What the New Federal Program Means, Why It Matters, and How the State Plans to Use Nearly $1 Billion
When Congress passed HR 1, the One Big Beautiful Bill Act (OBBBA), in July 2025, it made deep cuts to health care but also created a $50 billion Rural Health Transformation Program. Congress said the goal of the program is to help rural communities rebuild strained systems, modernize infrastructure, and expand access to care.
States had until November 5, 2025, to submit plans to the Centers for Medicare and Medicaid Services outlining how they will strengthen rural health systems between 2026 and 2030. Funding awards will be finalized by the end of the year.
Texas — home to the largest rural population in the country — submitted its application. And the price tag is significant: $968 million, nearly $1 billion in potential federal investment for rural health in Texas.
But before diving into the initiatives, it’s worth asking: Why does Texas need such a massive investment — and what exactly is the state proposing to do with it?
Why Rural Health in Texas Is at a Breaking Point
As outlined in HHSC’s application, more than 4.3 million Texans live in 202 rural counties across one of the country’s largest land areas, and many face significant barriers to basic health care. Rural Texans are older, have lower incomes, and experience higher rates of chronic illness and disability — all while living in communities with very limited local care options. Nearly one in five Texas rural counties has no primary care physician, and every rural county is a mental health shortage area. Additionally, more than 90 Texas rural hospitals have stopped delivering babies, creating some of the largest obstetric deserts in the nation. For many families, that means traveling 70 miles or more for maternity care, specialty care, or even routine visits.
At the same time, Texas rural health systems are strained by financial instability, outdated infrastructure, and persistent workforce shortages. Forty percent of rural hospitals across the nation operate with negative margins, and 15% carry high long-term debt. Furthermore, aging buildings and equipment make service delivery and recruitment even more difficult. Rural areas also tend to have higher rates of uninsured residents, which limits hospitals’ revenue from patient care and exacerbates financial instability. Technology gaps — including limited broadband, outdated IT systems, and inadequate cybersecurity — further limit telehealth and data-sharing capacity. Shortages of physicians, behavioral health providers, pharmacists, EMS personnel, nurses, and community health workers round out a system that is stretched thin and struggling to meet the needs of rural Texans. At Texans Care for Children, we’re particularly concerned with the shortage of rural providers supporting the mental health of children and parents, including those involved with Child Protective Services (CPS) and the foster care system.
What HHSC Identified as Texas’ Greatest Rural Health Needs
In its application, HHSC named six statewide priorities:
- A stronger, more stable workforce
- Better access to primary, behavioral, obstetric, and preventive care
- Financial stability for rural hospitals and clinics
- Modern technology, broadband, and cybersecurity
- Better chronic disease prevention and management
- Transportation and connectivity solutions
These themes closely reflect what rural communities have described for years: a system stretched thin, aging infrastructure, limited technology, and a workforce shortage that threatens access to care.
How Texas Proposes to Use Nearly $1 Billion in Federal Funds
Texas’ application outlines six major initiatives totaling $968 million — a multi-year investment that could make a real improvement in rural health if the funds are spent effectively and aligned with the needs of rural communities.
Initiative 1: Make Rural Texans Healthy Again
$218 million • Prevention, nutrition, chronic disease management
Grants to rural hospital districts would support diabetes education, nutrition programs, remote monitoring, wellness centers, and low-cost access to primary care — targeting chronic conditions that contribute to high costs and negatively affect the health and well-being of rural Texans.
Initiative 2: Rural Texas Patients in the Driver’s Seat
$150 million • Patient-facing health technology
A significant investment in patient portals, remote monitoring, health information exchange, and digital literacy is designed to help rural patients manage their care and communicate with providers.
Initiative 3: Lone Star Advanced AI & Telehealth Network
$150 million • AI-enabled care coordination and specialty access
A unified statewide telehealth and AI system to support diagnostics, documentation, care navigation, billing, and risk detection — with telehealth hubs for communities lacking broadband.
Initiative 4: The Next Generation of the Small Town Doctor and Team
$200 million • Workforce recruitment and retention
Texas’ most significant non-infrastructure investment would fund scholarships, signing bonuses, training pipelines, mentorship programs, and recruitment support for physicians, nurse practitioners, physician assistants, behavioral health providers, emergency medical services, and community health workers.
