Mid-Atlantic Health Law TOPICS

The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025. The OBBBA has a broad reach over many areas of the government and the economy, including several provisions that impact health care providers.

Many of the health care provisions either increase or decrease overall federal health care spending, and Congress framed those provisions primarily within four areas: Medicaid Program Integrity and Financing, Medicare Services and Eligibility, Affordable Care Act Tax Credit Reforms, and Rural Health Provider Support.

This article is the first in a series of three articles, and addresses two provisions of the OBBBA where there will be an increase in federal spending on health care, namely the Rural Health Transformation Program, and a temporary increase to Medicare Part B payments under the 2026 Medicare Physician Fee Schedule.

Congress dedicated additional financial resources in these two areas partially to offset anticipated reductions in federal health care spending in Medicaid and Medicare beginning in 2026.

Rural Health Transformation Program 

Beginning in 2026, CMS will spend up to $10 billion annually to improve the health of residents living in rural areas under a new Rural Health Transformation Program (RHTP). The Senate created the RHTP to offset the financial concerns of rural health care providers because many rural populations, and in turn rural providers, rely disproportionally on Medicare and Medicaid to pay for health care services.

For a state’s rural health providers to receive any funding, each state must submit an application to establish a threshold rural health care service plan.

While the Centers for Medicare & Medicaid Services (CMS) has yet to provide its “rural health transformation application”, the OBBBA directs CMS to require states to provide details involving the provision of health care to rural residents; the increased training of rural providers and their alignment into strategic partnerships with rural hospitals; the implementation of data driven care, preventative care, and chronic care management; the prioritization on rural health care provider solvency; and the identification (and prevention) of the causes of insolvency of rural hospitals.

States that file a satisfactory application by a December 31, 2025, deadline will receive at least a pro rata portion of the first $5 billion of RHTP funds each year from 2026 to 2030. That means that Maryland can receive at least $100 million per year from 2026 to 2030 for rural health initiatives. ($1 Billion divided by 50 states equals $100 Million.) The OBBBA specifically excluded any non-state jurisdictions, such as the District of Columbia, from receiving RHTP funds.

CMS has limited discretion to award the other $5 billion annually under specific statutory criteria. CMS must award the discretionary amount each year to at least one-fourth of the qualified applicants (or 13, assuming that all 50 states apply).

When making its discretionary award, CMS must take into account each state’s percentage of its population that resides in a rural census tract, the proportion of rural health facilities in the state in proportion to the number of rural health facilities nationwide, the financial situation of disproportionate share hospitals, and any “other” criteria that CMS implements.

When determining the type of rural health facilities to be funded, the OBBBA requires CMS to broadly include acute care and primary care facilities, including hospitals, rural health clinics, federally qualified health centers, community mental health centers, opioid treatment programs, and behavioral health clinics. Notably, any number of private, for-profit health care providers who do not meet these specific requirements will not be considered.

Curiously, the OBBBA-mandated criteria do not include any of the application requirements, nor do they directly take into account the amount of state or federal medical assistance program funding currently or previously provided to rural health care providers.

Once the funding is allocated, each state will be required to develop, submit, and receive approval for its annual rural health spending plan, all subject to statutory and yet-to-be determined CMS guidelines. Each plan must explain how the state will achieve better health care for rural residents.

The OBBBA also prohibits states from spending more than 10% of its allocation on administrative expenses.

Medicare Physician Fee Schedule (MPFS) 

The OBBBA provides some relief to Medicare Part B providers with a one-time 2.5% increase in the MPFS reimbursement for calendar year 2026. This is identical to CMS’s proposed decrease for 2026 due to an “efficiency adjustment” from the Medicare Economic Index, meaning that the MPFS will 
remain flat in the aggregate.

The MPFS impacts more than just physicians. Other health care professionals and Medicare suppliers are paid under the MPFS, including physical therapists, Advanced Practice Nurses, and more. Many commercial health insurers, state Medicaid agencies, Tricare, and others use the MPFS as the basis for setting commercial rates, Medicaid rates, and various public health care policies. 

Impact

The RHTP and the MPFS adjustment go into effect in 2026, which means that neither will increase reimbursement to health care providers in 2025. However, providers supporting rural communities should begin to assess how they can help their state apply for RHTP money.

Those providers already aligned through Advanced Alternate Payment Models, such as MSSP ACOs or bundle payment programs, may have an inherent advantage in obtaining and providing data to their respective state agencies.

Christopher P. Dean
410-576-4249 • cdean@gfrlaw.com