New Act Grants States Power to Scrap ACA, Medicare Rules for Universal Health Care Starting 2026

The new State-Based Universal Health Care Act of 2025 is a massive piece of legislation that essentially hands states the keys to build their own comprehensive, universal health care systems—if they’re willing to take the wheel. Starting with plan years on or after January 1, 2026, states can apply for a sweeping federal waiver that lets them opt out of nearly every major federal health program, including most of the Affordable Care Act (ACA), Medicare, Medicaid, and CHIP. The goal is clear: allow states to cover everyone.

The Ultimate Opt-Out Clause

This isn't your usual tweak around the edges. If a state successfully gets this waiver, they can shed the requirements of the ACA (like the marketplaces and essential health benefits), Medicare (Title XVIII), and Medicaid (Title XIX). Think of it as a state saying, “Thanks, but we’ll take it from here.” The catch is that the state must prove its new system will be budget-neutral for the federal government over ten years, meaning the Feds won't spend a penny more than they would have otherwise. They also have to commit to covering at least 95 percent of their residents within five years.

Following the Federal Dollars

For most people, the biggest question is: what happens to the money? If a state takes over coverage, the federal government promises to transfer the equivalent funds it would have spent on those residents. This includes the money that would have gone toward Medicare, Medicaid, and even the premium tax credits (ACA subsidies) that individuals and businesses would have received. This is a huge shift. For example, if you currently receive an ACA tax credit to lower your premium, that money would instead go to the state to fund its new system. Any administrative savings the state finds can be reinvested into services, which is a major incentive for efficiency.

The Fine Print on Fairness: What States Must Guarantee

To get the waiver, states have to promise a few things that protect consumers. The new state coverage must be at least as comprehensive and at least as affordable as what residents had under the federal programs. For Medicaid enrollees, all mandatory benefits must still be covered. Crucially, the state plan must cover all residents (except those using specific veterans' or Indian health services) and must be run by a public state agency. The bill explicitly requires coverage for reproductive health services, including abortion, contraception, and gender-affirming care. This sets a high bar for states looking to move away from federal standards.

The Five-Year Report Card

This isn't a one-and-done deal. Every five years, the state must hire an independent group to check the math: how the funds were spent, how affordability changed, and whether they hit that 95 percent coverage goal. If a state misses the 95 percent mark after five years, they get a 12-month grace period to fix it. If they still fail after that year, the Secretary can yank the waiver. This is the bill’s strongest accountability mechanism, but it relies heavily on the Secretary's willingness to terminate a massive, complex system.

Who Wins and Who Worries?

This bill offers a huge opportunity for states that have the administrative capacity and political will to innovate. If successful, residents could see a streamlined, potentially more comprehensive health system. However, the risk is substantial. The requirement that coverage be “at least as comprehensive” and “at least as affordable” is vague enough to allow for interpretation. If a state fails to manage this transition, residents could face fragmented coverage or hidden costs, especially since the state is waiving significant federal protections. The bill creates a new Independent Assessment Panel to review applications, but the ultimate decision rests with the Secretary of Health and Human Services, meaning expert warnings could potentially be ignored. For everyone else, this bill means that where you live could soon dictate your entire health care experience far more than federal law does today.