The State Public Option Act establishes a state-optional Medicaid buy-in program, extends enhanced primary care payment rates, adjusts federal funding timelines for newly eligible individuals, and mandates Medicaid coverage for comprehensive sexual and reproductive health services.
Kim Schrier
Representative
WA-8
The State Public Option Act establishes a new Medicaid buy-in option for uninsured residents starting in 2026, while also ensuring federal administrative cost-sharing for states offering the program. The bill mandates that Medicaid payments for primary care services must meet or exceed Medicare rates for certain providers, and it expands required Medicaid coverage to include comprehensive sexual and reproductive health services beginning in 2026. Furthermore, it adjusts federal matching fund timelines for states newly expanding Medicaid coverage and requires updates to Medicaid quality measures.
State Public Option Act: Medicaid Buy-In Starts 2026, Requires Coverage for Abortion and Boosts Primary Care Pay
This legislation, the State Public Option Act, is a major overhaul of how healthcare could work for millions of uninsured Americans. Starting January 1, 2026, it gives states the ability to create a Medicaid “buy-in” option for residents who currently don't have health insurance. Essentially, it creates a new, federally backed insurance pathway for people who fall into the coverage gap or can’t afford private plans, though the coverage comes with some important financial strings attached.
The New Medicaid Buy-In: Coverage with a Catch
If your state adopts this new option, you could enroll in Medicaid even if you don't meet the traditional low-income requirements. That’s the good news. The catch is that for certain new enrollees, states may charge premiums and cost-sharing. The bill sets a hard cap on these costs: annual premiums can’t exceed 8.5% of a family’s household income. Crucially, if you have to pay a premium, you’ll be treated as if you bought a plan on the ACA marketplace, making you eligible for federal premium tax credits to help cover the cost. This is huge because it links the new Medicaid option to existing federal subsidies, making it potentially affordable for working families.
For the states, this buy-in option comes with a solid incentive: the federal government will foot 90% of the administrative costs to set up and run the new program. However, states need to watch their numbers. If they collect more in premiums and charges from these buy-in members than they spend on their medical care in a year, they have to send 50% of that surplus back to the Secretary of Health and Human Services. It’s a mechanism designed to keep states from overly profiting off the program.
Mandatory Coverage: Reproductive Health and Primary Care Pay
Beyond expanding who can get coverage, this bill dictates what that coverage must include and how much doctors get paid. Effective January 1, 2026, Medicaid plans must cover “comprehensive sexual and reproductive health care services,” which the bill explicitly defines to include abortion services and related care. This provision makes covering these services a mandatory requirement for any state that wants its Medicaid plan approved, a significant change that overrides existing state-level restrictions.
On the provider side, the bill renews and expands the requirement that states pay primary care providers (PCPs) at least 100% of the Medicare rate for the same services. This minimum payment floor applies to physicians specializing in family medicine, internal medicine, pediatrics, and OB/GYNs, as well as certain advanced practice clinicians working under their supervision. For PCPs, this is a major financial win, providing stability and ensuring they aren’t reimbursed at drastically lower Medicaid rates. For patients, the hope is that better pay for PCPs means better access to care, especially in rural or underserved areas where doctors might currently avoid taking on Medicaid patients due to low reimbursement.
The Real-World Impact on Your Wallet and Your Doctor
If you’re a busy person juggling a job without employer-sponsored insurance, this buy-in option could be a game-changer. Instead of facing steep marketplace premiums, you might get a subsidized Medicaid plan. If you’re a self-employed contractor or small business owner, this gives you a new, potentially cheaper, coverage option. However, if you are required to pay a premium, you need to be aware of the 8.5% income cap and factor in how the tax credit will affect your out-of-pocket costs.
For the healthcare system, the impact is twofold. First, the mandated higher pay for PCPs (Section 4) means that managed care organizations that contract with Medicaid will have to adjust their payment schedules, which could increase costs for the state. Second, requiring coverage for comprehensive reproductive health services (Section 6) ensures a uniform benefit across all participating states, regardless of current state law, which will significantly alter the landscape of care access for millions of women.
Finally, the bill updates the federal funding rules (Section 5) to be more flexible. Instead of tying enhanced federal Medicaid matching funds (FMAP) to fixed calendar years, the enhanced funding period will now follow a state’s actual rollout schedule. This means if your state is slow to expand coverage, they won't lose out on those crucial federal dollars—they just start the clock later. It’s a practical adjustment that recognizes the reality of state implementation timelines.