilized for that purpose.”
Those hospitals “operate with very, very narrow margins, and it’s just difficult and, frankly, unsustainable,” she added.
Ken Gordon, a press secretary responding for the governor’s office and the state health department, said, “It’s still very early in this process, and many details are being worked out.”
State lawmakers around the country are also trying to ensure the federal program’s dollars benefit rural areas.
In North Dakota, Rep. Bill Tveit, a Republican who lives in a town with about 2,000 residents, introduced a bill that would have required the state to reserve its funding for programs located more than 35 miles from urban areas and small cities.
During a hearing, lawmakers appeared sympathetic to Tveit’s concerns but quickly shot down his idea.
State Sen. Brad Bekkedahl said the North Dakota health department already committed to prioritizing funding for the most pressing rural health needs. He also said he’s concerned any significant changes could cause the state to lose funding because CMS already reviewed and approved the plan.
Meanwhile, Republican lawmakers in Michigan and North Carolina have criticized their states’ definitions of “partially rural” or “rural,” saying that counties that include urban population centers could take money from lower-density counties, according to Michigan Advance and North Carolina Health News.
Lawmakers aren’t the only ones speaking out.
The Colorado Hospital Association wrote a letter to state lawmakers denouncing how the state created its plan and two of its proposed initiatives.
“Not only were Colorado’s rural hospitals’ recommendations disregarded,” president and CEO Jeff Tieman wrote, but the plan includes ideas “they actively oppose and believe will harm the communities they serve.”
The department responded to one of the association’s concerns by adding rural health leaders to the funding approval committee.
Meanwhile, in Michigan and Nebraska, some health groups are upset that their states’ plans lack specific funding streams for rural hospitals.
Lauren LaPine-Ray, who oversees rural health policy at the Michigan Health & Hospital Association, predicted the state’s rural hospitals will compete with other organizations, such as academic centers and health clinics, for funding. She said about 65% of the group’s rural members have never applied for a state grant before.
“The rural hospitals, the ones that really need the funding the most, will not be well equipped to apply for and pull down these dollars,” LaPine-Ray said.
Jed Hansen, executive director of the Nebraska Rural Health Association, said the federal funding won’t go to “rural hospitals, rural clinics, and rural providers in a meaningful way.”
“Rural Health Transformation will not save a single hospital in our state,” he said. “I don’t think it will save a hospital nationally.”
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—an independent source of health policy research, polling, and journalism. Learn more about KFF.
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