States are competing for a share of the new $50 billion allocated for local health funding. There are worries that the absence of strong guidelines and tight deadlines might overwhelm smaller healthcare providers, especially those needing help the most, as larger and more politically powerful health systems might dominate the funding process.
The funding, introduced through the One Big Beautiful Bill Act, serves as a safety net for states projected to lose nearly $1 trillion in Medicaid funding over the next decade.
“I think there’s a consensus that the available funding won’t fully offset the losses from the HR1 cuts. Still, states are eager to pursue any federal assistance that’s offered,” noted Heather Howard, a professor at Princeton University and an expert on state applications.
While this funding could significantly help sustain some local hospitals and clinics, there’s skepticism regarding whether their needs will be prioritized.
Michael Chameides, a county supervisor in Columbia County, New York, expressed concerns about an “insider” system potentially denying resources to those in dire need, inadvertently obstructing care provision.
A last-minute addition to President Trump’s recently signed bill included a five-year, $50 billion program for local health transformation, which played a crucial role in gaining support from hesitant Republican factions in various states.
Intriguingly, there’s no obligation for states to allocate funds to local providers.
“The federal government has kept it somewhat vague concerning eligibility, relying on states to determine who should receive the funds,” explained Ryan Kelly, executive director of the Alabama Rural Health Association.
This past August, the American Hospital Federation reached out to Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services (CMS), advocating for the requirement that states prioritize rural hospitals when distributing funds.
While Kelly’s group provides guidance to governors in the South on ensuring local healthcare providers benefit from funding, he acknowledges the necessity of urban health systems in enhancing health outcomes for rural populations.
All 50 states have submitted applications this week, and federal officials have until December 31 to evaluate and distribute the funds.
The program plans to allocate $25 billion equally among states, with each state receiving the same amount, regardless of its population. The other $25 billion will be distributed at Oz’s discretion, considering factors like whether states have implemented certain health policies.
For instance, states that revive the Presidential Physical Fitness Test or propose limits on Supplemental Nutrition Assistance Program benefits for sugary drinks may earn extra points on their applications.
According to Oz, this initiative aims to transition from a system that has frequently fallen short for rural America to one founded on dignity and long-term sustainability. Each approved state will have freedom in designing its approach to funding, with CMS offering consistent support.
Upon application opening in September, CMS stated it would focus on applications likely to significantly impact rural communities, not just individual state performances.
Approved funds can go toward various uses, like preventive care and chronic disease management, as well as supporting local healthcare providers and hiring new staff committed to serving rural areas for at least five years.
Though strategies may vary by state, common themes include modernizing care delivery through telehealth, enhancing access to healthy food, and developing the healthcare workforce.
“There’s uncertainty not just about whether states will receive funding but also about the timing,” Howard remarked. “There’s a political dimension at both the national and state levels, creating competition among different interests.”
Sustainability is another critical element, as even though the fund lasts five years, the Medicaid cuts from the law are permanent, urging states to invest in scalable programs beyond this funding period.
While it’s early in Alabama, Kelly mentioned, “We’re getting calls from vendors worldwide wanting to participate.”
He added, “The Governor’s Office doesn’t enroll people for grants, so even if a vendor has a groundbreaking treatment, it may not be feasible to include them in this application.”
Most experts agree that local health funds won’t fully compensate for the significant cuts imposed by this legislation.
The One Big Beautiful Bill Act is set to reduce Medicaid by about $1 trillion, mainly due to flexible work requirements and altered state funding strategies.
Yet, there’s optimism about the influx of funds. “In a way, the ideal outcome might be that while this Rural Health Transformation Fund can’t remedy all the damage done this year, it could still provide some level of assistance,” Chameides commented.
Lisa Hunter, from the advocacy group United States of Care, pointed out some ambiguity in CMS definitions. Still, she appreciates the flexibility offered to states. “I believe the lack of a one-size-fits-all approach allows states to target resources more effectively.”
