Rural health care systems have been in crisis for decades, a situation that will become more dire when steep cuts to Medicaid kick in next year.

These communities were seemingly offered a lifeline in 2025 — a $50 billion, five-year fund focused on establishing sustainable, high-quality care for rural Americans. But as states now start to spend the first tranche of money, the shortcomings of the hastily devised plan are becoming increasingly clear. That could turn a welcome investment into a missed opportunity.

It’s not that rural communities don’t need help. Rural Americans are, on the whole, less healthy than their urban and suburban counterparts, with more chronic conditions and worse access to insurance. And rural health-care systems face daunting challenges: The communities they serve are getting older, sicker and smaller, and have historically struggled to attract and retain providers. What’s more, both private and public insurance reimbursement systems seem to work against rural hospitals.

Those underlying challenges are about to get worse, with the Trump administration’s looming $880 billion cuts to Medicaid. The public insurance covers more than 10 million rural Americans, according to the healthcare consulting firm Chartis. When work requirements kick in next year and millions start to lose coverage, rural areas stand to lose some $137 billion over the next decade, according to a KFF analysis.

The financial strain could intensify amid surging costs for Marketplace health-insurance plans. Nearly 3 million rural residents are covered by ACA plans, and almost 80% of them previously didn’t have to pay an insurance premium thanks to Biden-era subsidies, according to the National Rural Health Association. But Republicans blocked the renewal of those tax credits, a move that is projected to leave as many as 4 million Americans uninsured — and leave hospitals providing more uncompensated care.

That’s a big hole to be filled by the five-year, $50 billion Rural Health Transformation Program, which was a last-minute addition to Trump’s budget bill to win over Republican lawmakers in largely rural states.

But there’s a wrinkle: The Centers for Medicare and Medicaid Services crafted the fund to emphasize building the rural health-care system of tomorrow, rather than address the structural challenges of today. Just 15% of the funds can be used to pay providers. The rest must go towards meeting a handful of goals like promoting Health Secretary Robert F. Kennedy Jr.’s Make America Healthy Again agenda and implementing technology like AI and telehealth.

Rural health systems do need to invest in the future. But as one health-care provider told me, the fund is like a tow truck showing up when you have a flat and offering you a new airbag instead of a tire. Sure, the airbag might be useful in the long run — but it isn’t going to solve your immediate problem.

And for rural hospitals now running on fumes, the immediate problem could cause their demise before the investment in long-term upgrades has a chance to pay off.

Already some 152 rural hospitals have closed since 2010, according to the University of North Carolina’s Cecil G. Sheps Center for Health Services Research. Much of the remaining rural hospital network is in a fragile financial state.

According to a Bloomberg Opinion analysis of cost reporting data from the Centers for Medicare and Medicaid Services, 82% of rural hospitals were operating in the red for at least one year between 2014 and 2023 — and 46% of those hospitals had negative margins for five or more years. Meanwhile, far fewer patients are admitted for care at rural hospitals: In 2011, the typical rural hospital saw about 900 inpatients, a figure that had dropped to 500 by 2023. (1)

To survive, hospitals have cut expensive services like maternity care, pediatric critical care and chemotherapy. As a consequence, pregnant women living in rural areas are more likely than their urban peers to be admitted to the ICU or even die. In some states, the majority of families have to drive over an hour to get to see a specialist or reach a facility that can provide pediatric emergency services.

The Medicaid cuts alongside other cost challenges could make matters worse. States have already begun to trim back coverage in advance of work requirements setting in next year, and some health care systems are laying off staff, cutting services or closing clinics in anticipation of tougher times ahead. UNC Sheps researchers told Congress that Trump’s One Big Beautiful Bill would put some 300 hospitals at risk of closure.

Even if rural health systems can weather the immediate financial strain of Medicaid losses, there are real questions about whether future-proofing efforts can be effective.

States were given very little time — less than two months — to develop proposals to fix the crisis. And the awards weren’t granted based purely on need and application quality, but weighed whether states were advancing administration priorities, such as adopting the Presidential Fitness Test in schools. A recent analysis found that design skewed funding toward states that voted for Trump.

Meanwhile, as states try to push money out to programs, they might not have the time and certainty they need to be successful. In some states, lawmakers are still bickering over how money should be spent. In others, rural health leaders reportedly feel left out of the process.

Even the most coordinated states could struggle to get programs off the ground. That’s because under the current plan, awards are reassessed each year to ensure that the money is being well spent. That might fit into this administration’s stated goal of rooting out waste and fraud, but runs counter to building a thoughtfully implemented, long-term solution for a problem as gnarly as the rural health crisis.

“One of the challenges is that there’s really no long-term stability,” says Jed Hansen, executive director of the Nebraska Rural Health Association. “It’s really difficult to be transformative when I can only invest in a way that gets me to the end of the calendar year.” For example, some new programs require hiring staff, which is more difficult when the funding for those jobs might evaporate in a year.

Future-proofing the rural health care system and investing in prevention alongside treatment is a good idea. Everyone deserves high-quality care, regardless of their ZIP code. But without putting more effort — and money — into stabilizing rural health care systems now, that long-term investment could be wasted.

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—With assistance from Carolyn Silverman.

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(1) Our analysis looked at more than 2,000 general hospitals in ZIP codes classified as rural according to the Federal Office of Rural Health Policy. We converted hospital fiscal years to calendar years and annualized all measures. Operating margins on patient services are for the 1,992 rural providers with complete cost reporting information from 2014 to 2023.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, health care and the pharmaceutical industry. Previously, she was executive editor of Chemical & Engineering News.

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