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The Trump administration is offering states $10 billion next year for rural health care — while reserving the right to take the money back if governors refuse to adopt policy priorities favored by the White House.
Federal officials announced Monday that all 50 states applied for funding from the new Rural Health Transformation Program, a $50 billion, five-year initiative created in the same Republican-backed budget law that slashed Medicaid spending by more than $1 trillion over the next decade. Health policy experts say the program functions less as a safety net for rural hospitals than as a pressure tool designed to steer state policy while offsetting political fallout from the Medicaid cuts.
Under the program, states will receive an average of about $200 million in 2026. Half the money is distributed evenly, while the rest is allocated based on a federal formula that weighs rural population, hospital finances and health outcomes.
But $12 billion of the five-year funding is explicitly tied to whether states adopt policies aligned with the administration’s “Make America Healthy Again” agenda — a condition that critics say gives the White House leverage to coerce states into unrelated policy changes by threatening to withhold health care dollars.
Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz said funding will be recalculated annually and can be “clawed back” if states fail to enact policies they promise in their applications. Those policies include restricting the use of SNAP benefits to bar purchases of foods such as soda and candy, requiring participation in the Presidential Fitness Test and mandating nutrition education for health care providers.
Oz rejected the idea that the funding conditions amount to punishment, instead describing them as leverage governors can use to force policy changes through resistant legislatures.
“I’ve already heard governors express that sentiment — that this is not a threat,” Oz said on a call with reporters. “This is actually an empowering element.”
Health advocates and state officials see it differently, warning that the program effectively ties access to rural health funding to ideological compliance with the administration’s agenda.
Carrie Cochran-McClain, chief policy officer for the National Rural Health Association, said Democratic-led states have faced a stark choice: adopt policies they oppose or risk losing money meant to stabilize already fragile rural health systems.
“It’s not where their state leadership is,” she said, adding that some states declined to include SNAP restrictions in their proposals despite the financial consequences.
Republicans who supported the budget law have repeatedly pointed to the rural health fund as evidence that the administration is mitigating the damage from Medicaid cuts. Rep. Don Bacon of Nebraska cited the program when questioned about how the cuts could affect rural hospitals in his state.
“That’s why we added a $50 billion rural hospital fund,” Bacon said. “This money is meant to keep hospitals afloat.”
But health economists say the numbers tell a different story. Rural hospitals are projected to lose roughly $137 billion over the next decade because of the Medicaid reductions — nearly three times the size of the rural health fund. An analysis by the Cecil G. Sheps Center for Health Services Research at the University of North Carolina found that as many as 300 rural hospitals were already at risk of closure before the budget law passed.
“When you put that up against $50 billion, the math doesn’t work,” Cochran-McClain said.
Critics also warn that the program provides no guarantee that money will go to hospitals facing immediate closure. States have broad discretion in how funds are used, and some proposals emphasize long-term wellness initiatives — such as healthier school lunches — rather than direct financial relief for struggling hospitals.
For rural providers already operating on razor-thin margins, Cochran-McClain said, the administration’s emphasis on “innovation” rings hollow.
“We hear from hospitals every day that they’re worried about meeting payroll,” she said. “When you’re in survival mode, innovation is not the priority — staying open is.”
