Community Health & Wellness

Rural health program will send $181 million to Washington state

Posted on January 12th, 2026 By: Conor Wilson

A new federal program aimed at improving health care in rural communities awarded Washington more than $181 million last week. State leaders argue the money will be helpful, but ultimately will fail to offset anticipated revenue shortfalls from Medicaid cuts.

The large sum comes from the Rural Health Transformation Fund, a $50 billion program in the so-called One Big Beautiful Bill that Congress passed in July. Congress intended the fund to allay worries about the legislation’s cuts to Medicaid and how they would impact rural hospitals.

Medicaid is a government insurance program that covers Americans with low incomes or disabilities. It is a crucial funding source for hospitals, especially in rural areas. Nearly a quarter of revenue at Mason General Hospital in Shelton, for example, comes from Medicaid patients. For hospitals on the Kitsap Peninsula, that rate is closer to 15%.

Rural areas will still fall short

Cuts to Medicaid take effect next year and are expected to put more than 600,000 Washington residents at risk of losing insurance coverage, according to the state health care authority. That will drive up uncompensated care.

The investment from the rural health program, though large, is not expected to backfill this revenue loss. An analysis by nonpartisan health nonprofit KFF last year estimated it will cover about 37% of that revenue loss in rural areas.

“This funding will not replace the dramatic cuts imposed by the Republican-led Congress and the White House,” Gov. Bob Ferguson said in a statement. “But these funds will help fortify rural communities against what’s to come. It is a significant investment in Washington’s rural health care.”

The fund will pay annual installments to all 50 states over the next five years, through 2030. Half of that award is distributed evenly. The other $25 billion was doled based on criteria outlined by the Centers for Medicare & Medicaid Services.

Washington ranked 41st in awards size. Texas led the country by about $100 million. Per capita, Washington is getting about $100 more per person than Texas, which has significantly more rural residents.

Where the money goes

The state plans to spend the funds on six topics, including funding infrastructure and maintenance needs at rural hospitals and supporting at-risk emergency, maternal and specialty care, according to its application. It will also go toward developing a rural workforce, behavioral health care, and investments in tribal care. Funding will be directed to a variety of agencies, including hospitals, clinics, tribes, and the state’s two flagship universities.

Funding will support all 39 counties in Washington, according to the governor’s office. Only 22 counties are considered fully rural, but rural areas of urban counties, like those in Kitsap and Pierce County, could also receive funding. Washington state Health Care Authority Director Ryan Moran said in a statement the funding would ensure the state’s 1.1 million rural residents could access care close to home.

“It supports the hospitals, clinics and providers that rural families rely on every day, and helps strengthen the systems that keep care accessible, safe, and sustainable,” he said.

New state taxes

Jacqueline Barton True, vice president of advocacy and rural health for the Washington State Hospital Association, agreed the funding would not be enough to offset the changes and cuts coming to Medicaid, adding that state hospitals remain in a precarious position.

“It’s going to continue to be a struggle for all of Washington’s hospitals and health care providers,” she said in an interview.

Cuts to Medicaid come in tandem with state changes, Barton True said. Those state changes will create more difficulty for hospitals, which have widely struggled to regain profitability since the pandemic.

The state levied additional taxes on business operations and payroll last year, impacting large hospitals. Additional hurdles could be on the horizon as the state looks to patch another budget deficit this year. After plugging a $16 billion budget gap last year, Washington will need to address another $2.3 billion hole this year, according to Ferguson’s office.

“We were the only industry last session that was both subject to new cuts and new taxes and we just can’t sustain [that] anymore,” Barton True said. “Now we’re seeing in the governor’s initial budget additional cuts to health care. So we are really concerned about how our hospitals are gonna continue to take these cuts, and frankly, not sure how that’s going to happen.”