Federal-State Relationship

RHTP operates as a cooperative agreement, a term that implies partnership, mutual respect, and shared decision-making. The legal instrument conveys a different reality. CMS holds the money. States need the resources. The federal government sets rules; states implement within constraints they did not choose. This structural asymmetry shapes every aspect of the program, from application requirements through annual performance reviews to the threat of clawback.

The tension between federal mandate and state autonomy runs deeper than bureaucratic friction. It reflects fundamental disagreements about who understands rural health challenges, who should control transformation strategy, and who bears accountability when programs fail. Neither CMS nor states have complete answers. Both have legitimate claims to authority. The question is not which side is right but how the relationship functions when authority is divided and stakes are high.

This article examines federal-state dynamics in RHTP implementation. It distinguishes between the partnership language of cooperative agreements and the power dynamics of actual practice. It assesses which relationship patterns support transformation and which undermine it. And it confronts honestly the federalism critique: that CMS oversight designed for fraud prevention actively hinders the innovation RHTP is supposed to enable.

The Fundamental Tension

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The Federal View

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CMS officials responsible for RHTP carry legitimate concerns about state implementation. Fifty billion dollars represents the largest rural health investment in American history. Congressional appropriators, GAO auditors, and administration officials will scrutinize every dollar. When state programs fail or funds are misspent, federal officials face accountability even though they did not make implementation decisions.

The federal position emphasizes several points:

Uniform standards ensure accountability. Without consistent requirements across states, comparing performance becomes impossible. States that underperform can hide behind claims of unique circumstances. Federal standards create baselines that reveal which states are achieving transformation and which are merely spending money.

Federal oversight protects against state capture. Provider interests dominate many state capitals. Hospital associations wield political influence. Without federal requirements pushing transformation, states may simply direct RHTP funds to incumbent providers without demanding change. Federal mandates force states to pursue actual transformation rather than subsidizing the status quo.

Prior experience justifies skepticism. Federal health programs have a long history of state implementation failures. Some states mismanaged ACA marketplace implementation. Others used Medicaid waivers to restrict coverage rather than expand it. Still others failed to spend federal funds effectively, allowing money to languish or disappear into administrative overhead. Federal officials who lived through these experiences have reason to distrust state assurances.

Technical assistance requires engagement. CMS has contracted with organizations possessing deep expertise in telehealth, workforce development, and care coordination. States that reject technical assistance as federal interference deny themselves resources that could improve implementation. Federal involvement is not surveillance; it is support.

The State View

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State officials implementing RHTP carry equally legitimate frustrations. They understand local conditions that Washington cannot see from spreadsheets and dashboards. They manage relationships with providers, communities, and legislators that federal requirements often complicate. They bear implementation responsibility without commensurate authority.

The state position emphasizes different points:

Rural health challenges vary dramatically. Texas border counties differ from Alaska Native villages. Appalachian Kentucky differs from California’s Central Valley. North Dakota wheat country differs from Mississippi Delta cotton land. Rigid federal requirements force states into templates that do not fit local conditions. What works in Minnesota may fail in Arizona. States understand their rural communities better than CMS ever will.

Federal reporting requirements consume capacity. Every hour spent on quarterly reports, performance metrics, and compliance documentation is an hour not spent on actual transformation. States with small rural health offices face impossible tradeoffs between meeting federal requirements and doing the work federal requirements are supposed to enable.

Approval processes delay implementation. When states need to modify subawards, adjust timelines, or redirect resources in response to changing conditions, federal approval requirements introduce weeks or months of delay. The 21-month obligation deadline creates urgency that federal processes contradict. States cannot be agile while waiting for CMS sign-off on every significant decision.

Technical assistance often misses the mark. CMS-contracted consultants may have national expertise but lack state-specific knowledge. Their recommendations may conflict with state political realities, existing relationships, or established programs. Technical assistance that ignores context wastes state time and federal money.

The Evidence Question

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Both positions contain truth. The question is not which side is right but what evidence would illuminate the optimal balance.

When has federal flexibility improved implementation? Some states given autonomy have achieved outcomes that exceeded expectations. Section 1115 waivers have enabled genuine innovation in states with capacity and commitment. The Flex Program’s relatively light federal touch has allowed states to adapt Critical Access Hospital support to local conditions.

