Centers for Medicare and Medicaid Services Administrator Mehmet Oz and state governments will have a great deal of discretion in spending the $50 billion in rural hospital funding passed in the Republican budget bill earlier this month, leaving some experts concerned that it will become a Medicaid slush fund rather than help underserved communities.

The Rural Hospital Transformation Fund in President Donald Trump’s One Big Beautiful Bill Act was added to assuage fears from Republicans about spending reductions from the Medicaid program included in the bill.

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But the wide latitude given to Oz and state health leaders in implementing the funds has left stakeholders scrambling to guess what the future will hold until the agency announces its plans for the fund.

The statute specifies that half of the $50 billion fund will be divided evenly between the states over the next five years. The rest will be given to the CMS to distribute to achieve a host of policy goals, including any objective “as determined by the CMS Administrator.”

The CMS did not respond to the Washington Examiner’s request for comment on its plans to date for the funds, which will start being given to states in 2026. But health policy experts have said that careful administration of the fund will be necessary to ensure that it goes where it is most needed.

Chris Pope, health policy specialist at the Manhattan Institute, told the Washington Examiner that he is concerned that the lack of specificity will allow state politicians to use the money as a “slush fund” for their Medicaid programs.

“If you look at carefully how this is done, written, it doesn’t actually specify the money has to go to hospitals,” Pope said. “This pretty much gives broadly the state Medicaid program to do whatever it wants with.”

Opponents to the bill’s changes to the Medicaid program have been the loudest voices in sounding the alarm that rural hospitals will face tough consequences from the estimated $1 trillion reduction in Medicaid spending over the next 10 years.

Rural hospitals have faced financial problems for decades. As medical technology becomes more specialized and expensive, it becomes more difficult for smaller hospitals to afford to offer high-quality care. Patients are also increasingly willing to travel farther distances to larger health centers that offer more specialized care, ultimately leading to less reimbursement and lower revenue streams for rural hospitals.

Nearly half, about 44%, of the nearly 1,700 rural hospitals in the U.S. had negative operating margins in 2023. That is especially true for those run as independent hospitals, outside of a large affiliate network.

The GOP’s rural hospital fund was initially supposed to only be $25 billion, but it was doubled during last-minute negotiations in the Senate to secure support of Republicans concerned about the bill’s cutting of provider taxes, a mechanism states use to bolster their Medicaid budgets.

But Pope said provider taxes are chiefly used in Democrat-run states and Republican states that have adopted Medicaid expansion through Obamacare, or Medicaid coverage for able-bodied adults without dependents.

The “big, beautiful bill” cuts the percentage at which states can tax healthcare providers in an effort to raise their state Medicaid budgets and solicit more federal matching funds. Healthcare providers have traditionally supported the provider tax system because they receive greater Medicaid reimbursements, bolstering their revenue.

But Pope and others opposed to provider taxes say they do not help independent rural hospitals but rather larger systems that are well-connected to state governments.

Oz himself said in late June, before the rural hospital fund was doubled, that Medicaid spending was not the main source of funding for rural hospitals, with rural communities accounting for only 5% of Medicaid inpatient spending.

“It’s basically taking a lot of money away from blue states, and this rural fund, it’s given pretty heavily to red states, so it’s not really an offset,” Pope said. “It’s a sweetener for Republicans and Republican Medicaid programs.”

Drew Altman, the president of the left-leaning health think tank KFF, wrote in an op-ed Friday that the amount of discretion for doling out the fund will result in a great deal of political jockeying between special interests potentially eligible for money.

Before KFF, Altman was commissioner of the New Jersey Department of Human Services.

“My experience in state government suggests that there will be some competition between rural hospitals, state health departments and other state agencies, counties, and community organizations to divvy up the funds, diluting the benefit to rural hospitals, although not necessarily to rural health care,” Altman wrote Friday. “There will be pressure on states both with regard to the processes they use to put their proposals together and as to who gets what.”

On the other hand, Jackson Hammond, of the right-leaning Paragon Health Institute, told the Washington Examiner that he is optimistic about the future of the fund in general, particularly because of Oz’s leadership.

Paragon Health is one of the loudest opponents of provider taxes and staunchest advocates of Medicaid work requirements, which were included in the GOP bill. Still, Hammond said there is a risk of mismanagement, should competing interests not be taken seriously.

“I don’t want to downplay that or pretend that there’s no risk here that this becomes a slush fund,” Hammond said. “That certainly is a possibility if this isn’t properly targeted to vulnerable hospitals and that states are really focusing on where the money needs to go.”

Congress has already enacted a multitude of other systems and programs to keep rural hospitals afloat, but most of them are based on higher reimbursement rates rather than direct subsidies. But with patient numbers dwindling for rural hospitals, inflated reimbursement rates do little to help.

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Hammond said he is also hopeful that solid management of the Rural Hospital Transformation Fund could spark further reforms for more efficient funding mechanisms in the future.

“What is going to be required, rather than these random payment adjustments, the different payment rules that cause all these problems downstream is the actual rural hospital subsidy fund, that’s direct and that’s targeted,” Hammond said. “It’s going to be really interesting to see, alright can we actually do this?”