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Pennsylvania Awarded $193 Million Under Rural Health Transformation Plan

Danna Casserly

In December, we reported on Pennsylvania’s Rural Health Transformation Plan (RHTP)—a comprehensive proposal the Shapiro Administration submitted to the federal government seeking up to $1 billion over five years to strengthen health care in the Commonwealth’s rural communities. Last month, Pennsylvania’s application was approved, and the state has been awarded $193 million for the first year of the plan.

 

What Was Awarded

In late December, the Centers for Medicare and Medicaid Services (CMS) announced that all 50 states would receive a share of $10 billion in first-year funding from the Rural Health Transformation Program—a new federal grant established by H.R.1, the budget reconciliation bill.

Pennsylvania’s $193 million award was slightly less than the $200 million per year the state had originally requested. Department of Human Services (DHS) Secretary Dr. Val Arkoosh noted that the state is making minor adjustments to its spending plan to accommodate the $7 million difference, but none of the proposed programs will be eliminated.

The funding is renewable over five years, with states able to get additional funding based on performance and spending.

 

How the Money Will Be Used

As outlined in our earlier coverage of the RHTP application, Pennsylvania plans to use this funding to address six priority areas identified through community engagement efforts:

  1. Technology – Like telehealth so you can see a doctor from home 
  2. Workforce – Helping rural areas get more health care workers like doctors, nurses, and other providers 
  3. Maternal health – Better care for pregnant women and new moms 
  4. Behavioral health – Mental health and substance use services 
  5. Care for older adults – Help for seniors to get the care they need 
  6. Emergency services and transportation – Getting people to care when they need it 
     

A central piece of the plan is the creation of eight Regional Rural Care Collaboratives (RCCs) that will coordinate regional health priorities, strengthen shared services, and expand access to primary and specialty care. The state also plans to offer rapid response grants to rural providers to address urgent needs while the RCCs take shape.

Importantly, direct payments to providers are capped at 15% of total funds. Most of the dollars must go toward workforce development, infrastructure upgrades, and innovative care delivery models. The funds cannot be used to pay for ongoing expenses like salaries or hospital operating costs, and they cannot replace federal funds lost from other cuts.

 

RHTP Funding in the Face of Medicaid Cuts

While the $193 million award is a welcome investment for Pennsylvania, advocates and health policy experts have been clear that this funding does not come close to offsetting the damage the federal Medicaid cuts will cause in rural Pennsylvania. The table below describes how the numbers compare. 

 

Measure Amount
PA’s first-year RHTP award $193 million
Maximum RHTP funding over five years ~$1 billion
Estimated loss to PA’s Medicaid program over the next decade (DHS estimate) $20 billion
KFF’s estimate of PA Medicaid losses over a decade $34–$57 billion
Estimated rural PA Medicaid losses over 10 years (KFF) $5.5 billion
RHTP benefit per rural PA resident (KFF) $78
RHTP benefit per rural resident nationally (KFF) $157

DHS Secretary Arkoosh has acknowledged the gap directly, stating that while the state is excited about what RHTP funding can accomplish, the approximately $1 billion in total RHTP grants cannot replace the $20 billion the state stands to lose in Medicaid funding.

The Medicaid cuts are expected to fall disproportionately on rural hospitals—many of which are already operating at a loss. Medicaid currently reimburses Pennsylvania hospitals just 71 cents on the dollar, and that rate is projected to drop further under the federal cuts.

Why did Pennsylvania receive a smaller share?

Pennsylvania represents roughly 4% of the U.S. population but received just 2% of first-year Rural Health Transformation funding—the 17th smallest award and the fourth fewest dollars per rural resident. While the amount each state receives is influenced by objective factors like rural population size and total square mileage, states could earn additional funding by agreeing to adopt certain Trump Administration policy preferences, such as restricting food stamp purchases on unhealthy products, reinstating the Presidential Fitness Test in schools, or requiring nutrition-focused continuing education for medical professionals. Pennsylvania did not commit to any of these measures in its application.

Why This Matters for Medicaid Enrollees

Pennsylvania has the third-largest rural population in the country, with more than 728,000 Medicaid recipients living in rural counties. Rural residents tend to be older, face higher barriers to care, and rely more heavily on government-funded insurance. Nearly a quarter of all Pennsylvanians are on Medicaid.

The combination of Medicaid cuts and the expiration of enhanced Affordable Care Act subsidies is expected to significantly increase the number of uninsured Pennsylvanians—putting additional strain on rural providers already operating on thin margins.

Between 2020 and 2023, eight acute care hospitals closed in rural Pennsylvania. Three additional rural hospitals closed their labor and delivery units in the past year alone. A recent analysis commissioned by the Hospital and Healthsystem Association of Pennsylvania estimates that 12 to 14 more facilities could be forced to reduce services or close entirely in the next five years without additional support.

PHLP will continue to monitor the rollout of RHTP funding and its impact on health care access in rural communities. We will also continue tracking the implementation of federal Medicaid changes and their effects on Pennsylvania enrollees.

 

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