When has flexibility enabled state dysfunction? Other states given autonomy have squandered opportunities. Waiver authority has been used to restrict coverage, impose barriers, and serve political rather than health objectives. Block grant proposals have historically preceded spending cuts rather than innovation.

What level of standardization optimizes outcomes? Implementation science suggests the answer varies by function. Core performance metrics may benefit from standardization. Implementation approaches may benefit from flexibility. Compliance processes may burden without benefit. No single answer applies across all program elements.

The Cooperative Fiction

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What “Cooperative” Actually Means

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The term “cooperative agreement” has specific legal meaning. Unlike grants, where recipients operate independently within stated parameters, cooperative agreements involve substantial federal involvement in implementation. CMS does not simply write checks and wait for reports. It assigns project officers, provides technical assistance, participates in stakeholder meetings, and maintains ongoing engagement throughout implementation.

This involvement is not optional. The cooperative agreement instrument requires it. States that attempt to minimize federal engagement violate the terms of their award. The choice is not whether to have a federal partner but how to make the partnership function.

The language of partnership, however, obscures power realities:

CMS holds funding authority. States cannot spend RHTP money without federal approval. Major expenditure categories require advance authorization. Subaward structures require CMS review. Budget modifications require formal processes. The partner who controls resources has leverage the other partner lacks.

CMS defines compliance. Federal officials determine whether states meet requirements. Ambiguous situations resolve in CMS’s interpretation. States can appeal, but appeals consume time and political capital. The partner who defines the rules has power the other partner does not.

CMS controls consequences. Poor performance triggers enhanced monitoring, additional reporting requirements, technical assistance mandates, or funding clawback. CMS decides what constitutes poor performance. States can disagree, but disagreement does not prevent consequences.

None of this means CMS acts in bad faith or that federal requirements lack justification. It means the word “cooperative” describes a legal instrument, not a relationship of equals.

Technical Assistance: Help or Surveillance?

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RHTP’s technical assistance infrastructure illustrates the ambiguity of federal involvement. CMS has contracted with organizations possessing genuine expertise. Technical assistance providers can help states navigate telehealth reimbursement, design workforce pipelines, structure hub-and-spoke networks, and implement evidence-based practices.

For states that want help, technical assistance is valuable. Staff in under-resourced rural health offices gain access to experts they could not otherwise afford. States learn from peers who faced similar challenges. Implementation improves.

For states that feel monitored, technical assistance is surveillance. Technical assistance providers report to CMS. Information shared in “helpful” conversations may appear in federal assessments. States that reveal challenges risk triggering enhanced oversight. The incentive to present success rather than seek help distorts the relationship.

The same interaction can function as either help or surveillance depending on trust. A state with a collaborative CMS relationship experiences technical assistance as support. A state with an adversarial relationship experiences the same interaction as monitoring. The technical assistance is identical. The relationship context transforms its meaning.

Vignette: Two States, One Challenge

A Critical Access Hospital in rural Montana announces sudden closure. The hospital serves three counties with no other inpatient facility within 60 miles. RHTP funds were supporting a rural physician recruitment initiative at the hospital. The closure renders the planned investment moot.

Montana’s RHTP program director calls her CMS project officer the day after the announcement. She explains the situation, outlines three options for redirecting funds, and asks which approach CMS would support. The project officer listens, asks clarifying questions, and suggests a fourth option Montana had not considered. Within a week, Montana has informal approval to redirect funds toward emergency services and a mobile health unit that can serve the affected communities. Formal modification paperwork follows, but implementation begins immediately.

The same week, a Critical Access Hospital in rural Georgia announces similar closure. Georgia’s RHTP administrator learns of the closure from a local news report; the hospital did not inform the state in advance. The administrator drafts a formal modification request, submits it through the CMS portal, and waits.

Three weeks pass with no response. The administrator calls CMS and reaches a different project officer than the one assigned to Georgia. The substitute explains that Georgia’s regular project officer is on leave and modifications are queued for review. Six weeks after the closure announcement, Georgia receives conditional approval with additional reporting requirements. By then, the affected communities have experienced two months without clear direction.