Initiative 5: Unified Care Infrastructure & Rural Cyber Protection
$100 million • Modern IT systems and cybersecurity
A cloud-based shared system for billing, reporting, and patient data, paired with statewide cybersecurity upgrades — essential for protecting patient information and maintaining operations.
Initiative 6: Rural Healthcare Infrastructure & Capital Improvements
$150 million • Equipment and facility upgrades
Support for CT scanners, ultrasound machines, EMS vehicles, generators, and facility repairs — aimed at stabilizing local access and addressing years of underinvestment.
Our Three Recommendations for Successful Implementation
Texas’ proposal is ambitious. To help it succeed, we urge state officials to provide careful oversight and policy leadership in three areas:
1. Technology Investments Must Include Clear Accountability and Sustainability
More than half of the plan is technology-focused. These systems have the potential to improve care if they are implemented effectively and maintained over time. To ensure these investments deliver lasting value, Texas leaders should prioritize strong accountability and sustainability measures as the plan is implemented.
For a program of this scale, successful implementation will require:
- clear and measurable performance metrics,
- required public reporting on system performance and outcomes,
- vendor accountability through enforceable contracts tied to delivery and functionality, and
- dedicated plans and funding to maintain and update systems after initial implementation.
Without these safeguards, technology investments risk becoming “shiny but short-lived,” a challenge rural communities have encountered when new systems launch without long-term support.
2. Implementation Should Be Paired with Strategies to Strengthen Rural Providers’ Financial Stability
HHSC correctly identified financial instability as a major challenge facing rural health systems. While this federal funding opportunity cannot address every barrier to rural health care, implementation of the plan should be complemented by broader state strategies that stabilize rural hospitals and clinics over time.
Some initiatives may improve capacity, but long-term sustainability depends on a stable financial foundation. Rural providers operate on thin margins, face high levels of uncompensated care, and rely on predictable reimbursement to remain open. The state currently has the highest uninsured rate in the nation, while nearby states like Arizona, New Mexico, Oklahoma, Arkansas, and Louisiana have much lower uninsured rates than Texas. As a result, in many cases rural hospitals are not compensated for the care they provide.
To ensure the investments in the state’s application translate into lasting access, Texas must continue prioritizing:
- strong Medicaid and CHIP access for currently eligible Texans,
- reducing uninsured rates in rural counties, and
- reliable provider reimbursement.
Technology alone cannot keep a hospital open, and equipment alone cannot stabilize a clinic. Financial stability is essential for these federal investments to achieve their intended impact.
3. Successful Implementation Should Include Targeted Investments in Rural Maternal Health
One of the needs HHSC highlighted in its application was:
“Improved Access to Care — Especially Obstetric, Primary, Behavioral, and Preventive Care.”
Long travel distances to basic and specialty care, including labor and delivery services, expose patients to delayed treatment and worse outcomes.
As implementation moves forward, Texas leaders should prioritize strategies that strengthen rural maternity care capacity, particularly in communities that have lost labor and delivery services. With more than 90 rural hospitals having closed or ended obstetric care, Texas faces one of the most severe rural maternity care shortages in the nation.
Expanding access to maternal health providers — including community-based doulas, certified nurse midwives, and certified professional midwives — can help fill gaps in care and support safer births closer to home. At the same time, fully implementing 12-month postpartum Medicaid coverage will be critical to ensuring continuity of care after delivery.
Together, these approaches would strengthen maternal health systems in rural Texas and help mitigate the impact of hospital closures on families.
The Bottom Line
Texas’ Rural Health Transformation Plan positions the state to secure nearly $1 billion in federal funds — an unprecedented opportunity to modernize infrastructure, strengthen the workforce, and expand preventive care.
But true transformation will require:
- strong accountability and performance metrics for technology spending,
- policies that address the long-term financial stability of rural hospitals and clinics, ensuring patients — including children and pregnant moms— have access to Medicaid and CHIP, and
- meaningful investment in rural maternal health care and labor and delivery access.
Rebuilding rural health is not just about new systems or upgraded equipment. It’s about ensuring that every rural Texan — from newborns to older adults — can get quality care close to home.
When rural health systems thrive, all of Texas benefits.
