New Act Lets States Swap Medicare, ACA for State-Run Universal Healthcare Starting 2026

The State-Based Universal Health Care Act of 2025 is a major piece of legislation that could fundamentally change how healthcare works in the US—if your state decides to take the plunge. Simply put, this bill creates a new federal waiver that allows states to ditch the federal health insurance programs we know today and build their own universal health care systems from scratch.

Starting in 2026, states can apply to the federal government for this "Universal Health Care Waiver." If approved, the state gets to opt out of huge swaths of federal health law, including major parts of the Affordable Care Act (ACA), Medicare (Title XVIII), Medicaid (Title XIX), and even CHIP. In exchange, the state has to promise two things: first, that their new system will cover at least 95% of its residents within five years, and second, that the entire plan will be budget neutral for the federal government over a decade. That last part is the core mechanism: the federal government stops paying for the waived programs and instead sends the equivalent money (plus an adjustment for inflation and growth) directly to the state to fund its new plan.

The Great Federal Funding Swap

For most people, the biggest question is, "What happens to my insurance?" If your state gets this waiver, the federal dollars currently spent on you—whether through Medicare payments, Medicaid matching funds, or ACA premium tax credits—will be rerouted to the state treasury. This is a massive shift in control. For example, if you’re a small business owner currently using the ACA marketplace and getting tax credits, those credits disappear, but the state must now use that money to provide you with universal coverage that is "at least as affordable" as what you had before.

States gain immense flexibility here. They can take those administrative dollars that used to be split across multiple federal agencies and programs and reinvest them into their new system. This could mean streamlined enrollment, better coordination of care, or lower costs. However, they are on the hook to prove their plan is comprehensive and affordable. The bill specifically mandates that the state plan must cover reproductive health care services, including abortion, contraception, and gender-affirming care, which adds a significant requirement that may clash with existing state laws in some places.

The 95% Coverage Cliff

While the goal is universal coverage, the bill sets the benchmark at 95% of residents within five years. This is a high bar, and the stakes for missing it are real. If a state hits the five-year mark and hasn't reached 95%, they get a year of federal "technical assistance" to fix the problem. If they still fail after that year, the Secretary of HHS can terminate the waiver. For the average resident, this means that the success of your entire health care system depends on the state government’s ability to execute a massive, complex logistical and financial overhaul.

If you live in a state that adopts this, you are effectively trading federal oversight and standardization for state innovation and control. While the state must maintain coverage that is "at least as comprehensive" and "at least as affordable" as the federal programs it replaces, those terms are somewhat vague. This vagueness means that the specific details—like your deductible, your doctor network, or what counts as a "covered benefit"—will be entirely up to your state’s legislature and regulatory agencies, not Congress or federal agencies. This could lead to 50 different versions of universal health care, ranging from excellent to barely adequate, depending on where you live.