Virginia, Other States Can Now Tap Into $50 Billion Rural Health Transformation Fund

The federal Rural Health Transformation Fund (RHTF) application period opened Monday. Virginia and other states will now have until Nov. 5 to apply for their piece of the $10 billion dollar per year pie.

With $50 billion earmarked over the next five years, Centers for Medicare and Medicaid Services administrator Mehmet Oz emphasized on a press call Monday morning how the fund can address root issues for rural health challenges.

“We think we have an opportunity not just to plug a few of the holes, but to transform in a lasting way the rural health care system in this country.”

He listed investment in workforce, updates to information technology and infrastructure of hospitals as examples of what the funding could fuel. Governors are supposed to work with their states to draft the applications. Awards should be announced by the end of this year and funding disbursed in early 2026.

In preparation for the RHTF, last month Gov. Glenn Youngkin issued a directive for different state agencies to work on an application. Part of that process entails the state’s secretary of Health and Human Services conducting listening sessions in rural areas, fielding input from emails and outreach with state lawmakers while developing the application.

Virginia HHS secretary Janet Kelly has already set up a webpage with an email where people can reach out with input.

Half of the funding will be evenly distributed to states with approved applications, Oz said. The other half will be awarded to states based on individual state metrics, a release about the applications opening further explained.

For states that are deemed to have not performed using the funding, the federal government will “have the ability to claw back some of that money and reallocate it to the states that are performing.”

“This is not punitive, it’s quality control,” Oz said.

Former Health and Human Services secretary Xavier Becerra said on a separate press call Monday that the RHTF would not be enough to counter recent federal policy actions  by President Donald Trump’s administration and Republican majorities in Congress that advocates and Democratic lawmakers say stand to strain health care across the nation in the months and years ahead.

“It’s a prescription for a man-made disaster,” Becerra said of recent changes to vaccine access by current HHS secretary Robert F. Kennedy Jr., the lack of renewal of premium tax credits that help people purchase health insurance, and the reconciliation bill passed this summer that will adjust hospital funding mechanisms and likely cause millions to lose Medicaid coverage.

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Virginia’s Health Benefit Exchange director Keven Patchett told lawmakers last month that about 100,000 people could fall off their insurance if the ACA tax credits aren’t renewed. Virginia’s Medicaid director Cheryl Roberts noted the state’s 600,000 people enrolled in its expanded Medicaid program are most likely to be affected by the eligibility and enrollment changes spelled out in the reconciliation bill.

Hospitals have warned for months that they could be faced with cuts to services or closures down the line. Augusta Health also recently closed two primary care clinics and an urgent care clinic under its umbrella in Shenandoah Valley, citing the reconciliation bill as part of the reason.

When asked on the press call how the transformation fund could help further alleviate issues triggered by the reconciliation bill, Oz said that “providing insurance is not providing health care.”

Eventually health systems could see spikes in private health insurance as hospitals negotiate with private insurers to help offset costs of caring for uninsured patients, health care associations have said.

Former Health Resources and Services Administration head Carole Johnson said on the press call with Becerra that Congress shouldn’t have voted to alter Medicaid “thinking it’s not going to affect all of us.”

She called the Rural Health Transformation Fund a “band-aid” for larger problems that was used as a “political solution” to get the reconciliation bill through, following pushback from some Republicans with large Medicaid or rural populations in their states.

Often, rural hospitals depend on both Medicaid and Medicare populations to make their businesses run, Johnson said.

A look ahead

As Congress works to conclude its work for the end of this year, Democrats and some Republicans have their sights set on extending the ACA tax credits, to potentially spare at least the estimated 100,000 from losing coverage.

Democrats have emphasized the lack of the tax credits renewal was one of several reasons they opposed the OBBA. Though ultimately voting for the reconciliation bill, U.S. Rep. Jenn Kiggans, R-Virginia Beach, had expressed concerns about it and has since joined a bipartisan chorus to extend the ACA credits for the time being.

Following this year’s gubernatorial election, either Democrat Abigail Spanberger or Republican Winsome Earle-Sears could oversee the next state budget that would address changes spurred by the federal health care actions.

Spanberger is examining how to streamline the eligibility process for Medicaid to ensure eligible people don’t fall off. Earle-Sears has expressed interest in tapping into Virginia’s “rainy day fund” to cover the gap, which lawmakers in appropriations committees stress is a short-term solution. Either woman would also be able to weigh in on future Rural Health Transformation Fund applications to direct that federal money to Virginia’s areas of need.

For now, White House spokeswoman Victoria LaCivita emphasized in a statement that the program is “a win for every rural community across the country, and the administration urges every single governor to apply.”

Editor’s note: This story has been updated with new information from Youngkin’s office.

by Charlotte Rene Woods, Virginia Mercury

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