The Trump administration is giving Arizona about two-thirds of what Gov. Katie Hobbs sought in newly available federal aid to help shore up rural health care.
New figures from the Center for Medicare and Medicaid Services show each state is getting $100 million in 2026 — and identical amounts for the following four years — under the Rural Health Transition Program. That $5 billion a year is designed, at least in small part, to help states deal with the future loss of federal Medicaid dollars.
Arizona, however, did not do as well as many other states in the first allocation of the other $5 billion Congress set aside for each of the next five years in its "Big Beautiful Bill'' to support the delivery of health care in rural areas. Those funds were parceled out by CMS based on its analysis of how each state's plan complies with the broad requirements of the law to strengthen and sustain rural health care.
Of that $5 billion, Arizona got less than $67 million of that money for 2026; the average among all states was $100 million.
The Governor's Office has no idea why Arizona got less than the average, Hobbs' press aide Christian Slater told Capitol Media Services.
"Arizona has contacted CMS to inquire about the agency's scoring methodology and award allocations,'' he said.
Some of it may be based strictly on demographics.
Having fewer people getting Medicaid benefits is a problem for hospitals.
The funds are specifically designed to strengthen rural health care. And while Arizona is the 14th-largest state by population, the United Health Foundation says it is the eighth most urbanized state, with just 11.5% of its residents living in rural areas.
Slater said that, no matter how much Arizona gets in the next four years, the whole thing is a bad deal.
He pointed out that the $10 billion in the federal law to be divided among the states over each of the next five years — half by giving each state an allocation and half through the award process — is tiny in comparison to what Arizona is set to lose. Other provisions in the bill will slash Medicaid spending in just this state by $34 billion over 10 years, he said.
Various changes in the law will leave hundreds of thousands of Arizonans without health insurance, "further straining rural hospitals'' that won't be able to make up the difference with whatever the state gets of that $10 billion a year, Slater said.
"The administration is shortchanging rural Arizonans in failing to give our communities the support they need to blunt the devastating impacts of the federal attacks on health care,'' he said.
All that refers to changes included in the "Big Beautiful Bill."
One involves expanded work requirements in the federal legislation, including for adults without children and non-disabled individuals.
Gov. Katie Hobbs
The new law says that, effective in 2027, states must deny coverage for some who are not already working at least 80 hours per month or participating in some other acceptable activity such as education or community service. There are exceptions based on age and health or whether the person is a caregiver for someone younger than 14.
But that's just part of the issue.
The federal law says applicants must reverify their eligibility every six months — it's currently annually — and must provide specific documentation. Foes have said that will result in some otherwise qualified people being kicked off the rolls for failing to fully comply.
All that has implications for the Arizona Health Care Cost Containment System, the state's Medicaid program, which currently provides care for about 2.1 million residents, about a quarter of the state's population.
One estimate by the Joint Economic Committee of Congress figures that more than 190,000 Arizonans will lose their AHCCCS coverage because they can't provide the required documentation. KFF, which studies health policies in the United States, says that figure could be as high as 360,000.
Having fewer people getting Medicaid benefits, in turn, is a problem for hospitals.
Recipients now get routine and preventative care from their doctors paid for through AHCCCS. Without such coverage, they are more likely to end up using hospital emergency rooms and showing up there with more expensive and complicated issues.
And federal law precludes hospitals from turning away patients with emergencies, even if they cannot pay.
Moreover, beginning in 2028, the federal legislation scales back a system that allows hospitals to essentially tax themselves, but in a way that draws down more federal dollars that can be used to make up for uncompensated care they provide. A lower cap on that tax means fewer Medicaid dollars coming in — perhaps by $6 billion over a five-year period.
In submitting the application last month, Hobbs cited some data to show the specific needs of rural areas.
For example, she said the median 2023 income in urban areas was $79,142, versus $55,766 in rural areas. The unemployment rate was 4.9% in urban areas against 7.5% in rural areas.
There are also key health differences.
In rural areas in 2024, the mortality rate per 100,000 from cancer was 228, versus 163.8 in urban areas. The rates of death also were higher from cardiovascular disease, diabetes, and Alzheimer's and dementia. Babies born in rural areas were also more likely to die, with women having a higher rate of not getting prenatal care.
The plan submitted by Hobbs, a Democrat, for the state's share of the $25 billion over five years said it was focused on "four strategic pillars'' of what she called the $200 million Arizona Rural Health Transformation Plan.
- Increased recruitment and retention of rural health-care providers, including financial incentives to retain or relocate existing health professionals, and training grants;
- Expanded telehealth use statewide, with $45 million for electronic appointments and mobile clinics;
- Improved outcomes for maternal and infant health, chronic disease management and behavioral health, with a $27 million price tag;
- Increased participation in preventive care services, leading to fewer hospitalizations and less reliance on emergency services.
"Through data-driven planning, cross-agency coordination, and community partnerships, our plan will ensure that every Arizonan — regardless of geography — has access to high-quality, coordinated, and sustainable care,'' the proposal said.
Slater said there's still a chance Arizona could do better when CMS divides up the 2027 cash. But he said that with less money — at least this coming year — he had no immediate answers to what out of Hobbs' proposal will not get funded.
"By Jan. 30 we're basically supposed to propose an updated plan that will have that information,'' he said. "But I don't have anything to share with you on that front right now.''
