As President Donald Trump’s deadline for a massive budget bill drew near early in the summer, Republican Senate leadership needed to corral the support of some members of the conference. The bill would help pay for tax cuts for the wealthy partly through cuts to Medicaid and needed nearly all Republican votes to pass. The impact on rural hospitals, analysts warned, would be severe. But Republican leadership was able to win over key votes by directing a small slice of money to a “rural hospital fund.”
Now, all 50 states are now vying for a piece of that $50 billion fund, billed as a savior for floundering rural hospitals — and a backstop against the harmful impacts of the now-passed, historic cuts to Medicaid. The fund, and its application process which closed last Wednesday, has been called “the rural health ‘Hunger Games.’” States are in a mad dash for a slice of the investment.
Despite that, due to Trump administration restrictions on how the fund can be used, advocates now say that hospitals will not be able to spend it in the areas they most need to address.
Under Centers for Medicare and Medicaid Services rules for distributing the funds, only 15% of any money awarded to states from this fund can be used to cover unpaid patient care, a major funding shortage for rural hospitals.
“If enough people keep coming in who can’t pay their bills, the hospital can’t just survive on nothing,” Adam Searing, an attorney and research professor at the Georgetown University McCourt School of Public Policy, told TPM. “That’s why we have more hospitals closing in non-Medicaid expansion states than elsewhere and this is just going to make that program worse.”
The grant funding will be distributed to states whose applications are approved by CMS over a five year period. Half of the $50 billion will be distributed equally to all approved applications. The other half will be distributed based on a complex weighted formula under which a range of policy-based factors account for about 15% of a state’s score. Some of those factors, advocates note, have a partisan valence.
Those policy points include whether a state restricts certain health insurance plans, sometimes called junk plans, which skirt Affordable Care Act rules, but also such MAHA-coded criteria as whether states restrict SNAP users from buying “non-nutritious foods” and whether states plan to institute Trump’s “Presidential Fitness Test” in schools.
“Ultimately the CMS administrator has non-reviewable authority to distribute that money,” Searing said. “And so that means they can do pretty much what they want and the states can’t complain about it.”
In the meantime, more than 300 rural hospitals are immediately at risk of closure, and more than 1,000 are at risk in general as of October 2025, according to an analysis by the Center for Healthcare Quality and Payment Reform’s rural hospitals initiative. More than 75% of the hospitals in either category are in states that went for Trump in the 2024 presidential election.
Solving the Wrong Problem
Ultimately, the rural health “fund” doesn’t deserve the name, rural emergency physician Rob Davidson told TPM last summer.
“I think we — probably all of us — need to stop saying that it’s a rural health fund,” he said.
Trump’s $3.4 trillion tax cuts and spending package, called the One Big Beautiful Bill Act, earned enough support from Republican lawmakers to pass the Senate largely only after the last-minute $50 billion Rural Health Transformation Program was added.
Yet the $50 billion fund is largely designed not for shoring up hospitals budgets left by the Medicaid cuts and other gaps in patients’ ability to pay, but for state spending on workforce recruitment and retention, modernization and technological advancement initiatives, and preventative care. The initiatives are mostly things that, barring historic health care cuts, Searing said would garner bipartisan support.
In addition to the CMS provision that only 15% of the cash can be used by rural hospitals to cover the cost of uncompensated care, only 10% of any award amount can be used to cover direct and indirect administrative costs, and no funds can be used to supplement clinical services already covered by other insurance sources including private plans, Medicaid or Medicare. This despite the fact that insurer payments to hospitals don’t always cover the cost of patient services, according to a report from the CHQPR’s rural hospitals arm.
“We have found that many small rural hospitals are losing money because of low payments from private health plans, not because of how many Medicaid patients they have,” Harold D. Miller, CEO of the Center for Healthcare Quality and Payment Reform, told TPM in an email.
Speaking to the Daily Yonder, a national rural news service, CEO of the National Rural Health Association Alan Morgan said the fund largely pushes preventative services, initiatives his organization supports.
“But you can see there’s a huge disconnect here,” Morgan said. “The $50 billion cannot by legislation (and is not by the administration) going to be used to help rural hospitals keep their doors open. This $50 billion is about sustaining health care for the future. It has nothing to do with maintaining access today.”
During negotiations, advocates decried the provision, saying the $50 billion boost was a drop in the bucket compared to the $1 trillion cuts, about $137 billion of which will be taken away from rural hospitals, according to an analysis by the Kaiser Family Foundation. They warned the legislative language wasn’t strong enough, and didn’t even ensure that the comparatively small amount of money allotted would go to the most vulnerable rural communities.
Now that CMS has released its rules for the program’s grant application, those warnings are proving prescient.
There’s also the fear that the partisan aspects of the application rules could be used to block funding Democratic states, several of which have at-risk rural hospitals.
“We have an administration which just says right out, ‘We’re gonna cut money to blue states and blue communities,’ and it is doing it,” Searing said. “If you happen to live in a community that we disagree with politically, too bad.”
