The Long View  

On December 29, 2025, the Centers for Medicare & Medicaid Services (CMS) announced the highly anticipated funding awards to states for the Rural Health Transformation Program (RHTP)—a five-year, $50 billion federal initiative designed to stabilize and transform rural health systems across the country. This new federal investment marks a pivotal moment for states and their partners to address long-standing challenges in rural healthcare while laying the foundation for broader transformation. It provides an opportunity to reimagine care delivery, strengthen infrastructure, and build sustainable models that address entrenched gaps in rural health. 

Directing Resources to Rural Communities 

RHTP is designed with a focus on rural communities, where residents face persistent challenges such as provider shortages, hospital closures, and limited access to care. RHTP investments will support infrastructure development, IT system implementations and trainings, workforce recruitment and retention, and innovative care models tailored to rural community needs. The long-term goal is to create lasting capacity and resilience in rural health systems and promote better health outcomes for residents. 

But the vision doesn’t stop there. 

Catalyzing Statewide Transformation 

While rural communities are the primary beneficiaries, we believe the impact of the RHTP will extend beyond rural borders. The program’s design encourages states to develop initiatives that can serve as pilots and start-ups, creating scalable solutions that can be adopted statewide. Workforce development programs, for example, may begin by focusing on rural providers and community health workers (CHWs) and training these individuals but, over time, strengthen the healthcare workforce across entire states and regions. 

Much of the federal funding will enable states and their partners to invest in technology modernization, telehealth expansion, and integrated care models. These improvements assuredly will enhance access and quality for rural residents. And these same technologies can be deployed to enhance efficiency and coordination across entire health systems, laying the groundwork for broader system transformation and health improvement. The focus on chronic care management and innovative care arrangements has the potential to improve outcomes for all populations. 

Collaborative Pathways for States and Partners 

States and their partners—including health systems, community-based organizations, and technology innovators—have a valuable opportunity to collaborate on initiatives. In our review of state applications and the initial wave of state driven funding solicitations, we identified efforts to tackle long-standing system challenges, including: 

• Data Sharing and Interoperability. States responded to the federal application with extensive technology and data interoperability related investments that have statewide benefits. Several states include information system initiatives that can scale care coordination statewide, including initiatives to build dedicated teams for analytics, data integration, and evaluation and tracking outcomes across initiatives. They have an opportunity to create the statewide backbone—starting with rural hubs and then expanding interfaces systemwide. States also will be advancing consumer-facing technology for preventive and chronic care, grounded in statewide health information exchange (HIE) and data strategy, again testing first in rural settings and accelerating statewide adoption of effective approaches. 
• Maternal Health & Perinatal Care. Several states proposed embedding family medicine with obstetrics fellowships, expanding doula/midwife pathways, and deploying remote prenatal monitoring with support from nursing teams. These rural pilots could help standardize practice, improve outcomes, and scale across the state. Many other state proposals explicitly include initiatives to strengthen access to maternity care, linked to broader workforce and technology investments that can be adopted in urban settings. 
• EMS Modernization. States also plan to develop and strengthen emergency medical services (EMS)-led preventive and complex care support in rural areas. One application, for example, formalizes such EMS-led support in rural areas, with protocols and training designed to scale broadly. Another state references mobile health and EMS integration, creating rural pilots to improve response, navigation, and handoffs that can be standardized across the emergency care system. 

Looking Ahead 

RHTP is more than a funding stream. It is a catalyst for innovation and collaboration, providing an important avenue to address the chronic inequities in quality, access, and outcomes that people living in our nation’s rural communities often experience. But it also could foster improvement statewide. Program evaluation and performance monitoring of the small, community-based programs and the large-scale, multi-site, multi-year initiatives will provide insights that inform strategic decision-making at the local, state and federal levels. By scaling effective rural health-focused initiatives and investing in new and feasible tools, strategies, and programs, states can create models that improve care delivery for all their residents in the future. This is a moment for states, providers, and partners to think big and design programs that deliver lasting impact. 

Health Management Associates (HMA) offers support to state agencies, health systems, and community partners shaping rural-first pilots that are designed for scalability—from maternal and perinatal care networks, EMS community care models, caregiver and CHW pipelines, to telehealth modernization and behavioral health integration. Our rural expertise and our unique ability to combine expertise in clinical, operational, policy, and data reforms for care improvement are well-suited to the goals of RHTP. 

With the RHTP funding advancing to state partners early in 2026 and annual recalculations of state awards tied to performance, the time to design rural pilots that become statewide programs is now. 

For questions about the RHTP opportunities for your organization and the solutions HMA can tailor to meet the needs of your state, contact Kathleen Nolan and Andrea Maresca. 

