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The Best Proposal We've Seen For Rural Hospitals

As you know, one of the compromises that was needed to secure passage of the OBBBA in the Senate was the $50 billion "Rural Health Transformation Program."

Paragon Health Institute has published a great brief outlining ideas on how to make this an actual "transformation program" and not just a handout. The stakes are considerable: nearly 200 rural hospitals have closed since 2005, and many more teeter on the edge despite decades of federal intervention.

The paper identifies what should become the central organizing principle for RHTP implementation: addressing uncompensated "stand-by" costs. This is the financial burden rural hospitals face in maintaining 24/7 emergency departments and obstetric services despite low and unpredictable patient volumes.

Here's the problem in concrete terms: current payment systems—whether Medicare, Medicaid, or commercial insurance—pay for services rendered. But they don't account for the fixed costs of simply keeping an emergency department staffed and ready, even when no patients walk through the door. For small rural hospitals serving 72% government payers (who reimburse below cost), this creates an impossible math problem.

The solution, the report argues, isn't open-ended subsidies. Instead, states should use RHTP funds to create temporary payment buffers that cover documented service deficits for the smallest rural hospitals (those under $45 million in annual expenses). Critically, these should include risk corridors that hold hospitals accountable for costs beyond reasonable thresholds, maintaining fiscal discipline while gathering data to inform permanent reforms.

The report also targets programs such as 340B and DSH. The 340B Drug Pricing Program was created in 1992 with admirable intentions: provide safety-net hospitals and clinics serving low-income patients, including rural hospitals, with access to discounted prescription drugs, allowing them to stretch scarce resources. The idea was that hospitals could buy drugs at deeply discounted prices negotiated by the federal government, then bill insurers at regular rates, using the spread to fund services for the uninsured and underinsured.

What actually happened illustrates everything conservatives criticize about poorly designed federal programs. The 340B program has metastasized from a modest initiative into the second-largest drug-purchasing program in America, with $66.3 billion in purchases in 2023. Worse, the primary beneficiaries aren't struggling rural hospitals or community health centers; they're wealthy urban health systems that have gamed the eligibility rules.

The Disproportionate Share Hospital (DSH) program, meanwhile, suffers from similar mission creep and misallocation. Established to compensate hospitals that serve a disproportionate number of low-income patients, DSH payments have become disconnected from actual need. The Medicaid and CHIP Payment and Access Commission (MACPAC) has repeatedly found "no meaningful relationship" between DSH allotments to states and the number of uninsured individuals, the amount of uncompensated care costs, or the number of hospitals providing essential services to vulnerable populations. Most damning: public teaching hospitals in urban settings receive more than half of total DSH funding. Like 340B, what was designed as a targeted safety-net program has become another stream of federal dollars flowing to large, politically connected institutions rather than the small rural providers and underserved communities the programs were meant to help.

Those programs are cautionary tales about what happens when federal programs lack clear targeting, rigorous oversight, and accountability measures.

How to fix it? The paper's recommendation is straightforward: require that RHTP funds actually stay in rural communities. This means establishing clear geographic criteria and preventing large urban systems from gaming the definitions. States should work with their rural health offices and community providers, not hospital association lobbyists, to determine funding priorities.

Here's where the program gets interesting from a conservative policy perspective: CMS has tied a quarter of RHTP funding to state policies that promote competition and expand access. States that eliminate certificate-of-need laws, expand scope-of-practice for nurse practitioners and physician assistants, and remove other regulatory barriers will receive more federal dollars.

This is smart policy design. Rather than simply throwing money at the problem, CMS is incentivizing states to fix the underlying regulatory dysfunction that restricts health care supply in rural areas. The research is clear: CON laws reduce quality, limit access, and increase costs. And yet, 35 states still maintain them.

For Republican governors and legislatures, this creates a win-win: implement reforms that align with free-market principles while maximizing federal funding for your state. And because states can receive partial credit for pledging reforms at application (with full credit upon implementation by 2027), there's a clear pathway and timeline.

