‘Sort of blackmail’: Billions in rural health funding hinge on states passing Trump-backed policies

‘Sort of blackmail’: Billions in rural health funding hinge on states passing Trump-backed policies

Alice Miranda Ollstein, Ruth Reader and Liz Crampton

Sun, December 7, 2025 at 8:00 PM UTC

11 min read

The Trump administration offered states a deal: pledge to enact White House-favored policies for a chance to win a bigger share of the $50 billion aimed at transforming the nation's struggling rural health care systems.

The battle for those funds is now underway.

In pitches submitted in November to the Rural Health Transformation Program that Congress and President Donald Trump created in July, state officials described a crisis in rural America — an explosion of chronic illnessness, hours-long drives for basic services, a scourge of addiction — and laid out their plans for turning things around.

But in a bid to get better scores on their applications, and thus more funding, several also vowed to change their own laws — making promises, for example, to restrict low-income people from using food benefits to buy junk food or to expand telehealth, that they may not be able to keep in the coming years.

Democrats and health advocates described the Trump administration’s criteria for doling out the money as highly unusual, and some fear it could be wielded to favor political allies.

“I've been working in government and health policy for 20-plus years, and I can't recall another scenario where it was quite this direct in terms of, ‘If you work on these policy changes at the state level, we will give you funding,’” said Carrie Cochran-McClain, the chief policy officer for the National Rural Health Association, which represents state and local officials who work on rural health.

When the Trump administration begins distributing the money at the end of the year, it will divide half of the $50 billion among all states that apply evenly, regardless of population — giving smaller states vastly more money per capita. It will also dole out a quarter of the funds based on factors like the size of a state’s rural population, how much free health care its providers give to people who can’t afford to pay, and how large its land area is.

The rest is up to the discretion of the federal Centers for Medicare and Medicaid Services based on how well states’ plans align with the Trump administration’s vision for the program.

And $3.75 billion of that, or 7.5 percent of the total, hinges on whether states pass a series of policies. States will receive “full credit” for laws they’ve already changed, and “partial credit” for pledges to make those changes. But if states don’t implement those promised policies by the end of 2027, or 2028 for some of the more complex ones, the Trump administration has threatened to “claw back” a portion of the money.

Some of the incentivized policies are popular across the political spectrum, like expanding access to telehealth and requiring medical students to study nutrition. Others are popular with conservatives and reviled by many progressives, including food stamp restrictions and the deregulation of cheaper-but-skimpier short-term insurance plans.

Several of the policies are designed to advance the food and fitness goals of Health Secretary Robert F. Kennedy Jr.’s Make America Healthy Again movement. Others are divisive within the medical community but not partisan, like allowing nurses, dentists, pharmacists, and EMTs to provide services previously restricted to doctors. None of the policies are specific to rural residents, and would impact states’ entire populations.

An analysis of 40 state applications to the Rural Health Transformation Program obtained by POLITICO found that states across the political spectrum are promising to enact the less controversial policies the program favors. For instance, 23 states — including eight run by Democrats and 15 by Republicans — told the Trump administration they would start requiring nutrition education in medical schools.

But states were sharply divided on other laws they saw as more partisan or contentious.

A dozen predominately conservative states boasted in their applications that they have already restricted low-income people who receive Supplemental Nutrition Assistance Program funding from buying candy, soda and other “non-nutritious” food and drinks, while another 11 promised to do so in the future. Only a handful of blue states, including Colorado, Connecticut and Hawaii, have embraced the SNAP policy — a long-sought conservative goal.

No states, meanwhile, pledged to deregulate short-term insurance plans that Democrats have long criticized as “junk plans,” though more than a dozen said they had already done so.

In a statement to POLITICO, a CMS spokesperson stressed that state policy is just one of the programs’ many components, that no state is forced to adopt any policy, and that states will get “significant baseline funding” regardless of what laws they do or don’t adopt.

The incentive structure, the spokesperson added “encourages alignment with evidence-based policies that have been shown to improve health care access, outcomes, and efficiency.”

Using federal funding as a cudgel to compel states to adopt particular policies is controversial, but not unprecedented. In the 1980s, for example, highway funding was contingent on states raising the drinking age from 18 to 21. And any hospital in the country that turns people away in an emergency risks being kicked out of Medicare.

Utah’s GOP Gov. Spencer Cox told POLITICO that he appreciates that the program pressures his and other states to test out new solutions to problems that have long plagued their rural populations.

“Health care is such a sticky wicket,” he said, citing years of work with experts through the One Utah Health Collaborative that haven’t yet yielded meaningful results. “We still haven't brought down the cost of health care in Utah. It still continues to go up significantly. So I don't know that anybody has all the answers here, but I'm willing to try just about anything to try to make a difference.”

But the policy incentives in the Rural Health Transformation Program — which was quickly cobbled together this summer to win over holdouts in Congress and secure passage of Republicans’ megabill that slashed taxes and Medicaid spending — are drawing scrutiny, even ire, from Democrats.

“It's a bad way to care for human beings, and it's bad for rural economies,” said Matt Klein, an internal medicine doctor and Democratic state senator who is running for Minnesota's only open — and most competitive — House seat. “And if that rural hospital fund is tied to sort of blackmail policy initiatives that are unacceptable to the people of Minnesota, we'll have to figure out our own pathway to care for our members.”

