Can a $50 billion rural health program make up for massive federal cuts to health care?

Rural hospitals are struggling across the country. Many have had to cut services in recent years, and some are completely closed. This leads to care deserts, where Americans are forced to travel for access to vital services, sometimes even just primary care.

A new federal project called the Rural Health Transformation Program was designed to help, and the $50 billion dollar program has attracted bipartisan support. What is it, and what impact could it have in Indiana?

Lizzy McGrevy, Community Engagement Specialist at WFYI, spoke with Tradeoffs Reporter and Producer Melanie Evans to learn more.

This transcript has been edited for style and clarity.

Lizzy McGrevy: Let's get down to the basics. Why was the Rural Health Transformation Program started, and why is it so important right now?

Melanie Evans: This $50 billion program was created last summer when Congress passed its sweeping tax and spending bill. That bill became law in July. It also includes major changes to health care and the insurance safety net for low income families, which includes Medicaid and also the Affordable Care Act.

So those changes are projected to leave millions of people uninsured and reduce federal health care spending by about a trillion dollars nationally. Members of Congress in rural states were extremely concerned that those really big changes and those really big cuts would hit rural America very hard.

There are a couple of reasons for this. One, rural hospitals typically have thinner margins than hospitals in other parts of the country, rural hospitals have been closing they've been closing services, and this leads rural communities with farther to travel to get the health care that they need.

So there was a real concern by Congress that these big cuts in the bill would cause more closures of rural hospitals.

McGrevy: Does this money make up for the cuts that have been made to Medicaid and the ACA?

Evans: So no, and everybody is pretty clear on that, the math just doesn't work. So nationally, across rural areas, the cuts are projected to be about $137 billion. So that's nearly three times the size of this new rural fund.

I spoke with people who work in state policy and who also study rural health care or work in rural health care, and no one is expecting this money to plug the gap. They are thinking about this money as a way to invest, to try to prepare for what's coming, and also address some of these really endemic issues in rural America that make it more challenging to get people the care that they need.

McGrevy: States applied for this over the summer of 2025 and have since received their funding notices. Indiana was awarded over $200 million. What can states use this money for? Are we talking premium tongue pressers and cotton swabs? More AI? What are we looking at here?

Evans: I can only imagine what a premium tongue presser is.

McGrevy: Made of gold. I think.

Evans: [Laughs] Okay, so when I was talking just a minute ago about like, some of these endemic issues, workforce shortages, long distances with maybe not the best transportation, these are the areas where states can spend the money. And states came up with a whole bunch of ideas about how to do that.

This money was handed out through an application, like you said. So states first put together an application for all of the projects they might want to fund with this money.

A lot of them put together proposals to recruit more doctors and nurses and physical therapists and specialists and community health workers and keep them in rural areas. Proposals for more telemedicine. A lot of people put together ideas for how to bring care to people instead of getting people to come to medical care.

In Indiana, the state put together some proposals to work on coordinating care, and providing referrals, and making emergency departments more ready for women who are having babies. They told the federal government they really want to work on reducing those rates of chronic disease.

McGrevy: So states have their money, and it sounds like they've got a plan now. What's next?

Evans: They have to spend the money really quickly. So this is a five year program, and every year state performance will be reevaluated. This is something that the White House has been very clear about, that they want to see progress, and where they see progress, they will spend money.

And if they don't see progress, they have said that they may take money away. So states are really focused in this first year on getting the money out the door, and making headway towards their first-year goals.

McGrevy: Melanie, thank you so much for spending time with us today. For more coverage on the Rural Health Transformation Program, visit tradeoffs.org