EXCLUSIVE — Leadership at the Centers for Medicare and Medicaid Services is working with states to develop plans to use the $50 billion in funding for rural hospitals and health systems baked into the GOP’s mega tax bill.
In an exclusive interview, CMS Administrator Dr. Mehmet Oz told the Washington Examiner that he and his team have been in close contact with governors to guide them on how best to administer the funding over the next five years to strengthen rural healthcare systems nationwide.
Recommended Stories
- Most Americans not getting COVID-19 booster this fall, survey says
- FDA requires overdose risk on opioid prescription labels
- Democratic states sue HHS over Medicaid cuts to Planned Parenthood
“What we’re hoping to do is actually create these models in a box, you know, a Chinese menu approach, where here’s a bunch of things we’ve thought through really carefully that might work for you,” Oz said. “Take them if you want, modify them so they fit the needs of your state, and hopefully that’ll accelerate the process for you.”
The Rural Hospital Transformation Program was a last-minute addition to President Donald Trump’s One Big Beautiful Bill Act. Many saw it as a necessary step to secure the support of Republican senators concerned about the bill’s $1 billion reduction in Medicaid spending over the next 10 years.
The statute specifies that half of the $50 billion must be divided evenly between states over the next five years, with the rest being given to CMS to distribute at Oz’s discretion.
Oz said they “don’t have the luxury of time.” States must submit their proposals to CMS by September, and the agency must respond by November. Funds will be distributed on December 31.
Caprice Knapp, Director of Medicaid at CMS, told the Washington Examiner that state leaders at the National Governors Association meeting last weekend came with a laundry list of ideas, ranging from improving workforce retention to dealing with cybersecurity challenges.
“There’s a lot of interest there in terms of shoring up the workforce in rural parts of the state. We heard ideas about scope of practice laws and how you can use pharmacists in the most beneficial way,” Knapp said. “We heard about compacts, interest in working from a regional perspective, telehealth laws, and being able to work with their neighbors.”
Oz’s team also said they’ve floated specific ideas on how community organizations like the YMCA can partner with traditional healthcare centers on Make America Healthy Again goals, such as nutrition education and other lifestyle factors.
Knapp said that the agency is coordinating out-of-the-box ideas on “how we connect both the health system to the non-medical part of the system, whether that’s food, whether that’s behaviors.”
Behind the scenes
Oz said that he had been working closely with Democrat and Republican governors from rural states on ways to secure funding for rural hospitals long before the bill was passed.
Gov. Josh Green (D-HI) told the Washington Examiner in an exclusive interview that he traveled from Hawaii to Washington, D.C., to meet personally with Oz and a handful of Republican governors from rural states during the drafting of the big beautiful bill to ensure changes to Medicaid funding would not disrupt care provided by rural hospitals.
Medicaid covers roughly 29% of Hawaii’s population, comparable to many mainland states. Hawaii also has 36 rural health facilities as defined by Medicare standards and 35 federally qualified health centers serving underprivileged communities.
Green, an emergency medicine physician by trade, was initially stationed with the National Health Service Corps at a rural hospital in Hawaii. He’s currently the only physician governor in the United States and works on health policy issues for the National Governors Association.
The bill originally included $25 billion in rural hospital funding, but Green told the Washington Examiner that he was personally involved in getting it doubled within hours of the Senate’s final vote on the measure.
“In the last about 36 hours, I would say, right before the votes in the bill, this idea got sparked again as some of the legislators started talking about rural health needs, and I immediately reached out to Oz and made my case that we should put $50 billion into the Rural Health Fund, which he did,” said Green.
Will it be enough?
Some analysts have suggested that the impending cuts to Medicaid will put hospitals in a tough position, even with the $50 billion in funding over the next five years.
Number crunchers from the left-leaning health think tank KFF project that the changes in Medicaid funding, particularly the cap on the amount states can charge in provider taxes to collect state-level Medicaid revenue, will result in a nearly $140 billion shortfall.
Sen. Josh Hawley (R-MO), who protested against provider tax cuts during the drafting of the bill, recently introduced a bill to increase the rural hospital fund to $100 billion over the next five years instead.
When asked about how they settled on $50 billion, Green said it was all he could muster.
“I backed out the losses from the provider tax and what I felt would be the short-term threat to Medicaid resources, and that’s where $50 billion was about as close as I could get,” Green said. “And I only had like 24 hours to convince them to do this.”
Regardless of the figure, Oz argues that the boost to rural funding over the next five years should be used to make much-needed investments in health systems and ensure that money is better spent in the future.
Oz says that care at rural healthcare systems now only accounts for about 7% of federal Medicaid spending, just shy of $20 billion annually, making the rural hospital fund “a 50% jump up in what you have normally been able to spend.”
“Use that money to change the system so that the $20 billion that was originally there now goes further,” said Oz