CMS announces year-two awards by October 31. Behavioral health and SUD providers can reach the money only through their states.
Key Takeaways
- The allocation: Every state won a first-year award, from New Jersey’s $147 million to Texas’s $281 million, in a five-year federal program totaling $50 billion.
- The behavioral health share: Addiction and mental health care are named uses in the law, and 38 states made them a focus of their applications.
- The constraints: Providers cannot apply to CMS directly, service payments to providers face a 15 percent ceiling, and year-one money expires at the close of fiscal 2027.
- The next window: Second-year award decisions land this fall, so provider access now hinges on each state’s procurement timetable.
Minnesota’s Department of Health describes its share in the language of a federal grant notice, as a financial assistance award totaling $193,090,618.14, funded entirely by the Centers for Medicare and Medicaid Services. Texas, which received the largest first-year award, reported its figure to a state public health committee in February as $281,319,361 for the first budget period, then added a slide explaining that its health agency could not discuss procurement or eligibility with potential applicants. Both documents describe the $50 billion Rural Health Transformation Program and its basic arrangement. The money goes to states, and everyone else, including the addiction and mental health organizations many state plans single out, waits for the state to decide how to spend it.
That wait is ending. Many states have released requests for proposals to select subrecipients, the Bipartisan Policy Center has noted, and CMS is due to announce second-year awards by the end of October, according to a timeline compiled by KFF. Required progress reporting to CMS was set to begin in August, and those reports inform the next round of funding decisions. For providers, the program has moved from a policy announcement to a procurement calendar.
How the Rural Health Transformation Program Divides $50 Billion
Congress created the program in the July 2025 reconciliation law, Public Law 119-21, and provides $10 billion a year from fiscal 2026 through fiscal 2030. Half of each year’s money is split equally among approved states, and CMS distributes the other half using factors that include rural population, the state of rural facilities and its scoring of each state’s proposed initiatives. When CMS announced the first awards on December 29, 2025, every state received one, averaging $200 million and ranging from $147 million in New Jersey to $281 million in Texas.
Because half the money is divided evenly, awards track rural need only loosely. A KFF analysis found that first-year funding ranged from less than $100 per rural resident in ten states to more than $500 in eight, with Texas, the largest recipient, receiving $66 per rural resident. KFF also set the program beside the reconciliation law’s projected Medicaid reductions, estimated at $911 billion in federal spending over ten years, including about $137 billion in rural areas. Acuity’s coverage of California’s H.R. 1 implementation traced how those enrollment changes reach behavioral health providers, and the comparison shapes how rural organizations weigh five-year grants against lasting changes in Medicaid coverage.
Behavioral Health and SUD Services Among the Program’s Permissible Uses
HHS’s award announcement described the kinds of structures states intend to build, including hub-and-spoke models, rural regional centers of excellence, shared data platforms and rural clinically integrated networks, alongside tests of new primary care and value-based care models. Those are the vehicles through which behavioral health money is most likely to travel.
The statute names mental health and addiction care outright. Among the permissible uses listed on Medicaid.gov is support for access to opioid use disorder treatment, other substance use disorder treatment and mental health services. The list also covers workforce recruitment with multiyear rural service obligations, technology and IT upgrades, innovative care models with value-based arrangements and limited capital improvements. States must spread their plans across at least three permissible uses, and program terms cap direct payments to providers for services at 15 percent of a budget period’s funds, according to a briefing by California’s Department of Health Care Access and Information. Administrative costs are capped at 10 percent, as the National Rural Health Association has noted. The association has also estimated that the program would offset about 37 percent of the reconciliation law’s $137 billion reduction in rural federal Medicaid funding, a projection that frames the program as partial relief rather than replacement revenue. Texas’s February briefing added a practical detail on facilities: minor renovations and alterations are allowed when clearly linked to program goals.
States used that opening widely. The National Academy for State Health Policy, which reviewed state applications, found behavioral health to be a central focus across many plans, and a NASHP presentation to a Council of State Governments Medicaid leadership academy in August counted 38 states with a behavioral health focus. The strategies cluster around integrated primary and behavioral health care, the crisis continuum, the rural behavioral health workforce and the embedding of mental health and substance use services in broader payment and technology investments. On crisis care specifically, NASHP describes states making broad investments in statewide infrastructure to improve coordination, stabilization and follow-up after a crisis, the part of the continuum where mobile teams and receiving centers depend on steady funding. North Carolina proposed developing Certified Community Behavioral Health Clinics within regional care networks, and Alabama proposed converting community mental health centers into certified clinics, the model whose ten-state Medicaid expansion Acuity covered in July.
Policy Commitments and Clawback Risk in State Rural Health Plans
The awards carry conditions that bear on how stable a state’s program will be. CMS scored states partly on policy actions they had enacted or committed to adopt, and it can reduce future funding or recover money if those commitments are not met. BPC’s analysis adds that scoring credit extends to policies formally introduced or promised by the close of 2027, and two of the scored actions concern the workforce: licensure compacts and scope of practice expansion. For behavioral health employers, those commitments could change who is allowed to deliver care within the program’s five years, independent of how any subaward is spent.
The workforce provisions connect directly to behavioral health. Recruitment funds require five-year rural service commitments, and state plans include paraprofessional training, health career pathways and clinical recruitment, with at least one state proposing retention incentives for behavioral health staff, according to NASHP. Acuity’s coverage of the behavioral health workforce shortage and Medicaid peer support reimbursement describes the gap those investments aim to fill, along with the durability problem that follows when grant-funded positions need a payer after the grant ends.
How Behavioral Health Providers Can Reach Rural Health Transformation Funds
Only the 50 states can receive awards, as CMS states on its program page, so providers reach the money through subawards, contracts and partnerships. Texas’s February presentation illustrates what that means. Its health agency described procurement and eligibility as matters to be settled through contracting and declined to discuss them with prospective applicants in advance, a standard procurement posture and a signal that the solicitation documents, when they appear, will serve as the rulebook. The 15 percent cap on direct provider payments shapes the opportunity as well. Much of the money is structured to build capacity through networks, technology, workforce and facilities rather than to pay claims.
Timing is the other constraint. States must spend first-year awards by September 30, 2027, and CMS will redistribute unused funds, with all money due to be spent by the end of fiscal 2032, according to KFF. States owe CMS the first of thirteen quarterly reports by November 29, 2026, a final report is due February 27, 2031, and any money still unspent on October 1, 2032 returns to the Treasury. Providers already named as partners in those state applications can move quickly when solicitations open. Organizations with experience in collaborative care and other integrated models will find that grant dollars obligated on a deadline tend to favor partners whose capacity is documented before the solicitation is written.
CMS’s second-year announcement, now weeks away, will show how the agency adjusts awards after the program’s first year. For rural clinics and treatment programs, the more immediate calendar is local: the dates on which their own state posts its solicitations, and the definitions of eligibility those documents contain.
