CMS Outlines State Funding Levels for Rural Health Transformation Program

The Centers for Medicare and Medicaid Services (CMS) announced how funding will be distributed in fiscal year 2026 under the $50 billion Rural Health Transformation Program, with Texas and Alaska receiving the largest allocations and New Jersey and Connecticut receiving the smallest.

The program was authorized under the One Big Beautiful Bill Act and will operate over five fiscal years, providing $10 billion annually from fiscal year 2026 through fiscal year 2030. All 50 states submitted applications in November outlining how they would use their funding to improve rural healthcare.

Under the statute governing the program, half of the $10 billion distributed each year is divided evenly among states. The remaining half is allocated by CMS based on how state applications addressed specific goals, including strengthening rural health prevention, establishing sustainable access to care, developing the rural healthcare workforce, and introducing innovative care delivery models and technology. This structure results in an average allocation of about $200 million per state per fiscal year, though final amounts vary.

CMS Administrator Mehmet Oz commented on the announcement in the agency’s release, stating, “Today marks an extraordinary milestone for rural health in America.” He said the investment reflects congressional action and is intended to support state-led plans to expand rural access, strengthen healthcare workforces, modernize care delivery, and support rural communities.

CMS also released a document containing one-page abstracts summarizing each state’s application. Only some states have chosen to make their full submissions public. According to its application abstract, Texas will receive $281,319,361 in fiscal year 2026 to implement its “Rural Texas Strong” strategy. The proposal includes six initiatives, such as “Lone Star Advanced AI and Telehealth,” “Infrastructure and Capital Investments for Rural Texas,” and the wellness-focused “Make Rural Texans Healthy Again.”

Alaska is scheduled to receive $272,174,856 in fiscal year 2026. Its application describes a set of “flexible, phased and voluntary” initiatives that include incentives to shift away from traditional volume-based reimbursement models, maternal and child health programs, and rural healthcare workforce development.

Other states receiving higher funding amounts in fiscal year 2026 include California at $233,639,308, Montana at $233,509,359, Oklahoma at $223,476,949, and Kansas at $221,898,008.

States receiving smaller allocations include New Jersey at $147,250,806 and Connecticut at $154,249,106. Rhode Island will receive $156,169,931, Delaware $157,394,964, Massachusetts $162,005,238, Arizona $166,988,956, and Maryland $168,180,838.

Congress set a compressed timeline for the program’s rollout. After the bill was signed into law in July, states received application criteria on Sept. 15 and were required to submit proposals by mid-November. CMS was required to announce award decisions by Dec. 31. Funding is scheduled to begin on Oct. 1, 2026, and continue for five years.

The program includes spending restrictions outlined in CMS’s Notice of Funding Opportunity. These include limitations on most new care facility construction, a 10% cap on administrative spending, and restrictions on replacing clinical service payments reimbursable by insurance or other coverage. CMS also stated that funds may be recouped if states fail to meet the required criteria or do not carry out pledged actions.

CMS Provides State Funding Details

CMS released first-year funding allocations under the Rural Health Transformation Program, ranging from $147M to $280M per state to strengthen rural healthcare access.

Funding from CMS aims to improve workforce development, facility upgrades, and innovative care models tailored to rural communities’ unique needs.

With this program, CMS seeks to reduce disparities in care, ensure essential services, and promote long-term transformation in rural healthcare systems.

The CMS Rural Health Transformation Program was authorized by the Working Families Tax Cuts Act and earmarks $50 billion through 2030 to help states modernize rural care, expand access, and address workforce shortages. Funding is split into two halves: one distributed equally to all approved states and another allocated based on metrics such as rural population size and proposed initiatives.