Proposed 'Choose Medicare Act' Creates New Public Option, Caps Medicare Spending at $6,700, and Permanently Ends ACA Subsidy Income Cliff

The proposed Choose Medicare Act is a massive health care overhaul that touches nearly every corner of the insurance market—from creating a new government-run option to permanently changing how you pay for marketplace insurance and traditional Medicare. The core of the bill is the creation of Medicare Part E Public Health Plans, a brand-new, federally-established health insurance option that must meet “gold-level” coverage standards and include all essential health benefits plus everything traditional Medicare covers. These plans would be available to most U.S. residents through the individual, small group, and large group markets, and the bill explicitly mandates that Part E plans must cover abortions and all other reproductive services, overriding any state laws that might try to prohibit such coverage (SEC. 2).

The New Public Option: Medicare Part E

Think of Part E as a souped-up, portable public option. If you’re a small business owner, you could offer this to your team. If you’re self-employed, you could buy it on the Exchange. The bill requires the Secretary of Health and Human Services to set the premiums and negotiate the reimbursement rates for doctors and hospitals. Crucially, these provider payment rates cannot be lower than what Medicare currently pays, but they also can’t be higher than what private insurers pay on the Exchanges (SEC. 2). This is where the rubber meets the road: the Secretary gets broad authority to set the price points for this new national plan, which could stabilize costs but also concentrates immense financial power in one office. Additionally, if an employer offers a Part E plan and you lose your job, you can keep the Part E coverage, making it highly portable.

Financial Lifeline for Traditional Medicare Users

For anyone on traditional Medicare (Parts A and B), this bill offers a major financial protection that has been missing: an annual out-of-pocket spending cap. Starting in 2027, if your deductibles, copayments, and coinsurance hit $6,700 in a calendar year, you are done paying for covered services for the rest of that year (SEC. 4). For seniors and individuals with chronic conditions—who currently face unlimited out-of-pocket expenses under traditional Medicare—this is huge. This cap, which will be adjusted annually for inflation, provides a clear limit on what you have to budget for healthcare costs.

Making Marketplace Coverage Permanently Cheaper

The bill makes the expanded Affordable Care Act (ACA) premium subsidies permanent, which is a big deal for everyone buying insurance on the Exchange. First, it eliminates the 400% of the federal poverty level income cap entirely, meaning the dreaded “subsidy cliff” is gone forever (SEC. 5). If your income is higher, you can still get financial help to cap your premium cost. Second, the bill changes how that financial help is calculated: instead of basing your subsidy on the cost of a Silver plan, it will now use the cost of the second lowest cost Gold plan (SEC. 5). Since Gold plans are more comprehensive and more expensive than Silver plans, basing the subsidy calculation on the Gold level effectively increases the amount of financial assistance you receive, lowering your monthly premium and potentially giving you access to better coverage.

Furthermore, the bill significantly enhances cost-sharing reductions (CSRs) for lower-income individuals. For example, if your income is between 100% and 133% of the poverty line, your plan must now cover 94% of total allowed costs, up from previous levels (SEC. 6). These changes take effect starting in the 2026 tax year.

New Rules for Employers and Insurance Rate Hikes

This legislation introduces a new administrative requirement for employers who don’t offer qualifying health insurance (or offer plans that are too expensive). These employers must now refer every full-time employee to an ACA health insurance navigator when they are hired (SEC. 3). This is an effort to make sure people know their options, but it represents a new administrative burden for small businesses without robust HR departments.

Finally, the bill gives the federal government more muscle to crack down on unfair rate hikes. It expands federal rate review oversight, which was previously focused mainly on the small group market, to include the large group market (SEC. 8). The Secretary is empowered to deny, modify, or force rebates for any rates deemed “excessive, unjustified, or unfairly discriminatory,” applying this protection even to older, “grandfathered” plans (SEC. 9). This means consumers across the board gain stronger protection against arbitrary premium increases, with the threat of fines or even losing “qualified health plan” status for non-compliant insurers.