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The July 2025 Tax and Spending bill (also known as the One Big Beautiful Act) enacts significant cuts — over $1 trillion over ten years — to federal health care funding for Medicaid and the Affordable Care Act (ACA) Marketplaces. According to a preliminary estimate from the Congressional Budget Office (CBO), the law is projected to result in nearly 12 million more people becoming uninsured by 2034. In response to bipartisan concerns about the bill’s impact on rural hospitals, the Senate added $50 billion in funding for a new “rural health transformation program” just prior to its passage. However, the fund doesn’t guarantee additional payments for rural providers as states have the discretion of using the funds for a variety of other purposes. The fund is also not big enough — is a little over one third (37%) of the estimated loss of federal Medicaid funding in rural areas.    The $50 billion in rural grants is about one-third of the estimated loss of federal Medicaid funding in rural areas. The fund allocates $25 billion equally among all states with approved applications, regardless of rural need. The remaining $25 billion is to be distributed by CMS, which will weigh factors such as rural population share and hospitals serving high-need patients, though CMS can also consider “any other factors” it deems appropriate.  States must submit applications to CMS by December 31, 2025, to be eligible for federal funding. The ambiguity in the bill's language regarding approval criteria grants CMS broad discretion to approve or deny applications and determine how to distribute the funds. Applications must outline how the state will use the funds for at least three approved purposes, such as provider payments, workforce recruitment, technology investment and behavioral health services.    Because there are so many “approved uses” for the funds, how much will get to rural providers is TBD. States can use funds for at least three of several approved purposes, including: 

• Direct payments to providers 

• Recruitment and retention of rural health workforce 

• Technology upgrades (AI, robotics, health IT, etc.) and remote monitoring 

• Chronic disease management and prevention 

• Support for mental health and substance use disorder treatment

CMS has broad discretion over the application and funding process. There is no mandated timeline, no formal review criteria, and decisions aren’t subject to judicial or administrative appeal. While states must submit annual reports to CMS on fund usage, the law doesn’t require public disclosure of state allocations or CMS’ rationale for approving or denying applications. As of now, CMS hasn’t issued guidance on how it will evaluate applications.   While the fund may offset about one-third of rural Medicaid losses, most of the federal cuts occur after 2030, meaning that this is only a short-term patch. The fund provides $10 billion annually from FY 2026-2030, with all funds to be spent by October 1, 2032. According to KFF, 63% of the ten-year reductions in federal Medicaid spending are projected to take place after FY 2030.  The fund is scheduled to be disbursed as follows: 

• $10 billion in each of FY 2028 and FY 2029 

• $2 billion in FYs 2030 and 2031 

• $1 billion in FY 2032 

AHPA extends our gratitude to emerging colleague Aimal Irteza, guest author of this article. Aimal is an undergraduate student studying Political Science and Public Policy at Rollins College.