Rural Health Transformation Program

On July 4, 2025, P.L. 119-21, HR 1, or the One Big Beautiful Bill Act (OBBBA), was signed into law. Among several provisions, it created the Rural Health Transformation Program (RHTP), a $50 billion fund for rural healthcare providers. All 50 states are eligible to apply for this funding. 

HFS submitted Illinois’ application for funding to the federal Centers for Medicare and Medicaid Services (CMS) on Nov. 5, 2025. 

Illinois’ application for the Rural Health Transformation Program is geared toward creating a stronger and more accessible health care system in the rural communities in our state. The Department looks forward to the Center for Medicare and Medicaid Services’ (CMS) funding allocation announcement by the end of calendar year 2025. HFS applied for a total of $1 billion, or $200 million per year over five years, as instructed by the federal Centers for Medicare and Medicaid Services (CMS). Federal CMS instructed every state to apply for this same amount.

Illinois’ application was informed by extensive stakeholder feedback about how to best support rural communities in the state. Before submitting the application, HFS engaged with other state agencies, provider associations, rural hospitals and health centers, community mental health centers, universities and community colleges, legislators and vendors. HFS also held a listening session with nearly 300 attendees and received over 120 written public comments and proposals.

Other provisions within HR 1, the federal law that created the program, are expected to result in deep federal Medicaid funding reductions in rural areas. According to an estimate from KFF, rural health care providers nationally are expected to lose a collective roughly $137 billion because of HR 1, which is nearly three times the $50 billion allocated in the RHTP fund. Rural health care providers who serve Medicaid customers are vital for their communities, and HFS is committed to mitigating harm to Illinois Medicaid customers and providers during the implementation of these federal Medicaid changes and cuts. 

Funding will be distributed in $10 billion annual allotments from Fiscal Years (FYs) 2026 to 2030: 

• 50% of the funding will be allocated equally across all states that have approved applications; and  

• 50% will be distributed at the CMS Administrator’s discretion to “not less than one-fourth of the states with an approved application.”

States can apply to use the funds in a variety of ways, such as for promoting care interventions, paying for health care services, expanding the rural health workforce, and providing technical assistance with system transformation.