Another Program Won't Secure Quality Rural Healthcare

In rural America, quality medical care can be hard to come by.

The Rural Health Transformation Program that's part of the budget reconciliation package that became law this summer aims to change that.

The $50 billion program seeks to improve healthcare access, quality, and outcomes in rural America. All worthy goals. But the fund also carries significant dangers.

Even the most well-intentioned government initiatives can easily fall victim to corruption, graft, and abuse.

For the Rural Health Transformation Program to avoid this fate, our leaders must ensure that it doesn't devolve into a slush fund that rewards entities adept at gaming the byzantine rules governing our healthcare system.

There's no question rural America faces healthcare challenges.

Roughly 80% of rural areas are medically underserved. More than 100 rural hospitals shut their doors between 2013 and 2020.

More than 91% of rural counties are currently experiencing physician shortages.

The chronic scarcity of medical care in rural areas helps explain why people who live there exhibit poor health outcomes.

Life expectancy for America's rural population is nearly two years shorter than for those living in urban areas.

Mortality rates for everything from heart disease to cancer, stroke, and unintentional injury are far higher in rural parts of the country.

Disparities like these are a big reason why Congress created the Rural Health Transformation Program.

Half of the $50 billion earmarked for the program will be distributed equally to all approved states.

The Centers for Medicare and Medicaid Services will decide how to hand out the remaining half, based on factors like the proportion of rural health facilities in a state and the size of a state's rural population.

How can federal officials ensure that money actually benefits rural patients? The Paragon Health Institute has offered a number of suggestions in a new paper.

First, the funds must go to rural communities exclusively — not to urban health systems. That might seem obvious.

But already, hundreds of hospitals in urban areas, including many large academic medical centers, have managed to get themselves classified as "rural" in order to extract extra money from Medicare.

Consider how other initiatives designed to benefit vulnerable populations have played out.

The 340B drug program, for instance, requires drug makers to sell medicines to certain hospitals and other "covered entities" at a steep discount.

These providers then mark up the prices of those drugs for private insurers and Medicare. The expectation is that they'll use that extra revenue to serve more low-income and uninsured patients.

But providers are increasingly abusing 340B. Even hospitals in affluent communities are taking advantage — and keeping the excess revenue from the mark-ups they charge for themselves.

There's also little oversight to ensure that hospitals deploy the savings they receive from 340B into serving their communities.

An estimated 65% of 340B hospitals spend less on charity care than the average U.S. hospital.

State and federal officials must ensure that the same kind of impropriety doesn't occur within the Rural Health Transformation Program.

Second, it's crucial that any efforts funded by the program be sustainable enough to continue after its funding expires in five years. Otherwise, lawmakers will lobby to renew the initiative indefinitely — at enormous cost to taxpayers.

Third, federal officials should consider using the funding to encourage states to roll back regulations that prevent providers from increasing the supply of care in a market.

State certificate-of-need laws, for example, force providers to convince regulators that there's a "need" for a new facility in a given community.

That process can effectively allow incumbent providers to lobby against the entry of competitors.

Patients — and market forces — should be the ones to decide whether a community needs new healthcare facilities.

Expanding telehealth services should also be a priority. Finally, states should consider creating incentives for healthcare workers in training to complete rotations in rural communities as a means of alleviating personnel shortages in these areas.

The Rural Health Transformation Program's funds must be used in ways that expand access to care in rural areas over the long term.

Otherwise, it will become just one more example of a well-meaning government initiative derailed by powerful interests adept at gaming the system. 

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It." Follow her on X @sallypipes. Read more of Sally Pipes' reports — here.