DHHS outlines HR1 rural health grant timeline; states must apply quickly and cannot supplant existing funding

Sarah Acre, executive director of medical services at the North Dakota Department of Health and Human Services, briefed the Budget Section on HR1 (the Rural Health Transformation program) and the compressed federal timeline for the state application.

Acre said HR1 provides $50 billion to states over five years, split evenly between baseline funding (equal allocations to approved states) and workload (competitive) funding that CMS will score based on demographic factors and the policy merits of a state’s application. States submit a single application covering five years (HHS said guidance arrived Sept. 15) with an application due date of Nov. 5; CMS will notify states of awards by Dec. 31. North Dakota expects the baseline distribution and believes it can secure significant workload funding given rural scoring factors, but the total workload award will be set by CMS.

HR1 requires states to spend funds on at least three areas such as prevention/chronic disease management, provider payments, consumer technology for health outcomes, workforce (with minimum retention periods), training and technical assistance, and infrastructure renovations within limits. The law forbids supplanting existing funding, limits administration to no more than 10% of total funds, and caps certain provider payment categories. States must obligate funds rapidly; the federal timeline requires states to obligate within a year and spend by the end of the following year or risk reallocation.

Acre said DHHS launched a survey (Aug. 13–Sept. 12) that collected over 1,200 responses and will hold listening sessions with providers and the public in October. She said the department will seek authority to accept funds through the emergency commission and coordinate with the governor and OMB; legislative leadership announced plans to form an interim group to provide legislative input within the tight timeline. Lawmakers asked whether baseline and workload use a single application (Acre: yes), whether the program supplants federal matching funds (Acre: it cannot supplant; it is new money), and how the program interacts with Medicaid policy changes. Acre said CMS may adjust future awards based on a state’s progress against application commitments and cautioned that some items (new construction, pre‑award costs, and certain reimbursable services) are unallowable.