‘We're not going to sell ourselves out’

Most states have made their applications public, including details on which of the Trump administration’s favored policies they will embrace or reject. A few others shared documents with POLITICO upon request. A handful, however, kept that information confidential or released only a general summary that did not include which laws and regulations they would or would not adopt.

Additionally, though the Trump administration was clear that it would only reward hard commitments, there was a great deal of variation in the firmness of states’ vows to enact the incentivized policies.

Tennessee, for example, pledged in its application to pass legislation in 2026 requiring implementation of the Presidential Fitness Test by 2028. New Hampshire, in contrast, pledged to “expand school-based wellness and promote physical activity,” but offered no timeline or specific bill.

CMS is set to grade states at least four times over the coming years on whether they’ve met their commitments, and will adjust funding accordingly. For example, state promises to mandate the Presidential Fitness Test and add nutrition counseling to their medical school requirements won’t be considered as part of their score until November 2026, and they’ll have until the end of 2027 or 2028 to implement those promises.

Meanwhile, even with billions of dollars hanging in the balance, many states flatly refused to even consider enacting some policies. Those jurisdictions were primarily, but not exclusively, Democrat-led.

For example, Delaware — which is seeking more than $100 million to establish its first medical school — pledged in its application to remove regulatory hurdles for providers to establish new facilities in rural areas, but declined to make any changes to the SNAP.

“We're not going to sell ourselves out to do this for $1 here, $1 there,” Delaware Gov. Matt Meyer, a Democrat, told POLITICO. “We need to look in the mirror as a state and decide if this is what we want to do. If it makes sense to do this, we should do it.”

Meyer added that he’s not a “huge fan” of putting policy requirements like these in grant applications, arguing they step on “local control.”

An additional complicating factor: states had just a few weeks to put together their applications this fall — a time when almost all state legislatures were not in session.

Even some aligned with the Trump administration’s vision felt trapped in a Catch 22. If they were too specific in their policy promises, without knowing what state lawmakers would be willing to pass over the next few years, they risked being deemed noncompliant and having some money recouped. But if they weren’t specific enough, they jeopardized their chances of getting extra points on their application.

“It was a challenge to have a very short timeline, and deadlines that certainly precede the reconvening of our state legislature in January,” said Daniel Edney, the leader of the Mississippi State Department of Health. “We had as much of a conversation with stakeholders in the very short amount of time that we were all given to try to get buy-in and understanding.”

Making matters more difficult, states have just a few years to make good on their policy promises — a narrow window for complicated legislative and regulatory moves that some states have fought over for more than a decade.

“Having to wait for your state legislature to pass a policy, no matter who you are, is a real, precarious requirement,” said Hawaii Gov. Josh Green, a physician who consulted with the Trump administration on the creation of the rural health program. “We have heard from the administration that they want to see results in the first year, and they're going to judge them. But look, I was a legislator for 14 years. And, for example, it took us 12 years to pass a law to provide insurance coverage for children with autism. Twelve years!”

North Dakota, one of several states where the legislature only meets every other year, convened a select committee this fall to draft legislation for a special session aimed solely at fulfilling the Trump administration’s health policy requests — anxious about failing to meet the program’s deadlines.

In late October, just days before applications were due, the state also sought to restrict certain SNAP purchases “to address root causes of chronic disease like obesity.”

MAHA moves

While Mehmet Oz, the head of the Centers for Medicare and Medicaid Services, will decide how billions in rural health funding gets distributed, Kennedy’s Make America Healthy Again movement is setting much of the agenda.

States were even told to direct any questions they had about their applications to the email address MAHARural@cms.hhs.gov.

Kennedy spent much of his first year in office visiting states that adopted SNAP waivers, removed food dyes and ultraprocessed foods from school meals, and banned fluoride in public drinking water — putting a spotlight on efforts in Arizona, New Mexico, Texas, Utah, and West Virginia.

But when governors grilled Kennedy at the Western Governors Association conference in November about how the billions in the rural health fund will be distributed — with Arizona Gov. Katie Hobbs describing some of the criteria as “arbitrary” — Kennedy appeared to distance himself from the program.

“That formula, as you know, was decided through negotiation in the legislatures, the Senate and the House, to pass the ‘big, beautiful bill,’” he said. “So as HHS Secretary, I really have no way of altering that formula.”

Kennedy added that money will be awarded based on an “independent review process that is supposed to be free of any kind of political manipulation or pressure.” Yet some state officials see the decision to condition some funding on MAHA initiatives and other health policies as coercive.

“They’re holding our rural health as a hostage, essentially, for these broader policy goals, and that's a problem,” said Priya Sundareshan, a Democratic state senator in Arizona, one of the dozen states that refused to adopt SNAP restrictions. Sundareshan called the incentivized food stamp rules, in particular, “a paternalistic policy.”

“People are making do with what they can, and what we need to do is let them put together the resources to feed their families,” she said. “If that involves a little bit of joy because they've splurged on something that is not necessarily what we would all think is the most helpful, then that's fine.”

She added that she’s concerned the structure of the program will penalize states like hers that have a divided government — in Arizona’s case, a Democratic governor and Republican-dominated state legislature — where it’s difficult to pass major health policies of any kind.

“It’s basically guaranteeing that our state will have a harder time accessing those funds,” she said.

About Our Ads

Source