The federal Rural Health Transformation Program (RHTP) is funded and moving fast. It was authorized under H.R 1*, or “The One Bill Beautiful Bill.” The program commits $50 billion over five years to strengthen rural health care in all 50 states. In December 2025, the Centers for Medicare & Medicaid Services (CMS) awarded first-year funds to every state. Each state received an average of $200 million.
This is a major federal investment for rural health systems, community health centers, behavioral health providers, state and local governments, and funders. However, the funding is more complex and conditional than it appears. Consider the following points before planning.
Understanding the Broader Funding Context
To understand the RHTP, you must also understand its context. RHTP only partly offsets H.R. 1’s $911 billion in Medicaid cuts over ten years. Analysts estimate 10 to 15 million people will lose coverage. Rural providers rely heavily on Medicaid payments, so any reduction hits rural healthcare and communities hardest.
Despite this infusion, it is important to recognize that the RHTP does not fully address the underlying policy challenges.
Five years of funding cannot offset a decade of cuts. States and health systems treating RHTP as a Medicaid revenue replacement will be disappointed. Instead, organizations should use these funds for strategic investments in efficient, resilient, and sustainable rural health infrastructure. This proactive approach will better prepare you when funding ends in 2030.
Funding Is Not Guaranteed for Five Years
A common misconception is that RHTP funds are guaranteed for five years. In reality, the program’s structure is more restrictive and affects all organizations partnering with or seeking funds through a state RHTP program.
States submitted a single, one-time application covering the full program period. The Noticeof Funding Opportunity (NOFO) requires states to submit annual non-competing continuation applications and progress reports to CMS. More significantly, the merit-based portion of funding, which represents 50 percent of total annual program dollars, is subject to partial rescoring by CMS each year. This workload funding is determined by two components. The first, a rural facility and population score, is calculated once at the time of the initial application and does not change in subsequent years. The second, a technical score based on each state’s programmatic initiatives, data metrics, and state policy actions, is recalculated every budget period using information from annual progress reports. As a result, a state’s annual allocation from the variable half of workload funding can rise or fall depending on its implementation progress and policy follow-through, but the rural/population component of that score remains fixed throughout the program. Additionally, CMS has made clear that continued funding is contingent on states adopting and implementing the policy commitments in their approved plans. States that fail to expend funds on schedule risk having unspent dollars clawed back and redistributed to other states in subsequent program years.
RHTP operates as a performance-based cooperative agreement, not a block grant. Accountability is central. Agencies and partners must act quickly, document outcomes, and meet commitments. Subgrantee performance directly affects the state’s standing and funding.
Another risk is the CMS Administrator’s broad discretion over annual rescoring. This exposes states to political influences beyond the NOFO. The Trump administration has used federal funding to pressure Democratic-led states and has tried to freeze or cancel grants. Courts blocked these actions, but the efforts continue. All case study states—Washington, North Carolina, and Connecticut—are Democratic-led. This fact matters for long-term RHTP planning.
Three States, Three Approaches
Washington, North Carolina, and Connecticut each submitted approved applications. Their plans demonstrate both shared themes and distinct strategic choices.
Washington received $181 million in year one for six initiatives: hospital modernization focused on AI, cybersecurity, and revenue cycle management; community-based chronic disease prevention; and a 10 percent set-aside for Tribal Governments. This tribal commitment, not required by CMS, was a deliberate policy based on treaty law and the role of Indian health care providers in rural areas.
North Carolina received over $213 million. Its six-part plan, NC ROOTS (Regional Organization and Outreach for Transformation and Sustainability), creates locally run networks of medical, behavioral, and social services. It advances financial stability by moving rural practices to value-based payment. These strategies address the state’s large rural population.
Connecticut, with a smaller rural population, received about $100 million. The plan expands access through Federally Qualified Health Centers. It prepares providers for value-based and alternative payment models, such as CMS’ AHEAD Model. The plan also addresses primary care shortages in areas with transportation barriers. Connecticut plans to reform Certificate of Need laws to reduce rural market barriers beyond the scope of RHTP funding.
What These Plans Get Right and What to Watch
Several themes appear across all three states, offering important lessons.
- Stakeholder engagement is essential. Washington included nearly 300 comments and held Tribal consultations. North Carolina reached over 420 stakeholders. Connecticut opened a public comment period. The quality and breadth of this engagement shaped each state’s plan.
- Equity requires explicit commitment. All three states addressed health disparities. Washington’s tribal funding set-aside and North Carolina’s county-level targeting of underserved populations were intentional policy decisions.
- Performance accountability is reciprocal. The annual rescoring process lets high-performing states increase funding. For subgrantees and partners, this is a strong incentive to embed rigorous data collection and outcome reporting in program design from the start.
- The timeline is aggressive. States had under six weeks to apply. Year one funds must be spent by September 30, 2027. Many states have not opened grant applications. Federal officials will assess state progress in late summer, leaving a narrow window between launch and evaluation. Planning, procurement, contracting, and community coordination must proceed quickly. Do not sacrifice governance.
- A persistent structural gap threatens the program’s goals. Many small, rural organizations, including hospitals, lack the grant-writing and administrative capacity to compete for funding. In some states, many have never applied for a state grant. Without support or simplified applications, these groups risk systematic exclusion, shifting resources toward larger, better-resourced systems, and undermining equity-focused rural health investment.
The Larger Policy Question
The RHTP will not resolve the tension between its promise and the policy environment that gave rise to it. Rural hospitals, community health centers, and behavioral health providers will face ongoing pressure from Medicaid losses. This is true even with transformation funding. State officials, nonprofit leaders, health system executives, and funders must recognize both realities. The RHTP presents a significant opportunity, but it is not sufficient on its own.
The key takeaway: Success depends on using this opportunity to advance equity, connection, and sustainability in rural health. Measure progress by these standards, regardless of federal actions.
*Visit our Knowledge Hub for our analysis of H.R. 1 in a policy brief and related Our Ideas articles.