Illustration: Sarah Grillo / Axios
States next year will begin tapping the $50 billion rural health fund in the GOP's tax and spending law, but questions have already arisen about how the funds will be allocated — and how much they will benefit rural providers.
Why it matters: The fund aims at helping rural hospitals and providers adjust to sweeping changes in how Medicaid is financed, including limits on provider taxes and state-directed payments. But important details have to be fleshed out.
What they're saying: Sen. Josh Hawley, who pushed for the fund, in part to get his vote for the megabill, said CMS will need to make sure the money "flows to hospitals that need it" and are not simply "going to states in general to do whatever they want with it."
- "So far, so good. I liked how it was written up," Hawley said. "But we'll want to monitor closely how the agency puts it into effect."
- Sen. Thom Tillis, who was one of the three GOP "no" votes on the reconciliation bill, told Axios that CMS needs to "make sure it's a fair formula for rural hospitals."
- "I think that that pot of money looks big, but it's not really when you consider some of the economic impacts, mainly from the state-directed payments," Tillis said. "We'll be interested to see how they interpret the law."
How it works: The new law allocates $10 billion annually for the next five years, starting in 2026.
- The law says $25 billion is to be distributed equally among all states that submit a "detailed rural health transformation plan," which could include details on how they would use the funds.
Between the lines: States can apply for the aid only once, by the end of this year. If they estimate wrong, or run into unforeseen problems, they don't get another shot at it.
- CMS Administrator Mehmet Oz must approve each state's application by Dec. 31.
- CMS has discretion to distribute the other $25 billion, based on factors such as how much of the state's population is rural and the number of rural health facilities.
- The CMS administrator can also consider other factors deemed appropriate.
Friction point: Some of that flexibility raises questions about how CMS will proceed, said Zach Levinson, director of the KFF Project on Hospital Costs.
- "States will also have discretion on how they distribute funds among hospitals and other providers," Levinson said. "And they maybe will steer some dollars to non-rural areas, pending CMS approval."
- The concern is that some states could be favored over others, or that funding will not go to providers with the greatest needs.
- "There are risks of this becoming a slush fund if it's not carefully attended to and if it's not focused" on actual rural hospitals, said Jackson Hammond, a senior policy analyst at Paragon Health Institute.
All the money has to be distributed by 2030 and spent by 2032.
- That also means much of the assistance will have already been spent before the provider tax and state-directed payment provisions take effect in 2028.
- The $50 billion sum also is about one-third of the $155 billion in estimated cuts to federal Medicaid spending in rural areas, per a KFF analysis.
- Lisa Hrobsky, senior vice president of federal relations at the American Hospital Association, said the group is urging "an expedient and streamlined application and distribution process" that prioritizes payments to hospitals so they can keep operating.
