Bureaucracy Times

All the news fit to be declassified.

Washington Put Billions in Rural Health Money Behind State Policy Changes

Flat, dry editorial illustration. A large federal government building with a money bag labeled "$50 BILLION" connected by strings — like a puppet master — to a small rural hospital and a state capitol building. A checklist of policy items floats between them. Muted institutional palette: navy, beige, gray, burgundy. Deadpan newspaper editorial style, no people, flat color.

Congress created a $50 billion program to transform rural health care. But the formula the Centers for Medicare & Medicaid Services built to distribute the money does more than measure rural medical need.

It also rewards states for adopting or promising to adopt a portfolio of policy changes favored by the federal government, including restrictions on Supplemental Nutrition Assistance Program purchases, physician nutrition-training requirements, professional licensing reforms and even the return of the Presidential Fitness Test in schools.

And the incentives do not end when the grant is awarded. CMS plans to rescore states as the five-year program proceeds, can withhold or recover money when states fail to carry out commitments, and operates under a statute that sharply restricts states’ ability to challenge many of those funding decisions.

That architecture emerges from a new Government Accountability Office review of the Rural Health Transformation Program, combined with CMS guidance and analyses of the agency’s scoring formula.

A $50 billion program, but not a $50 billion needs formula

The Rural Health Transformation Program was created by the 2025 reconciliation law and provides as much as $50 billion to states over five years. CMS awarded the first $10 billion to all 50 states at the end of 2025, with awards ranging from $147 million for New Jersey to $281 million for Texas.

Every state received $100 million in baseline funding during the first budget period. Another $5 billion was distributed as workload funding based on two broad components: rural characteristics and a technical score.

The rural factors include measures one would expect in a rural-health program: rural population, the share of residents living in rural areas, rural health facilities, uncompensated care, geographic isolation and hospitals receiving Medicaid Disproportionate Share Hospital payments.

The technical side is where the program becomes more complicated.

GAO found that CMS scored states partly on their proposed health initiatives and partly on state policy choices. CMS selected eight policy actions that could increase a state’s funding score. GAO specifically identified restricting SNAP benefits for foods deemed non-nutritious, requiring nutrition to be included in physicians’ continuing medical education and requiring schools to reestablish the Presidential Fitness Test.

An analysis published in Health Affairs Scholar reconstructed the scoring system and found that state-policy factors represented 18.125 percentage points of the overall workload score. The researchers identified policy factors involving SNAP waivers, physician nutrition education, certificate-of-need laws, interstate licensure compacts, scope-of-practice restrictions, short-term insurance regulation and remote-care services.

The researchers noted an important distinction. Policies involving scope of practice and certificate-of-need laws can have plausible connections to the availability of rural medical care. The connection is less obvious for measures such as school fitness testing and SNAP purchasing restrictions.

KFF separately estimated that about $3.8 billion of the entire $50 billion program is being distributed based on whether states have adopted, committed to adopting or made progress toward adopting designated state policies. KFF estimates another $8 billion is associated with scoring state initiatives, while approximately $12.5 billion is tied to rural-need measures and $25 billion is distributed equally among states.

States noticed the incentives

The policy points were not merely decorative.

CMS guidance to states explained that policy commitments could affect their scores and that states could receive points as they demonstrated progress on initiatives and policy commitments in later budget periods.

State governments responded accordingly.

North Dakota provides an unusually clear example. The state Legislature’s Rural Health Transformation Committee developed bills requiring the Presidential Physical Fitness Test in schools, adding nutrition education to physician continuing-education requirements, joining the physician assistant licensure compact and expanding pharmacists’ scope of practice.

The connection between those bills and federal grant scoring was hardly hidden. In a January 2026 address recorded in the North Dakota House Journal, Gov. Kelly Armstrong thanked the Rural Health Transformation Committee for advancing four measures that, he said, “significantly helped improve our application score with CMS.” North Dakota ultimately received $199 million in the first budget period, nearly twice the $100 million baseline available to every state.

The North Dakota Legislative Branch records the resulting bill drafts, including the Presidential Fitness Test, physician continuing education, the physician assistant compact and pharmacist authority.