Connecting the Dots: A new blog series for 2026 

Connecting the Dots is a monthly HMA blog series that brings together insights from our experts to examine the major policy, program, and market forces shaping healthcare coverage, delivery systems, and financing in 2026. The posts look beyond individual changes, instead connect emerging developments across programs and markets to help leaders understand what’s changing, why it matters, and how their decisions shape the path ahead. 

On February 11, 2026, the Congressional Budget Office (CBO) released The Budget and Economic Outlook: 2026 to 2036 report. The publication, which represents the first time CBO has released Medicare and Medicaid spending baseline projections since January 2025, reflects the impact of the 2025 Budget Reconciliation Act (P.L. 119-21, OBBBA), recent changes to Medicare reimbursement for skin substitute products, and the latest Medicare Part D and Medicare Advantage bids.

CBO’s baseline serves many functions, including serving as the official “scorekeeping” benchmark used for cost estimates of proposed legislation under consideration in Congress.

Changes to CBO’s Medicaid Baseline

CBO decreased its projections of 2026–2035 Medicaid mandatory outlays by approximately $514 million from its January 2025 baseline update. The main driver of that reduction is the impact of the Medicaid provisions in the 2025 Budget Reconciliation Act, which CBO expects will reduce total Medicaid enrollment by 13.1 million people in 2035. The drop in Medicaid spending from the OBBBA-related enrollment reductions was partially offset by technical changes CBO made to the Medicaid baseline.

Medicaid costs per enrollee grew by 16 percent in 2025, which was more than CBO had anticipated. The agency attributes the cost per enrollee growth to a reported decrease in the average health status of Medicaid enrollees following the end of the COVID-era continuous eligibility policy.

CBO anticipates that payment rates for Medicaid managed care plans will begin to rise in 2026 because of this decrease in the average health status of enrollees, and the agency has updated the Medicaid baseline accordingly (see Figure 1).

Changes to CBO’s Medicare Baseline

Compared with its January 2025 baseline, CBO increased its projections of Medicare’s 2026–2035 mandatory outlays by about $1 trillion (roughly $942 billion, by Health Management Associates (HMA) calculations). The main driver of that increase came from CBO’s updates to its Medicare Part D spending projections, which were increased to reflect higher than expected 2026 bids from private insurance plans that administer the Part D benefit. According to their 2026 bids, Part D plans anticipate a 35 percent increase in their annual per enrollee costs in 2026—a trend that CBO was not expecting and wants to study further. Part D spending per beneficiary in 2035 is now projected to exceed $4,000, up from less than $3,000 in the January 2025 baseline (See Figure 2).

The agency’s Medicare Part A fee-for-service (FFS) spending projection increase was the result of larger than expected increases in 2025 enrollment and per enrollee spending. Those trends were also seen in Medicare Part B FFS but were partially offset by the Centers for Medicare & Medicaid Services’s (CMS) recent reimbursement changes to skin substitute products. Overall, CBO estimates that the skin substitute reform issued in CMS’s Medicare Physician Fee Schedule (MPFS) and Outpatient Prospective Payment System (OPPS) CY 2026 final rules will save $245 billion over the 2026–2035 period, including the effects on the Medicare Advantage (MA) program (see Figure 3).

Finally, CBO reduced its spending projections for MA compared to the January 2025 baseline. This change was made to reflect lower-than-expected Medicare Advantage enrollment in 2025, although the spending implications of lower enrollment were partially offset by higher-than-expected bids in 2026 by providers of MA plans (see Figure 4).

Contact an HMA Expert Today

Interested in understanding how CBO’s latest baseline update affects the federal budgetary implications of certain Medicare or Medicaid policy topics or proposals? Contact our experts, Mark Desmaris and Rachel Matthews, to learn more about HMA’s “CBO-style” federal budgetary scoring work, which relies on The Moran Company’s long-standing methodology. [1]

Beyond federal budget scoring, HMA is working with states, health plans, and providers to assess how changes in enrollee health status are affecting utilization, costs, and payment rates—and what those trends may mean for Medicaid and MA organizations and providers. Our teams support states in evaluating managed care rate setting and program design, help Medicaid and MA plans anticipate risk and bid implications, and assist providers in understanding how changes in patient acuity could affect care delivery, contracting, and financial performance.

[1]Specifically, we apply our understanding of CBO precedents to predict how CBO will likely evaluate the budgetary impact of the legislation in question. We use our best judgment to adopt the assumptions CBO would tend to use, with the understanding that any variance in the assumptions CBO ultimately adopts could cause our estimate to differ from theirs.