Both states faced identical challenges. Both followed appropriate processes. The difference was relationship quality, not procedures. Montana’s collaborative relationship enabled rapid problem-solving. Georgia’s compliance-focused relationship imposed delays that harmed the communities RHTP exists to serve.

Federal Framework

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CMS Oversight Mechanisms

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RHTP’s federal framework establishes multiple oversight layers:

Project officers serve as primary federal contacts for each state. Effective project officers understand state contexts, facilitate problem-solving, and provide early warning when issues arise. Ineffective project officers enforce requirements without judgment, creating friction that hampers implementation.

Quarterly progress reports document activities against plan milestones, financial expenditures, emerging challenges, and course corrections. Reports follow standardized templates enabling cross-state comparison. The reporting burden is not trivial. States estimate that quarterly reports require 40 to 80 staff hours to prepare, time unavailable for implementation.

Annual performance reviews assess whether states are meeting objectives. Reviews consider quantitative metrics and qualitative implementation quality. Poor performance triggers consequences ranging from enhanced monitoring to clawback.

Annual Rural Health Summit convenes state leaders, federal officials, and stakeholders to share best practices. The first summit occurs during the 2026 CMS Quality Conference. Summits can facilitate peer learning or devolve into performance theater depending on how CMS structures them.

Where Federal Flexibility Exists

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Not all federal requirements are equally rigid. Understanding where flexibility exists helps states navigate the system:

Subaward structures allow variation. States can direct funds through intermediary organizations, make direct awards to providers, or combine approaches. CMS reviews subaward plans but generally defers to state judgment on implementation structure.

Use categories are broad. The ten approved uses of funds encompass most rural health transformation activities. The tenth category, “additional uses promoting sustainable rural health access,” provides catch-all authority for innovative approaches.

Timeline adjustments are possible. States facing legitimate implementation delays can request timeline modifications. Approval is not automatic, but CMS has shown willingness to accommodate realistic adjustments.

Technical assistance is optional in practice. States must accept some federal engagement, but the intensity of technical assistance utilization is largely state-determined. States can engage deeply or maintain minimal contact.

Where Flexibility Is Limited

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Other requirements permit little negotiation:

Obligation deadlines are statutory. The requirement to obligate FY2026 funds by September 30, 2027 reflects Congressional mandate. CMS cannot waive it. States that fail to obligate lose funds.

Prohibited uses are absolute. RHTP cannot backfill Medicaid cuts, provide operating subsidies, or fund maintenance rather than transformation. These restrictions flow from statutory language and reflect Congressional intent that CMS must enforce.

Performance metrics are standardized. While states can propose additional metrics reflecting local priorities, core performance indicators are CMS-specified. States must report on required measures regardless of whether those measures capture what matters locally.

Clawback authority is real. States that significantly underperform face potential fund recovery. The annual re-scoring process exists to identify and address failure. States cannot assume that federal funds, once received, are theirs to keep regardless of performance.

State Variation

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Relationship Patterns

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Federal-state relationships cluster into recognizable patterns. Each pattern reflects history, leadership, capacity, and political context. No pattern is inherently superior; effectiveness depends on circumstances.

Why Patterns Diverge

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States arrive at different relationship patterns through multiple pathways:

Prior program experience shapes expectations. States that had positive ACA implementation experiences bring trust into RHTP engagement. States that battled CMS over waiver interpretations bring wariness. Neither approach is irrational; both reflect learned behavior.

Leadership matters enormously. A state rural health director with CMS relationships built over decades can navigate federal systems that mystify newer colleagues. Personal relationships between state and federal officials accelerate problem-solving. When key personnel change, relationship quality often shifts.

Political alignment affects tone. States whose governors share the administration’s party may find federal engagement smoother. States in political opposition may encounter friction unrelated to program substance. These dynamics are rarely explicit but consistently present.

Capacity shapes engagement. States with robust rural health offices can engage CMS as partners. States with skeletal staff struggle to respond to federal requests, creating cycles of delay, frustration, and diminished trust.

Evidence on Effectiveness

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Research on federal-state relationships in health programs suggests several patterns:

Collaborative relationships correlate with better outcomes. Studies of Medicaid managed care, ACA implementation, and Flex program administration consistently find that states with positive federal relationships achieve better results. The mechanism is straightforward: problems are identified earlier, solutions emerge faster, and both parties invest in success.

