Heat the olive oil in a large skillet over medium heat. Add the diced onion and bell pepper, sautéing for about 3-4 minutes until softened.
Add the Italian sausage to the skillet, breaking it apart with a spatula. Cook until browned and fully cooked through, about 5-7 minutes.
Stir in the garlic powder, paprika, salt, and pepper, cooking for an additional 1-2 minutes until the spices are fragrant.
Add the long-grain rice to the skillet, stirring to combine with the sausage mixture.
Pour in the chicken broth and milk, bringing the mixture to a gentle boil.
Once boiling, reduce the heat to low, cover the skillet, and simmer for about 15 minutes or until the rice is tender and has absorbed most of the liquid.
Remove the skillet from the heat and stir in the shredded cheddar cheese until melted and creamy. Adjust seasoning if necessary.
Let the dish sit for a few minutes before serving to allow the flavors to meld.