Billions in Rural Health Grants Tied to Administration’s Policy Agenda; Critics Call It “Blackmail”

The Rural Health Transformation Program will distribute $50 billion to states to help overhaul struggling rural health systems — but a meaningful slice of that money is tied to whether states adopt policy changes favored by the administration and Health Secretary Robert F. Kennedy Jr.’s Make America Healthy Again (MAHA) initiative.

How The Funding Formula Works

The program divides the $50 billion in three parts: half will be split evenly among all applying states, a quarter will be allocated using objective measures (such as rural population, uncompensated care, and land area), and the remaining portion will be awarded at the discretion of the Centers for Medicare & Medicaid Services (CMS) based on how closely states’ proposals align with the administration’s priorities.

Crucially, $3.75 billion — 7.5% of the total — is contingent on states passing a set of incentivized policies. States earn “full credit” for laws already on the books and “partial credit” for formal pledges to enact changes. CMS warned that if pledges are not implemented by the end of 2027 (or 2028 for more complex measures), a portion of funds could be clawed back.

Which Policies Are Incentivized?

Some incentivized measures are broadly popular or nonpartisan, such as expanding telehealth, increasing nutrition education in medical training, and expanding the scope of practice for nonphysician clinicians. Others align with conservative priorities — for example, limiting certain purchases with Supplemental Nutrition Assistance Program (SNAP) benefits or deregulating short-term insurance plans that critics label “junk plans.” Several items also reflect priorities promoted by Secretary Kennedy’s MAHA initiative.

State Responses: A Patchwork

POLITICO’s review of 40 state applications found states across the political spectrum embracing less controversial policies: 23 states (eight run by Democrats and 15 by Republicans) pledged to require nutrition education in medical schools, for example. But states sharply diverged on more contentious measures. About a dozen predominantly conservative states reported they already restrict select SNAP purchases, and 11 others pledged to pursue similar rules; only a few blue states have adopted such limits.

Some states explicitly refused to tie SNAP policy to funding even when seeking large awards. Delaware, for instance, asked for more than $100 million to launch a medical school and agreed to ease provider rules for rural facilities but declined SNAP changes. “We’re not going to sell ourselves out to do this for $1 here, $1 there,” Gov. Matt Meyer said, arguing that policy mandates in grant applications infringe on local control.

Process, Timeline, And Political Pressure

States had only weeks to prepare applications while most legislatures were not in session, forcing many to pledge changes without firm legislative buy-in. That created a dilemma: be specific and risk noncompliance if lawmakers later balk, or be vague and forfeit extra points. CMS will grade states at least four times through 2027 and 2028 and adjust funding based on compliance.

Some governors welcomed the pressure to try new solutions. Utah Gov. Spencer Cox described the program as a push to test ideas after years of limited progress. Others warned it amounted to coercion: Minnesota state senator Matt Klein called it “a bad way to care for human beings” and compared the incentives to “blackmail.”

Who Shapes The Agenda?

While Mehmet Oz, as head of CMS, will oversee the discretionary distribution of funds, Secretary Kennedy’s MAHA initiative influenced much of the program’s policy menu and applicant guidance. States were directed to an MAHA-specific email for application questions, and Kennedy publicly promoted several of the program’s favored measures during state visits.

Oversight And Precedent

Using federal dollars to influence state policy is not unprecedented: in the 1980s, highway funding was conditioned on states raising their drinking age to 21. Still, critics say the combination of scarce money, aggressive deadlines, and politically charged policy preferences risks advantaging states that align with the administration and punishing those that do not.

Bottom Line

The Rural Health Transformation Program offers substantial support for rural health but ties a notable portion of funding to policy commitments that cross into politically sensitive territory. States, already pressed by tight timelines and legislative calendars, must weigh the benefits of additional funding against concerns over local control and the feasibility of passing promised reforms.

“If you work on these policy changes at the state level, we will give you funding,” said Carrie Cochran-McClain of the National Rural Health Association, summarizing critics’ unease about the program’s unusually direct incentive structure.