In other words, the federal scoring system did what an incentive system is designed to do: it affected state behavior.

The leverage continues after the check arrives

The first round of awards is only the beginning.

CMS plans to distribute as much as $40 billion over the program’s remaining four years based on states demonstrating “satisfactory progress” toward their approved initiatives and policy actions. The agency plans to convert that progress into numerical scores used to calculate future allotments.

That creates an ongoing federal lever rather than a one-time grant competition.

States generally cannot simply abandon commitments after securing the first award. GAO found that CMS may withhold, reduce or recover funding when states use money improperly, make unapproved changes to initiatives or fail to finalize policy actions promised in their applications.

GAO provides a particularly useful example. If a state committed to establishing nutrition requirements for physicians’ continuing medical education, that policy must be enacted by the specified deadline. If the state fails to implement the commitment, CMS can recover funding previously provided for the policy action.

States generally receive 90 days to address violations before CMS can recover previously awarded funds or withhold additional money.

CMS can make the decision. Challenging it is another matter.

The enforcement authority becomes more consequential because Congress gave CMS broad discretion over the program while placing unusual limits on review of its decisions.

According to GAO, the 2025 law generally provides no administrative or judicial review of amounts allotted or redistributed to states, payments withheld or reduced, or previous payments recovered under the program.

CMS interprets that language as generally preventing administrative or judicial review of annual award amounts, redistribution decisions and recovery of money associated with noncompliance. There is some uncertainty at the margins: CMS told GAO that particular challenges could depend on the facts of a case and that the agency was still determining whether the HHS Departmental Appeals Board could review some disputes.

The basic structure nevertheless produces a notable imbalance. CMS can score state policy commitments, rescore progress, change future awards and potentially claw back money, while the state’s ability to challenge those funding decisions is sharply constrained.

States had months to prove progress

GAO also identified an early implementation problem that could make that performance system more consequential.

After CMS announced the first awards, states had to revise their budget plans to reflect the amounts they actually received. GAO found that the revision process took about 41 days on average. Until CMS approved those revised plans, states were limited in their ability to spend their first-year money.

That left states only four to seven months before an August 2026 deadline for reporting progress that CMS could use to calculate their second-period funding. Representatives of rural-health and state-government organizations told GAO they were concerned about the short period available to demonstrate progress.

Meanwhile, the oversight apparatus was still being assembled. As of July 2026, CMS had completed 21 state site visits, but had not yet reviewed quarterly or annual state reports because the first reports were not yet due. Reporting forms were still being finalized, and CMS planned to begin audits of state use of the money in 2027.

GAO concluded that CMS’s planned monitoring activities were generally consistent with selected federal award requirements, but cautioned that it was too early to determine whether implementation would fully satisfy those requirements. GAO plans additional work as the program proceeds.

The distinction matters

None of this establishes that CMS violated grant law or improperly administered the program. GAO made no such finding.

Nor is every policy factor disconnected from rural health. Telehealth, interstate licensing, scope-of-practice rules and certificate-of-need requirements can directly affect whether rural communities have access to providers.

But the program demonstrates something broader about federal grants: money appropriated for one policy objective can become leverage over a much wider set of state decisions.

Congress created the Rural Health Transformation Program and expressly gave CMS broad discretion to determine state allotments. CMS then built a system in which billions of dollars depend not simply on how rural a state is or how strained its hospitals are, but partly on whether state governments adopt, promise and subsequently demonstrate progress toward policy choices selected in Washington.

North Dakota’s experience shows the incentive is not hypothetical. Legislators drafted state laws to improve the state’s federal application score.

For a program advertised as transforming rural health care, Washington has discovered that $50 billion can transform a few other things along the way. The Rural Health Transformation Program sits at one end of a spectrum of how federal money shapes — or fails to shape — what agencies and states actually do. At the other end, the U.S. Interagency Council on Homelessness demonstrates what happens when the coordinating body goes silent: staff restored by court order, no policy direction from anyone, and fourteen of nineteen member agencies that haven’t answered a contact request. And for the question of congressional visibility before federal money moves, the Commodity Credit Corporation’s Charter Act offers a structural contrast: one cabinet official can deploy up to $30 billion with Congress settling the bill afterward.

Sources