New Mexico will receive about $211 million over five years to expand rural health care access under a new $50 billion federal program, though state officials have not yet said which hospitals or communities will benefit when funding begins in 2026.
The Centers for Medicare and Medicaid Services announced Jan. 5 that New Mexico secured $211.5 million in the first year of the Rural Health Transformation Program, slightly more than the state requested for a single year. The five-year initiative aims to address workforce shortages, expand specialty care and modernize rural health facilities across all 33 counties.
However, the same federal law will likely cut New Mexico’s Medicaid funding by an estimated $8.5 billion between 2028 and 2037, according to the New Mexico Health Care Authority. As reported by the New Mexico Political Report in July 2024, state senators warned those cuts could force six to eight rural hospitals to close within 18 months.
While the Rural Health Transformation Program provides an immediate infusion of one-time grant funding, it does not replace the long-term, predictable revenue lost from permanent federal Medicaid reallocations. This distinction is what critics call a “funding cliff,” as hospitals may build new programs they cannot afford to maintain once the five-year federal grant expires.
“This $211.5 million federal investment recognizes New Mexico’s bold plan to transform rural health care delivery across all 33 counties,” the agency’s secretary, Kari Armijo, said in a statement.
Armijo said the state’s award exceeds the program’s $200 million national average and that officials are “ready to put these resources to work for the families who need them most.”
Health and Human Services Secretary Robert F. Kennedy Jr. called the initiative a “historic investment” that “puts local hospitals, clinics and health workers in control of their communities’ health care.”
As Searchlight New Mexico reported in December 2024, the state applied for $1 billion over five years. The proposal directs nearly $400 million to a “Healthy Horizons” program to expand specialty care and chronic disease management in rural areas. Another $243 million would support rural workforce development, $188 million would fund competitive grants for rural and tribal health projects and $53 million would create a statewide health data platform.
The Rural Health Transformation Program will distribute $10 billion a year through 2030. Half of the funding will be distributed evenly to participating states, with the rest based on rural population, health system needs and proposed policy changes. First-year awards ranged from $147 million to $281 million, according to the Centers for Medicare and Medicaid Services (CMS).
CMS Administrator Mehmet Oz called the awards an “extraordinary milestone for rural health in America” and said states are “stepping forward with bold, creative plans to expand rural access, strengthen their workforces, modernize care and support the communities that keep our nation running.”
Julia Ruetten of the New Mexico Hospital Association said in July 2024 that while new funding would help, the timing raises concerns.
“I do have concern that it’s setting up a future cliff in terms of supplemental federal funds that hospitals will utilize or be reliant on,” Ruetten told the Albuquerque Journal.
The association could not be reached Jan. 5 for comment on the announcement.
The program ends in 2030, while the Medicaid cuts that created it are permanent, raising questions about how rural hospitals will stay afloat once the funding expires. Analysis by health policy group KFF shows the program will offset only 37% of the Medicaid funding rural providers are expected to lose nationwide.
The state submitted its 128-page application in November 2024, citing high chronic disease rates, long travel times for care and hospitals operating on thin margins. Gov. Michelle Lujan Grisham called the program a “critical lifeline” for rural communities in her letter introducing the application.
State officials have not said which hospitals or clinics will receive funding first or when implementation will begin.
More information about New Mexico’s rural health transformation plan is available on the agency’s website at hca.nm.gov/rural-health-transformation-program.
This report relies on a 128-page application submitted by the New Mexico Health Care Authority to the Centers for Medicare and Medicaid Services (CMS) in November 2024. Figures regarding future Medicaid funding cuts were provided by the Authority, while the analysis of the program’s ability to offset those losses was conducted byKFF, a nonpartisan health policy research group. All dollar amounts were rounded to the nearest million for clarity.