Compliance-focused relationships achieve adequacy. States that follow rules without deeper engagement typically meet minimum requirements but rarely excel. They avoid failure without achieving transformation. For programs seeking mere administration, this suffices. For programs seeking transformation, it falls short.

Adversarial relationships predict implementation problems. When states and CMS approach each other as opponents, every interaction becomes a negotiation rather than a collaboration. Energy spent on positional bargaining is unavailable for actual work. Neither party shares information that might advantage the other. Implementation suffers.

Relationship quality is modifiable. States can improve federal relationships through deliberate effort. Proactive communication, transparent problem-sharing, and genuine engagement with technical assistance signal good faith. Federal officials respond to states that treat them as partners rather than adversaries.

Alternative Perspective: The Federalism Critique

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The Argument

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A substantial critique holds that CMS micromanagement undermines state innovation and transformation capacity. This view deserves serious engagement.

The critique proceeds as follows:

Federal requirements reflect CMS’s need for standardization, accountability, and political protection. These needs are legitimate but do not necessarily serve rural health transformation. Requirements designed to prevent the worst cases may actively harm the best cases.

Compliance burden consumes capacity. States estimate that 15 to 25 percent of RHTP administrative effort goes to federal reporting and compliance rather than implementation. This burden falls most heavily on small states with limited staff. The states least able to afford compliance overhead face the highest relative burden.

Approval processes impede agility. Rural health transformation requires adaptation to changing conditions. Provider closures, workforce departures, and community needs shift unpredictably. Federal approval requirements impose delays that prevent rapid response. By the time modifications are approved, circumstances may have changed again.

Risk aversion discourages innovation. States that propose novel approaches face additional scrutiny. Proven models receive faster approval than experimental designs. The incentive structure favors replication over innovation, exactly the opposite of what transformation requires.

Technical assistance sometimes misses context. National experts may lack state-specific knowledge. Recommendations that work elsewhere may fail locally. States that follow federal guidance and achieve poor results face consequences anyway.

Evidence Supporting the Critique

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Evidence supports several elements of the federalism critique:

Compliance burden is real and measurable. State surveys consistently report significant administrative overhead for federal reporting. The burden is not merely perceived; it reflects actual staff time diverted from implementation.

Approval delays are documented. States report waiting weeks or months for modification approvals. Emergency situations requiring immediate response cannot accommodate standard federal timelines.

Innovation correlates with autonomy. Studies of Medicaid waivers find that states with greater flexibility have produced both the most innovative programs and the most problematic ones. Autonomy enables both excellence and dysfunction.

Evidence Against the Critique

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Other evidence complicates the federalism critique:

States given flexibility have sometimes misused it. Section 1115 waivers have been used to impose work requirements, restrict coverage, and achieve political objectives unrelated to health improvement. Federal oversight exists partly because states cannot always be trusted with autonomy.

Accountability requires standardization. Without common metrics and reporting requirements, assessing state performance becomes impossible. States could claim success using self-selected measures while hiding failure. Federal standards create the comparability that accountability requires.

Technical assistance has value when accepted. States that engage genuinely with federal technical assistance report benefits. The problem is not technical assistance itself but resistance to external input.

Assessment

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The federalism critique has substantial validity. Federal requirements designed for fraud prevention and political protection do burden state implementation. Approval processes do impede agility. Risk aversion does discourage innovation.

But the critique is not dispositive. Some federal oversight is necessary. The question is not whether CMS should be involved but how involvement can enable rather than impede transformation. Current structures likely err toward excessive standardization, but the answer is not complete federal withdrawal.

Vignette: The Waiver Lesson

Oregon’s Section 1115 waiver authorizing health-related social needs services illustrates both federal flexibility and its limits.

Oregon sought authority to cover medically tailored meals, produce prescriptions, and housing supports through Medicaid. These services address social determinants that clinical care alone cannot reach. The evidence base supported their effectiveness.

Federal approval required years of negotiation. CMS staff raised concerns about cost containment, service definition, and quality monitoring. Oregon modified proposals, added safeguards, and documented evidence. Eventually, approval came. Implementation proceeded.