Another clever idea from the paper has to do with workforce, which is also too scarce for rural hospitals. First, expanding scope-of-practice would allow physician assistants and nurse practitioners to work at the top of their licenses. Second, using RHTP funds for student stipends ($3,000 for a six-week rotation) would address the practical barriers that prevent health professional students from completing rural clinical rotations. Evidence shows that rural exposure during training significantly increases the likelihood of rural practice. This is seed money for long-term workforce development, not an entitlement. Third, strategic telehealth investments can extend specialist access without requiring every rural hospital to replicate full service lines. The key is avoiding duplication of the billions already appropriated for rural broadband and instead focusing on the technology and infrastructure needed to leverage that connectivity for health care delivery.

Perhaps the most important feature of RHTP is what it's not: a permanent new entitlement. The five-year window and October 1, 2032 sunset create urgency for states to implement sustainable reforms rather than becoming dependent on federal transfers.

This should be the test for conservative policymakers: Are we using RHTP to restructure how rural health care is financed and delivered, or are we just keeping inefficient institutions on life support for a few more years? The former advances the cause of accessible, affordable care; the latter wastes taxpayer dollars and delays inevitable reckoning.

This is what smart conservative policy looks like: not cutting with a hatchet, but smart investments that enable the creation of a better, and ultimately self-sustaining, system. If we can actually pull it off.

Anyway, we highly recommend the full report by Paragon.

NEW: CS3D Is Just One Way In Which Europe Exploits American Economic Vitality — Second in our article series on the EU directive CS3D and how it affects American business, in collaboration with Baron Public Affairs. Read and share!

Policy News You Need To Know

#Nukes — Another exciting announcement on the nuke front! The Army has announced the Janus Program, which will deploy commercially owned-and-operated microreactors at military installations using an innovative milestone-based contracting model borrowed from NASA's commercial space program. What's particularly noteworthy here is the emphasis on cutting bureaucratic red tape and leveraging Army nuclear regulatory authorities in partnership with DOE to accelerate deployment timelines, with Executive Order 14299 mandating operational capability by September 2028. The focus on "Nth-of-a-kind" production and supporting the full uranium fuel cycle signals an intentional strategy to rebuild domestic nuclear industrial capacity, which has atrophied considerably over recent decades. This approach of using defense procurement to catalyze commercial nuclear development could prove more straightforward as a way of doing industrial policy.

#Chyna #Manufacturing — You have probably seen videos or heard someone say something to the effect of: "I've been to Shenzhen, and Chinese manufacturing is light-years ahead of us." Physicist and manufacturing CEO Aaron Slodov had a very good thread pouring some cold water on that propaganda, citing a recent NIST report (PDF) on Chinese manufacturing. In particular, the report notes that only 37% of Chinese firms have achieved basic digitization, with a mere 4% hitting leading-edge standards. In other words, the Chinese did build lots of factories, but not many very good ones. Slodov also highlights China's strategy to deliberately build overcapacity, to flood the rest of the world with cheap products and eliminate competitors. He highlights China's Made in China 2025 plan, which "launched 33 'manufacturing innovation centers' (MICs) - R&D hubs for inventing new production methods - backed by $300B+ in funding." The goal was to "replace every foreign product," but not only that, "replace the foreign manufacturing technology itself." The plan "targeted 50-70% domestic share in high-end CNC machines, robot core components, industrial software, smart manufacturing IT." In other words, the Chinese are not yet at our level, but they're moving fast. Writes Slodov: "US Manufacturing USA gets $160M annual federal funding for 18 institutes. Germany's Fraunhofer gets $374M, investing ~20X more relative to GDP. We're letting china outspend us on manufacturing process R&D while we still lead in actual innovation."

