Rural Health Transformation: How States Are Putting Federal Funding to Work

A Five-Year Investment in Rural Health 

The Rural Health Transformation Program is being funded through cooperative agreements between CMS and participating states, creating an ongoing relationship between the federal government and states over the five-year life of the program. 

Funding is split evenly between baseline and workload funding, with awards also tied to factors identified in states' applications, including quality, rural needs and performance. 

That structure means states are not simply receiving a uniform allocation to spend however they choose. Their investments are connected to the plans and priorities outlined in their applications. 

The Size of the Award Doesn't Tell the Whole Story 

The first-year awards demonstrate just how differently the funding picture can look from state to state. 

According to the Summit discussion, Texas, Alaska, California and Montana each received more than $233 million in their first fiscal-year awards. New Jersey received approximately $147 million. 

But looking only at the total award can be misleading. 

When funding is considered on a per-rural-resident basis, the picture changes considerably. 

Texas received the largest overall award among the states highlighted in the discussion, but it also received the lowest amount per rural resident. Rhode Island, meanwhile, was a significant outlier, with approximately $6,305 awarded per rural resident. 

The comparison underscores an important point: the impact of rural health funding can't be understood solely by looking at the size of a state's award. 

Population, geography and the number of rural residents in a state all shape what those dollars mean on the ground. 

States Are Taking Different Approaches 

One of the most notable aspects of the program is the range of approaches emerging across states. 

Within the scope of their approved applications and plans, states have some flexibility to adjust funding among initiatives. However, significant changes to initiative budgets or sub-awardees still require CMS review and approval. 

The areas of focus discussed during the Summit include: 

• Telehealth technology 
• Data infrastructure 
• Rural workforce development 
• Chronic disease prevention and management 
• Behavioral health 
• Hub-and-spoke regional networks 

States are also pursuing approaches tailored to their individual needs. 

Vermont and Rhode Island, for example, are working on mobile integrated health systems. Alabama and Illinois are focusing on EMS and treatment-related initiatives, while North Carolina and Missouri are pursuing integrated care efforts. 

Arizona, North Dakota and Maine are developing "grow your own" workforce pipeline initiatives. 

Alabama, Arkansas and Tennessee are focusing on targeted disease areas, while frontier states such as Alaska, Montana and Wyoming are pursuing approaches designed around the unique challenges of highly rural populations. 

The variety of strategies is one of the program's defining features. 

Rather than taking a one-size-fits-all approach to rural health, states are using their approved plans to address different challenges in their communities. 

Implementation Is Already Moving Forward 

Although the program spans five years, states are already working through important implementation milestones. 

The Summit discussion noted that states are advancing on their own timelines for procurement and for distributing funds to eligible entities. They also have reporting and spending deadlines ahead. 

States are required to submit financial and performance reports and commit their first-year funding by October, with first-year funds required to be fully expended by September 30, 2027. 

That creates a relatively short window for states to move from planning to execution. 

As one Summit speaker put it, states will essentially need to "use it or lose it." 

That urgency makes implementation strategy particularly important. 

From Funding to Transformation 

The Rural Health Transformation Program creates an unusual opportunity: significant federal investment paired with state-level flexibility to address very different rural healthcare challenges. 

But funding alone won't transform rural healthcare. 

The effectiveness of the program will depend on how states translate their approved plans into sustainable initiatives, how they measure performance and how successfully they build infrastructure and partnerships that can support rural communities over time. 

The early examples already show that there is no single model for rural health transformation. 

For some states, the priority may be workforce development. For others, it may be telehealth, behavioral health, EMS, integrated care, or chronic disease management. Frontier states may require entirely different solutions than states with smaller but highly concentrated rural populations. 

The opportunity—and the challenge—is to make the investment work at the state and community level. 

As implementation continues, watching how states deploy these funds, measure results and adapt their approaches will be critical for anyone involved in Medicaid, rural healthcare or state policy. 

This article draws on discussion from Module 1 of the 2026 Advantage+ Medicaid Policy Summit. Interested in viewing our Summit recordings? Register here for on-demand access and CE.