CMS Announces Rural Health Transformation Program State Awards and Support
The Centers for Medicare & Medicaid Services (CMS) has announced that all 50 states will receive awards under the Rural Health Transformation Program, a $50 billion, 5-year initiative included in H.R. 1. $10 billion is available for distribution each year, with half evenly distributed to states with approved plans, and the other half awarded “based on individual state metrics and applications that reflect the greatest potential for and scale of impact on the health of rural communities.”
What happens now?
In 2026, states will receive first-year awards from CMS averaging $200 million within a range of $147 million to $281 million. CMS also announced the establishment of the Office of Rural Health Transformation (ORHT) within the Center for Medicaid and CHIP Services (CMCS) to oversee the program. Lead by Director Alina Czekai, the ORHT will guide states in implementing their rural health transformation plans, provide technical assistance, and coordinate federal and state partnerships for the duration of the program, which will run through September 30, 2031. Each state will have a dedicated CMS project officer, and the states will also convene annually at the CMS Rural Health Summit.
Court Blocks HHS Move to Freeze $10B in Federal Funds to 5 Democratic States
In response to a lawsuit filed by the states attorneys general of California, New York, Minnesota, Illinois, and Colorado, a federal judge on Friday, January 9, temporarily blocked the Department of Health and Human Services (HHS) from freezing $10 billion in federal social services funding to the 5 Democratic-led states. HHS officials, who announced their intention to freeze the states' funding earlier last week, argue that the action is necessary to crack down on fraud, while the states call the move unconstitutional. The judge's temporary restraining order will last 14 days, while the court considers the case further. If the funding freeze is allowed to move forward, $7 billion will be cut from the Temporary Assistance for Needy Families (TANF) program, $2.4 billion from the Child Care Development Fund (CCDF), and $870 million in social services grants.
Congress Advances Three More Spending Bills; Further Action Needed Before Jan. 30
Congress is expected to vote this week on three additional full-year spending bills covering the Departments of Interior, Commerce, and Justice, as well as the Environmental Protection Agency and U.S. Army Corps of Engineers. This action comes ahead of the January 30 expiration of the current Continuing Resolution (CR), which has been funding much of the federal government since November. That CR also enacted full-year funding for agriculture, military construction, veterans affairs, and the legislative branch. Negotiations continue on the remaining six appropriations measures, including the bill funding the Departments of Labor and Health & Human Services. Before the current CR expires, Congress will need to pass another package that includes a new CR and any full-year bills that can secure bipartisan agreement. It remains unclear whether the next CR will extend funding through the end of the fiscal year or only provide another short-term patch and force Congress to continue work on FY26 funding.
Why it matters:
Failure to pass additional funding measures before January 30 could lead to a partial government shutdown, disrupting federal services and programs. The outcome of these ongoing negotiations will determine whether agencies receive stable, full-year funding or face continued uncertainty under short-term extensions.
Federal Medicaid Outlook
Implementation of H.R. 1: Following the release in December of initial guidance from CMS to states to inform implementation of the new Medicaid community engagement provisions (aka: work reporting requirements) required by H.R. 1, Nebraska has become the first state to develop a plan to implement them. Most states, however, are awaiting greater clarity from CMS on numerous technical questions impacting their financial and operational actions. In our recent letter to CMS, we made recommendations of ways to better support states and providers through the implementation process in order to protect access to care.
What else are we watching?
Medicaid Cuts and Impact on HCBS: We are also tracking the impact of the Medicaid funding cuts in H.R. 1 on home- and community-based care, where staffing shortages are set to worsen in the coming months according to KFF’s latest survey of Medicaid home care programs, in which all responding states (49 plus DC) reported shortages of home care workers and most states (41) reported permanent closures of home care providers within the last year.
Enhanced Affordable Care Act (ACA) premium tax credits remain in limbo
Following House passage last week of a bill reauthorizing for three years the Affordable Care Act (ACA)’s enhanced advance premium tax credits, the measure faces an uncertain future in the Senate, even as negotiations continue between Democrats and Republicans on healthcare issues more broadly. Democrats’ latest proposal would pair a three-year renewal of the tax credits with extensions of other expiring health provisions, while on a separate track, a bipartisan Senate group has been floating a package that would extend the tax credits along with new restrictions Republicans favor, such as eliminating $0 premiums. There are still considerable hurdles, with most Republicans remaining opposed to any kind of ACA tax credit extension, and the current open enrollment period closes on January 15.
What’s Ahead in January?
Capitol Conversations: Join Us on January 15
Join us for our first Capitol Conversations of the new year for a discussion on what we are expecting for the first few months as Congress gets back to work. We will discuss what’s ahead for Medicaid, appropriations, workforce, and health and housing issues.
The discussion will feature the following speakers:
- Ilene Stein, Vice President for Government Affairs at the Center on Budget and Policy Priorities
- Luis Zaldivar, Project Director at the American Business Immigration Council
- Andrew Fuller, Program Director for Housing and Human Needs at the Evangelical Lutheran Church in America
Lutheran Services in America government relations and advocacy staff will also share updates specific to ongoing efforts to engage with members of Congress.
If you have already registered for an upcoming session, please note the updated registration link below. You must re-register using the new registration form for each individual session that you would like to attend.
