Minnesota bags almost all of requested $200M federal grant to boost rural health care

Fearing political reprisals from President Donald Trump’s administration, Minnesota leaders were relieved late last month when they received almost all of the $200 million in federal grants they requested to boost rural health care in the state in 2026.

Now they have precious few months to invest the $193 million in areas such as telehealth and rural training and show progress before the 2027 funding application deadline hits this summer. The Minnesota Department of Health (MDH) is adjusting its health goals based on the actual award and soon will court hospitals, clinics, public health agencies and tribes to use the money and prove it makes a difference.

“There are big financial changes coming in health care, especially rural health care,” said Zora Radosevich, director of MDH’s Office of Rural Health and Primary Care. “We’re excited by the opportunity to better prepare for that and get our rural health facilities and providers as prepared as they can be.”

One analysis found Democrat governor-led states received less of the discretionary funding. But at a time when the Trump administration is hammering Minnesota for allegedly fraudulent use of social service dollars, state health leaders worried Minnesota’s application would suffer.

An amount just $7 million of the requested total was a “pleasant surprise,” said Diane Rydrych, director of MDH’s health policy division.

Rural health care providers were already struggling with funding and worker shortages before Congress and the Trump administration approved a budget in 2025 that could strip as much as $1 trillion from Medicaid in the next decade.

The publicly subsidized health plan for people with disabilities or low incomes has become a growing source of health insurance in Minnesota, especially in rural areas. Medicaid covers about one in four residents under Medical Assistance in Minnesota or MinnesotaCare.

The program guaranteed each state $100 million per year for five years, but the rest was a product of complex formulas involving rural geography and need. Texas gained $281 million this year while New Jersey received $147 million. Minnesota’s award was slightly below average, given the relative size of its rural population, according to a KFF analysis. North Dakota benefited the most, gaining $198 million that will stretch farther because of its small population.

Minnesota’s application featured measurable five-year goals, including a 10% increase in Medicaid recipients accessing medical care via telehealth, a 10% reduction in avoidable hospital readmissions in rural areas and a 4% increase in rural patients using disease-management programs to keep conditions such as heart disease and diabetes in check.

The rapid installation of technologies and personnel to achieve these goals in future years is the measure of success in year one.

Minnesota is unique among states in that more of its rural hospitals and health care providers have avoided closure. The state has the fourth-highest total of “critical-access hospitals” that receive federal payment boosts to stay open and serve rural communities. But some are just hanging on; 31 Minnesota hospitals were financially distressed at the end of 2023, and 27 of them were in rural communities.

One analysis predicted Fairview Range would close because of the cuts to Medicaid, which pays for the majority of patients admitted to the Hibbing hospital’s regional psychiatric unit.

“We want to move as quickly as possible, given that we also have to do it right,” Rydrych said.

Ideas in Minnesota’s grant proposal include mental health urgent care centers so people in psychiatric crises can avoid detention in jails or transport far from their homes. Investments in artificial intelligence technologies that organize clinical notes and records could allow rural providers more time to spend with patients as well.

Minnesota isn’t starting from scratch. One goal is to increase the number of providers that are large enough to provide value-based care, which means the quality of patients’ outcomes determines providers’ pay, rather than the number of tests and procedures.

Twenty small hospitals already formed the Headwaters Network to pool their outcomes and qualify for value-based payments from insurance plans.

Sanford Health has expanded its use of integrated health therapists who provide mental health care by phone or video conference. Therapist Melissa Cook lives in Woodbury but sees patients from across northern Minnesota who appreciate the accessibility and privacy of virtual visits, she said.

Beyond telehealth visits, many providers are interested in expanding the use of wearable devices such as watches and sensors so they can monitor the health of their patients remotely, Rydrych said.