Then administration changed. New federal officials indicated they would not renew waiver authority for social needs services. The innovation that required federal approval to begin now faced federal opposition to continue. Oregon must plan for scenarios where services CMS once enabled, CMS now blocks.

The lesson is not that federal involvement is bad. Oregon’s waiver produced genuine innovation that improved health outcomes. The lesson is that federal partnership is contingent. What one administration enables, another may prohibit. States building transformation infrastructure must consider not just current federal relationships but future relationship uncertainty.

Implications for RHTP

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Which States Are Positioned for Success

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Relationship quality predicts implementation success. States positioned for RHTP transformation share characteristics:

Experienced rural health leadership. Directors with CMS relationships built over time navigate federal systems effectively. They know when to call project officers, how to frame requests, and which battles are worth fighting.

Proactive communication habits. States that inform CMS of challenges before they become crises receive flexibility that reactive states do not. Project officers can help when they understand context. They cannot help when surprised by problems.

Technical assistance engagement. States that use available resources wisely gain expertise without excessive federal scrutiny. Engagement signals good faith. Good faith is reciprocated.

Realistic expectations. States that understand RHTP as a time-limited investment in transformation, not a permanent funding stream, plan accordingly. They build toward sustainability rather than dependency.

Warning Signs of Relationship Dysfunction

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States should monitor for relationship deterioration:

Communication becomes formal. When informal conversations yield to written requests and official correspondence, relationship quality is declining. Formalization signals distrust.

Project officer turnover. Frequent changes in federal contacts disrupt relationship continuity. States experiencing multiple project officers should invest extra effort in relationship maintenance.

Approval delays lengthen. Extended response times indicate either federal dysfunction or state credibility problems. Either requires attention.

Technical assistance feels adversarial. When federal “help” feels like monitoring, the relationship has soured. States should address the dynamic directly rather than withdrawing from engagement.

What Both Parties Can Change

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Federal-state relationships are not fixed. Both parties can contribute to improvement:

For states:

• Invest in relationship management as implementation infrastructure
• Communicate proactively about challenges before they become crises
• Engage genuinely with technical assistance
• Frame requests in terms of federal interests as well as state needs
• Build personal relationships with project officers and federal staff

For CMS:

• Differentiate oversight intensity by state performance and capacity
• Reduce compliance burden where it does not serve accountability
• Provide targeted technical assistance based on state-specific assessment
• Accelerate approval processes for time-sensitive modifications
• Recognize that transformation requires flexibility that fraud prevention impedes

For both:

• Acknowledge the structural tension rather than pretending partnership is seamless
• Distinguish between requirements that serve transformation and those that do not
• Build trust through reliability, honesty, and follow-through
• Address relationship problems directly rather than allowing them to fester

The Integration Gap: A Structural Coordination Problem

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The federal-state relationship in RHTP now operates in an environment where two separate federal strategies pursue overlapping rural health objectives without coordinating with each other. RHTP builds infrastructure. CMMI builds payment pathways. Neither references the other. The state is expected to connect them.

The Design Problem

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The late-2025 CMMI model wave launched four payment models directly relevant to rural health transformation: ACCESS (Advancing Chronic Care with Effective, Scalable Solutions), LEAD (Long-term Enhanced ACO Design), MAHA ELEVATE, and BALANCE. Each model creates payment mechanisms for activities RHTP funds are building capacity to deliver.

ACCESS pays $420 per year ($35/month, 50% withheld pending outcomes) for technology-enabled chronic disease management of kidney and cardiovascular conditions. RHTP funds remote monitoring infrastructure. ACCESS pays for what that infrastructure delivers. The federal government designed both investments and connected neither.

LEAD replaces ACO REACH beginning January 2027, explicitly designed for small, independent, and rural practices that MSSP and previous models excluded. RHTP funds workforce development and care coordination capacity. LEAD creates accountable care pathways for the providers that capacity serves. No federal mechanism links the two.

The integration gap is not an oversight. CMS’s RHTP office and CMMI operate as distinct federal entities with separate staffs, separate program accountabilities, and separate relationships with states. A state director managing an RHTP cooperative agreement reports to a different federal structure than a state Medicaid director engaging with CMMI model applications. The federal government designed two complementary strategies through institutional structures that do not communicate.

