Millions v. billions: New health funds in rural Minnesota are welcome, but they won’t offset Medicaid cuts

A $193 million influx doesn’t seem miniscule – until it’s stacked against losses measured in billions.

The former figure is the amount of federal funding Minnesota will receive in year one of the Trump administration’s Rural Health Transformation Program. The fund will pump a total of $50 billion in $10 billion installments into states for rural health projects over the next five years. 

On its own, Minnesota’s $193 million is an exciting investment in the state, said Carrie Henning-Smith, co-director of the Rural Health Research Center at the University of Minnesota. 

“How could you not be excited about nearly $200 million coming into the state in one year?” she asked. But, she added, the funding comes at a time of deep cuts in a significant source of rural health funding: Medicaid. 

Related: Tim Walz says Minnesota is auditing payments in Medicaid programs vulnerable to fraudsters. But the scope of the audit is quite limited. 

In tandem with the Rural Health Transformation Fund, Republicans in Congress passed sweeping Medicaid cuts set to kick in this year. It’s worth connecting the dots between the two, Henning-Smith said, because Medicaid losses are projected to dwarf the rural health funding.

“There is some good that will come from this, and I’m excited to see what comes from it, but using that (Rural Health Transformation Program) as the lever to then pass a bill that is slashing Medicaid was really concerning,” she said. 

How does RHTP funding compare with Medicaid cuts?

Medicaid is a crucial funding source for hospitals and clinics, along with residents who rely on government-run health insurance. A KFF analysis estimated that Trump’s so-called One Big Beautiful Bill will reduce nationwide Medicaid spending in rural areas, which have high rates of reliance on the program and larger access gaps than non-rural areas, by $137 billion over the next decade. 

Minnesota’s estimated rural Medicaid funding losses total $4.34 billion over the next 10 years, according to KFF. The new health fund’s cash infusion over the next five years can’t offset losses on that scale, said Katherine Hempstead, a senior policy officer at the Robert Wood Johnson Foundation, a health-focused philanthropic organization. 

“It’s a one-shot deal, even though it’s being paid out over five years, versus cuts that are permanent,” she said.

Disparities between the two funding sources won’t be as pronounced over the next five years. They’ll become more glaring once the Rural Health Transformation Program runs dry. About 76% of Medicaid spending reductions were backloaded between 2030 to 2034.

That’s why sustainable funding for rural health care is so needed, Henning-Smith said, echoing a statement released by the National Rural Health Association. The association, which Henning-Smith is helming as board president this year, has summaries of state funding amounts and applications on its website.

In the statement, the association applauded the Trump administration’s “unprecedented federal investment” while reiterating that more will be needed to support providers and maintain care access. 

How does Minnesota’s funding compare to other states?

In the last days of 2025, states learned how much initial funding they’d get from the new program. The announcement by the Centers for Medicare & Medicaid Services (CMS) was much anticipated, capping off what had been a mad dash by all 50 states to submit applications.

Dr. Keith Stelter, a family medicine physician in Mankato, was involved in Minnesota’s application process as a member of the state’s Rural Health Advisory Committee. The state prepared a thoughtful proposal to meet a tight deadline, he said. 

States knew they’d receive money from one pot of guaranteed funding. The anticipation was about how much they’d get from the second pot. 

• Pot one totaled $5 billion, to be split evenly among 50 states. Minnesota’s share equals $100 million.
• Pot two totaled $5 billion, to be awarded on a discretionary basis. Minnesota’s share equals $93 million.

In health-care terms, a dollar amount can sound like a lot yet feel like a little, said Stelter, a past president of the Minnesota Medical Association. “It’s hard to say how far $193 million can go until you start really putting proposals together and seeing how far that can be spread around the state,” he said. 

Before the announcement, Hempstead said there was speculation on whether Minnesota’s application would be judged harshly for political reasons. She wondered whether the Trump administration would use the state’s Medicaid fraud narrative to put a thumb, or even an elbow, on the scale. 

Related: ‘Seismic’ Medicaid changes will be rough on rural hospitals

“There are a lot of reasons to think that there are considerations other than the quality and objective measures of need,” Hempstead said. 

Did this bear out? It would be naive to think politics weren’t involved at all, Henning-Smith said, but she doesn’t think it was a driving force.

Although “red” states received more discretionary funding on average than “blue” states, they tend to have more rural populations. Some “blue” states actually fared well in total and/or per capita allocations. California received the third-most total funding, behind Alaska and Texas, while Vermont and Hawaii received among the most dollars per capita. 

Purely population-based or land-area considerations would’ve pushed Minnesota above average. For whatever reason, it wasn’t one of the states that came out ahead. Minnesota’s $93 million from the discretionary pot puts it closer to the bottom of the heap – New Jersey’s $47 million – than the top – Texas’ $181 million. 

Many smaller states measured by residents and land area received bigger investments than Minnesota on a per-capita basis, including North Dakota and South Dakota. The CMS did consider land area among its criteria. 

Total population wasn’t a consideration, with CMS instead looking at percentages of residents living in rural areas. Minnesotans should’ve fared well enough in this metric, since an above-average amount of residents, 30%, live in rural settings, according to the Minnesota Department of Health’s application.

The remaining score factors used by CMS were: 

• Proportion of rural health facilities
• Uncompensated care
• Metrics that define a state as being a frontier
• Percent of hospitals receiving Medicaid 

None of the metrics stand out as red flags for sinking Minnesota’s chances at average to above-average funding awards. The opaqueness of the decision process makes it difficult to figure out what CMS prioritized most, Hempstead said. 

How will Minnesota’s $193 million be used?

The Minnesota Department of Health outlined five initiative areas in its $1 billion request over the program’s five-year period: 

• Preventive care and chronic disease management
• Recruiting and retaining talent in rural communities
• Sustaining care access to keep care closer to home
• Creating regional care models
• Investing in technology, infrastructure and collaboration

Henning-Smith and Stelter are eager to hear more specifics on what the state and health care organizations will do in these areas. Money could go toward expanded telehealth services, mobile health clinics, clinical rotations and worker recruitment and retention in rural areas, to name several examples.

Telehealth and worker recruitment are particularly interesting to Stelter. 

“It’ll allow some rural hospitals and health systems to pivot a little bit in some areas they might have wanted to put some money and energy into, but didn’t have any seed money to really move in that direction,” he said.

Related: The big, not beautiful, mental health care gap in rural Minnesota

Five years of funding isn’t a long time in health care, though. 

“That’s one of our concerns, that we could develop some really innovative and encouraging things, but then when the grant funding runs out, what are we going to do?” Stelter asked.

One thing the funding can only do so much of is directly support hospitals, thanks to a cap on such usage. The program is designed to look more upstream, seeking to lower health care needs in the long run, Hempstead said.

As good as this approach sounds, she suspects it’s a bit like trying to catch lightning in a bottle. Money dumped into the bottle might’ve been better spent on direct support for ailing rural health networks that will soon be losing Medicaid, a more direct source of funding. 

“It’ll take time to pay off if they ever do, whereas the problems health care systems face are more immediate,” she said.

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