The collision between sweeping Medicaid cuts and a far smaller, tightly restricted rural health investment program was the focus of a Jan. 6 virtual panel discussion convened by the University of Pennsylvania’s Leonard Davis Institute of Health Economics and the Tradeoffs podcast. The discussion brought together leading academic researchers and two health journalists to examine what the new federal approach means for access, outcomes, and financial stability in rural America.
At the heart of the debate is how states are expected to manage new federal policies that slash Medicaid spending by an estimated $137 billion over 10 years while simultaneously offering a $50 billion rural initiative spread over five years. The initiative asks struggling rural communities to reinvent health care delivery and financing without shoring up hospitals that serve millions of low-income patients.
Both policies were enacted by Congress as part of the “Big Beautiful Bill,” signed into law by President Trump in July. The Medicaid reductions are widely understood. Far less familiar is the second program — the Rural Health Transformation Program, also known as the Rural Health Fund — which requires states to compete for five-year Centers for Medicare and Medicaid Services grants to pursue “transformative” strategies aimed at workforce development, technology adoption, and new provider partnerships in rural areas.
Striking Policy Symmetry
The result is a striking exercise in policy symmetry: The legislation weakens the primary payer that underwrites rural health care while demanding long-term transformation in the very systems those Medicaid cuts destabilize. The Rural Health Transformation Program explicitly bars states from using its funds to stabilize rural hospitals, even though rural communities account for roughly 17% of all Medicaid beneficiaries. That leaves states caught between immediate fiscal harm and a future-oriented mandate that offers innovation without relief.
The stakes are substantial. According to American Hospital Association data, the United States has roughly 1,796 rural community hospitals, 92 of which have closed or eliminated inpatient services over the past decade. A 2025 analysis by the consulting firm Chartis found that 46% of rural hospitals operate with negative margins, with an estimated 432 considered vulnerable to closure.
“The RHTP poses a huge challenge for a state,” said panelist Kevin Bennett, PhD, Professor and Director of the Center for Rural & Primary Healthcare at the University of South Carolina School of Medicine. “My colleagues at the National Rural Health Association said this program would have been great as a standalone transformational investment program for changing rural health care. But with the Medicaid cuts, facilities will be struggling. It’s really hard to think about transformation if you’re trying to keep your doors open, your employees employed, and your patients served.”
Politics vs. Science
“We also need to explicitly acknowledge that all of what we’re talking about is part of a political process,” Bennett continued. “This is politically based legislation and not necessarily health care legislation. It’s not planned out by health policy wonks to create a better health care system. It was a way to bring other Republicans on board to get the legislation passed.”
Bennett was one of five participants in the discussion. The others were Rachel M. Werner, MD, PhD, Executive Director of the Leonard Davis Institute of Health Economics, a physician–health policy researcher whose work focuses on health care payment and financing policies and their effects on care delivery; Paula Chatterjee, MD, MPH, Director of Health Equity Research at the Institute and Assistant Professor of Medicine at the Perelman School of Medicine; Sarah Jane Tribble, Chief Rural Correspondent at KFF Health news; and moderator Dan Gorenstein, Founder and Executive Director of Tradeoffs.
“Even before the Medicaid changes that are coming, rural health care has been struggling,” Werner said. “The number of rural Americans expected to lose Medicaid coverage over the next decade is 1.8 million. The Big Beautiful Bill is changing Medicaid by imposing work requirements and requiring more frequent eligibility determinations. Both make it harder to get on and stay on Medicaid.
“For individuals, becoming uninsured leads to foregone care, missed medications, medical debt, and even higher mortality rates,” she said. “For health care systems, higher uninsured rates are a big financial hit, reducing operating margins for hospitals, primary care providers, and specialists. These Medicaid changes are likely to exacerbate a rural health crisis that has been years in the making.”
Senate Requested Analysis
In response to a request from U.S. Senate Finance Committee Ranking Member Ron Wyden, D-Ore., Werner and colleague and panelist Chatterjee conducted an analysis of the Rural Health Transformation Program that was published in December. It found that “estimated RHTP funding allocations do not appear to be clearly aligned with rural health needs: States with higher rural mortality rates are estimated to receive less formula-based RHTP funding per rural resident.”
Chatterjee noted that “the original rhetoric around this program said that it was going to offset all of the financial challenges that would be coming as a result of the changes to Medicaid and other financial reforms.”
Tribble concurred, saying the original rhetoric during the legislative debate was that the RHTP would address states’ fears and concerns. “Plenty of Republicans said that, but that is not the reality of what was written into the bill — and the administration is following what was written into the bill,” she said.
There was consensus among the panelists that one of the largest and most persistent challenges for rural health care facilities is recruiting and retaining physicians and other specialized staff. Gorenstein asked whether any of the state workforce transformation policies approved for RHTP use to date are evidence-based.
Chatterjee pointed to an ongoing 50-year federal effort to incentivize medical professionals to practice in rural areas that has not yet produced evidence showing how to “transform” that problem into a solution.
Since 1965, the federal government has spent more than $1 billion on the Health Professional Shortage Areas (HPSA) program, which offered incentives to lure physicians into rural practice. Federal and state incentives have included signing bonuses, debt relief, enhanced reimbursement, visa flexibility, and other state-level financial add-ons.
No Significant Changes
A 2023 study published in Health Affairs reported that “this national-level evaluation of the HPSA program found no evidence of statistically significant changes in county-level mortality rates or physician density after HPSA designation. Seventy-three percent of counties designated as HPSAs continued to qualify as shortage areas 10 years after their initial designation. Although reducing geographic disparities in access is critical to reducing disparities in outcomes, the mechanisms available to do so are unclear.”
Tribble, who has been collecting data on approved RHTP state proposals, said some are focused on establishing new training and certification programs for doulas and community health workers because those programs have shown benefits.
Panelists also raised several other concerns:
• States were given only 52 days to assemble applications, raising doubts about whether proposals could be deeply evidence-driven rather than merely “fast and feasible.”
• There is concern about the RHTP distribution formula because only half the funding is split equally across states, with the remainder influenced by factors such as Make America Healthy Again priorities.
• Required Make America Healthy Again concepts — including nutrition education, SNAP restrictions, and fitness test revival — are likely to have, at best, marginal effects on rural health outcomes, which are shaped far more strongly by social determinants of health.
• Evidence that reducing or eliminating certificate-of-need requirements leads to clear improvements in mortality or quality remains limited.
Looking Forward
As the session wrapped up, Gorenstein asked panelists what they will be watching as the programs evolve.
CHATTERJEE: “I see a tremendous opportunity for rigorous natural experiments that, for the first time in a long time, are going to be in rural areas. Our evidence base for rural areas is sparse. The research community has to tool up to meet this moment — figuring out what works, what doesn’t, why, and where. I’m nervous but excited about it.”
BENNETT: “In a few words — referral networks, coordinating councils, and bridge organizations exploring how to connect clinical services to community resources to improve patient care, while feeding those informational loops back to providers and patients. Some states are going to do it better than others.”
TRIBBLE: “Journalists should be watching state offices closely, asking whether they are following their plans and holding recipients accountable for providing high-quality care to rural residents. I’ll be asking the federal government about how it is following through in its contacts with states. I’m very interested to see whether improved outcomes actually happen.”
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