States as the Integration Layer

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The state that connects RHTP infrastructure investment to ACCESS or LEAD participation is accomplishing what federal design assumed but did not organize. This represents a form of administrative burden that the cooperative agreement framework does not acknowledge.

Practical implications for states are substantial. An RHTP state director building remote monitoring infrastructure through a cooperative agreement subaward must now also understand ACCESS application requirements, provider eligibility criteria, the April 1, 2026 first cohort deadline, and the strategic tension between ACCESS participation and existing FFS billing patterns for CCM and RPM codes. None of this coordination is required by the cooperative agreement. All of it affects whether RHTP investments produce sustainable outcomes.

The coordination challenge compounds because CMMI models carry cancellation risk that cooperative agreements do not. Making Care Primary, a 10-year CMMI model involving nearly 700 primary care practices across eight states, was terminated after months of operation in March 2025. RHTP cooperative agreements extend through September 30, 2030 with defined terms and clawback provisions that create accountability on both sides. CMMI model commitments are aspirational, not contractual. States building five-year RHTP transformation plans around the assumption that ACCESS or LEAD will serve as sustainability pathways are depending on federal commitments with different durability than the cooperative agreement itself.

A New Dimension of Relationship Complexity

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The CMMI-RHTP integration problem adds a dimension to federal-state relationship management that existing relationship frameworks do not address. States must now manage relationships with CMS’s RHTP program office, CMMI model teams, and their own internal structures that separate Medicaid, public health, and rural health functions.

The states positioned to navigate this complexity have characteristics beyond those that facilitate cooperative agreement management. They require staff who understand both transformation financing and payment model economics. They require internal coordination between the RHTP program director and whoever manages Medicaid value-based care engagement. They require strategic capacity to assess which RHTP investments create infrastructure that CMMI models could sustain, and which create dependencies on programs that may not survive.

What CMS could do but has not done: Publish guidance connecting RHTP investment categories to CMMI model participation pathways. Coordinate ACCESS application windows with RHTP obligation timelines. Allow RHTP funds to explicitly support provider preparation for CMMI model participation. Create direct communication channels between RHTP program officers and CMMI model implementation teams so states do not navigate the integration alone.

What states should do regardless: Identify which RHTP infrastructure investments align with ACCESS technology requirements (FHIR APIs, connected monitoring devices, HIE connectivity). Assess which providers in their RHTP networks are eligible for LEAD participation beginning January 2027. Track CMMI model application windows as implementation milestones independent of the cooperative agreement calendar. Build the integration that federal design assumed into state RHTP implementation plans.

The federalism critique correctly identifies that federal requirements burden state implementation. The more consequential problem may be federal fragmentation: two strategies pursuing the same objective through separate institutional channels, leaving states to integrate what federal architecture could not.

Cooperative agreements describe one federal partner. The actual coordination environment has more. States that recognize this reality and build integration capacity are positioned to achieve transformation that outlasts the 2030 sunset. States that manage RHTP as a standalone cooperative agreement without CMMI model awareness may build infrastructure that the post-2030 payment environment cannot sustain.

Conclusion

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Cooperative federalism in RHTP reflects genuine tensions without clean resolution. CMS has legitimate accountability obligations. States have legitimate implementation expertise. Neither can achieve transformation alone. Both must work within structures neither fully controls.

The evidence suggests that relationship quality matters more than formal structures. States with collaborative federal relationships navigate the same requirements more successfully than states with adversarial relationships. The requirements are identical. The relationship context transforms their effect.

RHTP’s five-year timeline intensifies the stakes. States cannot afford years of relationship-building before implementation. They must engage federal partners immediately and productively. CMS cannot afford state failures that undermine the program’s political credibility. Both parties benefit from collaborative relationships. Neither benefits from adversarial dynamics.

The federalism critique has merit. Federal requirements do burden states. Approval processes do impede agility. Compliance overhead does consume capacity that could serve communities. But federal oversight also prevents misuse, ensures accountability, and protects against state capture by provider interests. The answer is not federal withdrawal but thoughtful federal engagement that enables transformation rather than obstructing it.

Cooperative agreements are not partnerships of equals. Acknowledging this reality is the first step toward making the partnership work anyway.