#Chyna — A recent CBS News report highlights growing national security concerns regarding Chinese entities acquiring agricultural land near sensitive US military installations, as well as building large cyrptocurrency mining operations. Former Trump administration official David Feith warns that the cryptocurrency mining operations, which are large datacenters, could be used to facilitate intelligence collection or even potentially sabotage the electrical grid. Meanwhile, land next to US bases could be used for kinetic attacks using modern drone technology; Feith cited Ukraine's successful strikes on Russian military targets as a proof of concept. Still, there are some encouraging developments on the policy front: 29 states have already moved to restrict or ban foreign farmland purchases, and the Ag Department rolled out a seven-point plan this summer to increase transparency, impose stricter penalties for false reporting, and work with Congress to block adversarial nations from further acquisitions. Given that Chinese law compels even nominally private Chinese companies to cooperate with Beijing's intelligence apparatus, this issue demands continued vigilance and potentially stronger federal legislation to close remaining loopholes in our national security framework.

#BigTech — A new lawsuit alleges Amazon manipulated Prime Day pricing by inflating baseline "list prices" before applying discounts. Coming on the heels of Amazon's $2.5 billion FTC settlement over deceptive Prime membership practices—a case that began under Trump 1.0 but accelerated under Lina Khan—the complaint presents another data point in the ongoing tension between traditional Republican deference to corporate prerogatives and the populist-nationalist right's increasingly skeptical view of tech giants' market power. The specific allegations here (that Shokz earbuds were advertised at 40% off a $179.95 "list price" that hadn't existed for 90+ days, when they'd actually been selling for $130-$160) speak to consumer protection concerns that cut across ideological lines. It's an occasion to ask whether our historical aversion to consumer litigation and pricing regulations remains tenable when dealing with platform monopolies that command unprecedented market dominance.

#Islamism #FarLeft — Rep. Stefanik and Sen. Cotton have sent a new letter to Treasury Secretary Bessent requesting an investigation into the organization's potential financial links to Hamas, the Washington Free Beacon reports. The group's funding sources are closely guarded. The letter builds on CAIR's troubling history as an unindicted co-conspirator in the 2009 Holy Land Foundation case and highlights recent inflammatory remarks from executive director Nihad Awad, who praised Hamas's October 7 attack on Israel. This represents the latest in a series of Republican efforts to scrutinize CAIR's tax-exempt status and its "educational" initiatives in public schools, though the organization continues to enjoy broad support from congressional Democrats. The Biden administration did take the unusual step of condemning Awad's remarks and removing CAIR from its anti-Semitism task force, but Republicans argue much more aggressive action is warranted given the organization's alleged ties to designated terror groups and its refusal to disclose donor information on its website or tax filings.

#FakeScience — The 2025 Nobel Prize in Economics went to Joel Mokyr, Philippe Aghion, and Peter Howitt for their groundbreaking work on endogenous growth theory, essentially highlighting how creative destruction drives progress, something for conservatives to celebrate. But a recent X thread by former academic Doug Campbell throws a wrench in the celebration, pointing out how Aghion's reliance on a 2016 Bloom-Draca-Van Reenen paper (claiming Chinese import competition boosted UK patents by 10%) crumbled under scrutiny due to three coding errors he exposed in his 2019 Review of Economic Studies comment. This snowballed into Campbell's 2020 AER replication study, where Aghion's own 2013 QJE finding on institutional ownership juicing innovation citations flipped signs and lost significance under robust checks—part of a broader 59% failure rate in replicating top econ empirics. (Campbell writes that his attempts to replicate major economics studies led him to leave academia for trading.) Campbell notes that Aghion's 2021 book still cites these debunked papers 34 times. Most of academia is simply…fake. All the way up to Nobel Prize winners. Keep that in mind when you read about how the Trump administration is destroying science.

#MAHA #Nutrition — HHS is asking medical schools to make nutrition a mandatory part of the curriculum.

#DOGE — Sen. Mike Crapo has come out in support of the CDFI Fund, which the Trump administration has set up for shutdown-motivated layoffs. The CDFI Fund, for those needing a refresher, is a Treasury Department program established back in the '90s that doles out more than $350 million annually in grants and assistance to so-called Community Development Financial Institutions. In other words, it's corporate welfare and handouts to mostly-Democratic constituencies.

NEW: CS3D Is Just One Way In Which Europe Exploits American Economic Vitality — Second in our article series on the EU directive CS3D and how it affects American business, in collaboration with Baron Public Affairs. Read and share!