Illinois will receive $193 million for each of the next five years to expand health care access for the approximately 1.9 million people in rural areas — or about $101 annually for every rural Illinoisan.
The money comes from the $50 billion federal Rural Healthcare Transformation Program fund, which Congress created to offset federal Medicaid spending cuts included in the One Big Beautiful Bill Act, or H.R. 1, that passed last summer.
But health care organizations said the money will not be enough to compensate for Medicaid cuts.
“These funds are good, and we’re going to put them to good use, but it’s not a solution,” said Jordan Powell, senior vice president of health policy and finance for the Illinois Health and Hospital Association. “It’s not going to mitigate the impact of the significant Medicaid cuts that are coming our way.”
The Illinois Department of Healthcare and Family Services said between 190,000 to 360,000 Medicaid recipients are at risk of losing coverage in Illinois because of new work requirements.
H.R. 1 also imposes a tighter cap on how much money states can raise for their Medicaid programs through provider taxes. The new limits will be phased in, starting in fiscal year 2028, and could reduce total Medicaid funding in Illinois by $4.5 billion a year by fiscal year 2031.
“Long term, we know a number of HR 1 provisions will have a devastating impact on healthcare in our state and present significant challenges with respect to maintaining equitable access to high-quality healthcare coverage for all Illinois residents,” the department said in a statement.
Illinois has 85 small and rural hospitals that serve as hubs for access to care for people who can’t travel long distances. Nearly 30% operate at a deficit, though, and most of the patients they serve are on Medicare or Medicaid, according to the Health and Hospital Association.
Powell described the new federal money as a bandage, not a permanent solution for the cuts Illinois hospitals will face. As Medicaid reimbursement decreases, he said, hospitals could be forced to reduce services like obstetrics, cut staff, or close entirely.
Rural population is only a small part of grant consideration
The amount each state received ranged from $147 million for New Jersey to $281 million for Texas, and rural population appeared to be only a small factor in the equation.
That means states like Texas, with the largest rural population in the country, got far less per rural resident than states like Rhode Island, which has the smallest. Texas received $66 per rural resident and Rhode Island, with a total award of $156 million, received $6,305 per rural resident.
Half of the total $50 billion was awarded to states equally, but the other half was awarded based on specific factors such as a state’s current or planned policies for rural health care and proposed ideas that align with federal Make America Healthy Again priorities.
Among its neighbors, Illinois has the second-lowest award amount. Michigan, with its $173 million award, is the only state with less.
In the Midwest, Michigan’s rural population is slightly larger than Illinois’, but it received only $83 per person compared to Illinois’ $101. Iowa, with fewer rural residents than Illinois, got $139 per rural person.
Illinois’ Priorities
When filling out the application to the federal government, Illinois’ HFS consulted provider associations, rural hospitals, community health centers, community mental health centers, universities and community colleges, legislators and vendors.
According to the department, the state’s application focused on:
Increasing the number of health care workers in rural areas with education, scholarships, training and incentive programs.Removing the barriers that rural residents face to getting health care by investing in mobile and telehealth services.Changing the way rural health care systems run by creating regional partnerships.
The federal government indicated a preference for “transforming systems,” not just supporting ongoing operating expenses.
HFS said the hospital transformation grants will be a good tool for expanding its existing Healthcare Transformation Collaboratives to rural areas. The state launched the collaborative effort in 2021 to improve health care outcomes and reduce disparities across the state. It involves providers sharing resources to meet the health needs of multiple communities and expand access to services like preventative and specialty care.
“Team-based care, in partnership with hospitals and primary care practices, looks to improve access to care for rural residents by building out infrastructure and technology in order to increase access to specialty services, transform healthcare delivery, and overcome known geographic barriers for these communities,” the agency said in an emailed statement.
Powell said increasing the workforce and cybersecurity at hospitals are some of the top priorities. After that, he said, expanding rural broadband internet and upgrading electronic health records are important.
“Workforce and technology were two of the main things that we heard from our members,” he said. “I think the state wants to emphasize better partnerships and collaboration between providers.”
‘Not a long-term fix’
Despite allowing rural hospitals and health systems to make needed improvements, Powell said he still doesn’t think the money will be enough to make up for losing Medicaid payments.
“It’s kind of like supplemental funding that’s going to help them survive just a little bit longer,” he said. “I would actually say a significant portion of them are facing slim to negative margins, as is. And so this is funding that, again, will maintain some stability and viability for these organizations. But it’s not a long-term fix.”
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.