Rural hospital closures have increased over the past few decades and more are at risk for closure. Medicare is a principal payer of rural hospitals and payment policy plays a predominant role in rural hospitals' financial viability. However, these policies may not have adequately considered the unique environment in which most rural hospitals operate. Over time, Congress has implemented further statutory provisions and demonstrations that increase Medicare payments to rural hospitals and test innovative delivery and value-based payment models designed to improve rural hospitals' financial sustainability and maintain access to essential rural health care services. This paper aims to provide an overview of historic Medicare rural hospital payment policies; to describe the realities of rural hospitals that should be considered when designing payment systems; to describe special rural hospital payment provisions and designations, including legislative modifications to the Inpatient Prospective Payment System; and to describe current federal payment models that are of importance to rural hospitals and potential revenue streams that support rural hospitals.