As part of H.R. 1, Congress created the Rural Health Transformation Program (RHTP) to assist health care facilities and providers, primarily in rural communities. The Governor of each state determines how the funds will be applied for and managed in their state. Each state must apply to the Centers for Medicare and Medicaid Services (CMS), and awards will be made to states by Dec. 31, 2025. While there is some information about what is required to apply for the funds, CMS is expected to release a notice of funding opportunity (NOFO) and additional guidance in early September.

On July 4, 2025, President Trump signed into law H.R. 1, the budget reconciliation law, which makes changes to Medicaid and creates the Rural Health Transformation Program.

The changes to Medicaid will have a significant impact on the program, affecting states differently based on their Medicaid programs. Medicaid is a vital source of health insurance coverage for Americans living in rural areas, including children, parents, seniors, individuals with disabilities and pregnant women. 

Federal changes to Medicaid are complex, and the bulk of the changes will take place after the 2026 election cycle. Federal Medicaid spending in rural areas is expected to decrease by $155 billion. Health care facilities that serve Medicaid patients will need to use this time to prepare. The National Health Law Program has developed a timeline of implementation for the proposed changes, which is available here.  

This program will be administered by the Centers for Medicare and Medicaid Services (CMS). CMS has developed a website for the program information, which can be found here.

The fund was appropriated at $50 billion to be spent from fiscal year (FY) 2026 to 2030. $25 billion will be allocated to states that apply and are approved equally. The other $25 billion will be allocated based on the number of eligible facilities in each state and at the discretion of the CMS Director. The CMS Director has discretion as to where the second tranche of funds will be allocated, but must provide the funds to at least 25% of the states that apply for the RHTF.

• Funding Period: $10 billion will be distributed annually from FY 2026 through FY 2030, totaling $50 billion over five years.
• Fund Expenditure Deadline: States are allowed to spend the funds they receive through the end of the fiscal year following the year in which the funds were allotted. For instance, funds received in FY 2026 must be used by the end of FY 2027.
• Overall Fund Expenditure Deadline: All funds must be spent before Oct. 1, 2032. 

CMS released a NOFO and additional guidance in early September. This gave states the needed information to craft an application to submit to CMS. Based on language in the legislation, applications by states must include:

“ (i) a detailed rural health transformation plan: (plan has to carry out three or more activities listed below:

• (I) to improve access to hospitals, other health care providers and health care items and services furnished to rural residents of the State;
• (II) to improve health care outcomes of rural residents of the State;
• (III) to prioritize the use of new and emerging technologies that emphasize prevention and chronic disease management;
• (IV) to initiate, foster, and strengthen local and regional strategic partnerships between rural hospitals and other health care providers in order to promote measurable quality improvement, increase financial stability, maximize economies of scale, and share best practices in care delivery;
• (V) to enhance economic opportunity for, and the supply of, health care clinicians through enhanced recruitment and training;
• (VI) to prioritize data and technology driven solutions that help rural hospitals and other rural health care providers furnish high-quality health care services as close to a patient’s home as is possible;
• (VII) that outlines strategies to manage long-term financial solvency and operating models of rural hospitals in the State; and
• (VIII) that identifies specific causes driving the accelerating rate of 16 stand-alone rural hospitals becoming at risk of closure, conversion, or service reduction;
• (ii) a certification that none of the amounts provided under this subsection shall be used by the State for an expenditure that is attributable to an intergovernmental transfer, certified public expenditure, or any other expenditure to finance the non-Federal share of expenditures required under any provision of law, including under the State plan established under this title, the State plan established under title XIX, or under a waiver of such plans; and
• (iii) such other information as the Administrator may require.”

The RHTP funds cannot be used to offset cuts to federal Medicaid payments. Amounts allotted to a State must be used for three or more of the following health-related activities:

• “(A) Promoting evidence-based, measurable interventions to improve prevention and chronic disease management.
• (B) Providing payments to health care providers for the provision of health care items or services, as specified by the Administrator.
• (C) Promoting consumer-facing, technology-driven solutions for the prevention and management of chronic diseases.
• (D) Providing training and technical assistance for the development and adoption of technology-enabled solutions that improve care delivery in rural hospitals, including remote monitoring, robotics, artificial intelligence, and other advanced technologies.
• (E) Recruiting and retaining clinical workforce talent to rural areas, with commitments to serve rural communities for a minimum of 5 years.
• (F) Providing technical assistance, software, and hardware for significant information technology advances designed to improve efficiency, enhance cybersecurity capability development, and improve patient health outcomes.
• (G) Assisting rural communities to right size their health care delivery systems by identifying needed preventative, ambulatory, pre-hospital, emergency, acute inpatient care, outpatient care, and post-acute care service lines.
• (H) Supporting access to opioid use disorder treatment services (as defined in section 1861(jjj)(1)), other substance use disorder treatment services, and mental health services.
• (I) Developing projects that support innovative models of care that include value-based
• care arrangements and alternative payment models, as appropriate.
• (J) Additional uses designed to promote sustainable access to high quality rural health care services, as determined by the Administrator.”