Updated analysis of the rural health transformation fund on rural hospitals
Medicaid serves as a vital source of health insurance coverage for Americans living in rural areas, including children, parents, seniors, individuals with disabilities, and pregnant women. The One Big Beautiful Bill Act (OBBBA), enacted into law on July 4, 2025 made sweeping changes to Medicaid and the ACA Marketplaces that will result in coverage losses for rural Americans. It is estimated that the combined impact of the Medicaid cuts alone in the OBBBA could decrease spending in rural areas could decrease by $155 billion over 10 years.
The National Rural Health Association recently partnered with experts from Manatt Health to shed light on the potential impacts of those cuts on rural health care for over the next decade in the Estimated Impact on Medicaid Enrollment and Hospital Expenditures in Rural Communities and One Big Beautiful Bill Act (OBBBA): Impact of the Rural Health Transformation Fund. Today’s release provides releasing updated data reflecting the Rural Health Transformation Fund program.
Given the broad discretion Congress permitted with respect to both the distribution and uses of the Rural Health Transformation Fund, little is known at this point as to the extent to which the Fund will address H.R.1’s reductions in Medicaid funding for rural health providers. The three scenarios modeled in the analysis offer illustrative examples of how different approaches to distribution would affect funding for rural hospitals. Anticipated percentage of cuts addressed by the Fund ranges from 87.9 percent to 30.8 percent depending on distribution levels.
Potential rural health transformation fund distribution scenarios and rural hospital impacts | |||
Distribution Approach % to rural hospitals | % of Medicaid Cuts addressed by funds | # of states having all rural hospital Medicaid cuts addressed | # of states having X% of rural hospital Medicaid cuts addressed |
Scenario 1: 100% of Fund to Rural Hospitals | 87.9% | 28 | 4; less than 50% |
Scenario 2: 80% of Fund to Rural Hospitals | 70.3% | 15 | 4; less than 30% |
Scenario 3: Hospital’s Share of Total State Medicaid Expenditures | 30.8% | 10 | 6; less than 15% |
States, in consultation with rural providers and stakeholders, will be developing their plans and likely weighing in with CMS and their congressional delegation as CMS develops its guidance. A state-by-state analysis of the three scenarios can be found here.
“Rural communities have always been at the forefront of innovation out of necessity. NRHA is deeply concerned that there is not enough discussion about how hard rural hospitals and providers will be hit by the upcoming Medicaid cuts. Regardless of the intent behind health care ‘transformation,’ the reality is clear: many rural communities may lose essential services before any improvements can be implemented. These cuts threaten access to OB/GYN care, emergency services, and primary care—services that rural residents rely on every day. NRHA recommends that rural hospitals be prioritized in the funding distribution for the Rural Health Transformation program. It is essential that funding goes to rural health care providers, not diverted to larger, urban providers or for activities that will not directly benefit rural communities,” said Alan Morgan, CEO of the National Rural Health Association.
About the National Rural Health Association
NRHA is a non-profit membership organization with more than 21,000 members nationwide that provides leadership on rural health issues. Our membership includes nearly every component of rural America’s health care, including rural community hospitals, critical access hospitals, doctors, nurses, and patients. We work to improve rural America’s health needs through government advocacy, communications, education, and research. Learn more about the association at RuralHealth.US.
About Manatt Health
Manatt Health is a leading professional services firm specializing in health policy, health care transformation, and Medicaid redesign. Their modeling draws upon publicly available state data including Medicaid financial management report data from the Centers for Medicare and Medicaid Services, enrollment and expenditure data from the Medicaid Budget and Expenditure System, and data from the Medicaid and CHIP Payment and Access Commission. The Manatt Health Model is tailored specifically to rural health and has been reviewed in consultation with states and other key stakeholders. For more information, visit Manatt.com/Health.