Wyoming Has a Wild Idea to Make Federal Rural Health Money Last Forever — and CMS Is Deciding Whether to Allow It

Cheyenne, Wyoming — Wyoming officials have a creative proposal for their share of a new $50 billion federal rural health program: invest it like an endowment and stretch it for decades. Whether the federal government will actually allow that is another question entirely.

The state is set to receive $205 million in the program’s first year — $5 million more than it requested. Now it wants to deposit the bulk of that money into what it calls a Rural Health Transformation Perpetuity Fund, investing the principal in stocks and bonds and spending only 4% annually, in line with expected investment returns.

“Rather than spend out now, we would have this available to help fund us over a longer time period,” said Patrick Hardigan, dean of the College of Health Sciences at the University of Wyoming.

If approved, Wyoming could generate about $28.5 million for rural health programs every single year — indefinitely.

How the Money Would Be Spent

The state’s proposed legislation lays out a detailed spending plan. Roughly 41% of annual distributions would go toward incentive payments for small hospitals and rural nursing facilities, including one-time grants, medical debt relief for patients, and ongoing subsidies to offset fixed operating costs.

That could amount to 2.5% to 10% of a qualifying facility’s annual operating budget — a meaningful cushion for facilities that are often running on the thinnest of margins.

Another 27% would support rural ambulance services, with strings attached: providers would need to reduce duplicate or unnecessary services and participate in regional coordination arrangements. Nearly a quarter would fund scholarships for nursing, behavioral health, and emergency services students, conditioned on five-year work commitments in the state.

The legislation passed out of Wyoming’s House Appropriations Committee in February with a unanimous vote.

CMS Has Not Said Yes

The catch is that the federal Centers for Medicare and Medicaid Services has not clearly greenlit the plan.

CMS told officials in some states last November that grant funds cannot be used to create “an endowment, capital fund, or other vehicle resembling an investment fund with the purpose of generating income.” Wyoming’s application argues its fund would not turn a profit — all investment returns would go directly to rural health programs.

Stefan Johansson, Wyoming’s health department director, said CMS called him in December with questions about the fund and that he believes the agency has effectively approved it. But he acknowledged the details are still being worked out.

Kevin Bennett, director of the South Carolina Center for Rural and Primary Healthcare, said he’s never seen another state try this with federal health grant funding. “I think states will try to do a lot of creative things like this, and CMS will approve or not on a case-by-case basis,” he said.

The Bigger Picture

The Rural Health Transformation Program was created last summer as a sweetener to offset rural communities’ concerns about the One Big Beautiful Bill Act, which is expected to cut Medicaid spending by close to $1 trillion over the next decade. Since 2010, 152 rural hospitals across the country have shut down or stopped offering inpatient care.

Wyoming’s perpetuity idea stands out from every other state that submitted applications. While the state’s health chief is optimistic, he did not sugarcoat the risk — CMS retains the authority to claw back misspent funds for decades.

“I can’t predict the future,” Johansson said. But for the least populous state in the country, a perpetual funding stream could mean the difference between keeping rural care facilities open and watching them disappear.

Rural facilities already face mounting pressure from Medicaid reimbursement shortfalls. As industry reports have noted, rural nursing homes have been pushing for permanent federal policy fixes rather than relying on temporary waivers and stop-gap programs.

Wyoming’s bet is that one federal program — invested wisely — could provide that stability for good.

Source: KFF Health News. Photo: Pexels.