Montana has been awarded approximately $233 million for the first year of the federal Rural Health Transformation Program. This program represents a five-year, nationwide investment aimed at enhancing rural health care services and infrastructure. The state could potentially receive $1.2 billion in grant money by 2031 if funding continues at the initial level.
Program Origins and Purpose
The federal rural health fund, totaling $50 billion for all states, originated from House Resolution 1 (H.R. 1), a tax-and-spend bill signed in July 2025. This fund was established in conjunction with efforts to reduce federal Medicaid health insurance program funding for low-income individuals. According to Ed Buttrey, president and CEO of the Montana Hospital Association, the fund's purpose is to support small rural facilities that may be significantly impacted by Medicaid cuts, helping them with workforce development, right-sizing, and long-term sustainability.
Potential Medicaid Revenue Loss vs. New Funding
Congressional analysts estimate H.R. 1 will reduce federal Medicaid spending nationwide by over $900 billion over the next decade. A 2025 report by the Montana Health Care Foundation projected Montana could lose between $4.8 and $6.1 billion in federal Medicaid funds over a decade, an amount substantially greater than the new rural health investment. Buttrey expressed hope that thoughtful use of the rural health funds could offset some of these losses, for example, by ensuring eligible Medicaid recipients remain enrolled or by creating new revenue streams for hospitals.
Montana's Proposed Initiatives
Montana's program application outlines five high-level initiatives:
- Develop workforce through recruitment, training, and retention.
- Ensure rural facility sustainability and access through partnerships and restructuring.
- Launch innovative care delivery and payment models.
- Invest in community health and preventative infrastructure.
- Deploy modern health care technologies to guide rural health interventions.
Specific projects may include creating a statewide bed registry, financing IT and electronic health record system upgrades, and purchasing new software and equipment for emergency medical services.
Center of Excellence Proposal
The largest single funding proposal in Montana's application allocates $418 million over five years to establish a Center of Excellence within the state health department. This entity aims to develop a "rural health supply and demand fact base" for Montana and recommend aligning care delivery services with rural health needs. The objective is to encourage facilities to shift from underutilized inpatient services to in-demand outpatient services to improve financial viability.
- The Montana Hospital Association has raised concerns regarding a uniform approach and advocates for individualized assessments of each facility's needs.
- The Montana Medical Association hopes the center will foster regional health care networks and data sharing, and incentivize value-based services.
Funding Restrictions and Distribution
The federal grant generally prohibits the use of funds for physical infrastructure, such as adding new hospital wings. However, funds can cover infrastructure costs directly linked to carrying out initiatives, such as furnishing a new lab or purchasing EMS equipment. The award is a statewide cooperative agreement with the Centers for Medicare and Medicaid Services (CMS). Montana is required to submit a detailed budget by January 30 for federal review. The state is expected to issue "Request for Proposals" (RFPs) for contractors, including rural health providers and association groups, to bid on projects within the five initiatives.
Upcoming Steps
The state health department has formed a Rural Health Transformation Program Advisory Committee to provide input on funding allocation and ongoing projects. The committee's first meeting is scheduled for January 22 in Bozeman to discuss project goals and gather public feedback. This meeting will not involve decision-making or funding awards.