KFF Examines $50 Billion Rural Health Fund Included in New Reconciliation Law
The reconciliation law signed by President Trump this month creates a new $50 billion rural health transformation fund designed to alleviate some of the expected impacts of the law’s more than $1 trillion in cuts to Medicaid and other health programs.
In a new brief, KFF examines the fund and how it might work, including how funds could be distributed by the Centers for Medicare & Medicaid Services (CMS) and then by the states. The fund represents about a third of the $155 billion in reduced federal Medicaid spending in rural areas that KFF previously estimated will result from the new law over a 10-year period starting in fiscal year 2026 (based on preliminary CBO estimates). Funds will be distributed between fiscal years 2026 and 2030, while nearly two-thirds (63%) of the Medicaid spending reductions occur later in the 10-year budget window.
The law gives CMS broad leeway to decide the criteria for distributing funds, explicitly stating that those decisions are not subject to administrative or judicial review. States also have discretion on how they may distribute the funds among hospitals, other providers, and various state initiatives, including the possibility of allocating funds to non-rural providers, subject to CMS approval.
