Rural Health Fund Will Do Little to Offset Harm to Rural Providers in Republican Megabill

Medicaid provides health care for millions of people in rural areas and is vital to keeping rural hospitals financially stable. The recently enacted Republican megabill, which will cut $1.1 trillion from Medicaid and Affordable Care Act marketplaces over ten years, threatens the health of rural residents and the economic viability of rural health providers.

In response to concerns from senators representing rural states about the adverse effects such massive health care cuts would have on rural communities, the megabill created the $50 billion, five-year Rural Health Transformation Program (RHTP). But as CBPP and others warned during the megabill debate, a temporary fund will not mitigate the harm to rural communities caused by deep and long-term health care cuts.

Now, as the Centers for Medicare & Medicaid Services (CMS) rolls out the RHTP, official information from the agency confirms that people living in rural communities and the providers who serve them will experience Medicaid losses that far exceed what’s available to states through the RHTP.

Because the Republican megabill will take coverage away from people, it will increase uncompensated care at the same time that it cuts providers’ payment rates. This creates a uniquely difficult financial landscape for rural health ecosystems. KFF estimates that of the more than $900 billion in Medicaid cuts in the megabill, about $137 billion of those cuts will impact rural areas. Already we’ve seen press reports tying the recent federal policy changes to plans to closeentire hospitals or rural labor and delivery units; these cuts will impact not just Medicaid enrollees but entire communities that rely on these providers.

CMS issued a Notice of Funding Opportunity (NOFO) laying out how states can apply for their share of funding from RHTP. The new law specifies that half of the $50 billion funding is to be distributed evenly among all states with approved applications. Distribution of the other half will be partially based on statutory standards (like the number of rural residents and health facilities and the relative amount of uncompensated care in the state) but CMS has a great deal of discretion in allocating the funds. State applications are due November 5, and the law requires CMS to award funds by the end of this year.

CMS has been clear that the RHTP is not designed to backfill deep Medicaid cuts or to otherwise shore up rural providers who may bear the burden of forthcoming Medicaid cuts. Indeed, the new funding announcement specifies that no more than 15 percent of funds can be used for provider payments (e.g., uncompensated care). Instead, as CMS previewed in presentations to states, on its website, and in FAQs, the new NOFO specifies that RHTP applications will be scored based on states’ plans to achieve the following five strategic goals: “make rural America healthy again,” promote sustainable access, strengthen recruitment and retention of health care providers in rural areas, drive innovative care, and promote tech innovation.

States that advance policy choices that are in sync with these goals — such as restricting the use of SNAP benefits for certain foods, despite a lack of evidence that such limits improve diets — will be scored preferably. CMS can claw back funding from states that do not finalize legislative or regulatory actions promoting these program goals on a specified timeframe and can redistribute them to other states.

The Republican megabill requires RHTP funds to be awarded by the end of this year, setting in motion a rapid timeline. Even before CMS’s funding announcement was posted, some states already started consulting with their stakeholders about how to design their rural health transformation plans. Nevertheless, it’s a tall order for states to develop robust applications with impactful proposals by November 5.

Earlier this month, Senate Finance Committee Democratic leadership asked the Government Accountability Office to produce an analysis of the RHTP, citing the mismatch between health care cuts in the Republican megabill, the broad parameters for which RHTP funding may be used, and the rapid timeframe for awarding funds.

While states will undoubtedly propose innovative ways to use RHTP funding to improve access, the RHTP won’t mitigate the impending financial strain from the megabill’s health care cuts, which could force rural hospitals and providers to reduce services or close altogether.