Medicare-X Choice Act Creates New Public Health Plan by 2028, Removes ACA Tax Credit Cap

The Medicare-X Choice Act of 2025 is a massive piece of legislation aimed at shaking up the health insurance market by creating a new public option, expanding financial aid for private plans, and taking aim at high drug prices and market consolidation. Starting in 2028, the bill establishes the “Medicare Exchange health plan,” a new, low-cost public insurance option that must be available in every rating area nationwide for individuals and small businesses (SEC. 2).

This new plan is required to meet the same standards as existing qualified health plans under the Affordable Care Act (ACA) and must offer at least Silver and Gold level coverage. Crucially, it must cover primary care services with zero cost-sharing, meaning no copays or deductibles for your basic check-ups and routine care (SEC. 2, Plan Requirements). To get this off the ground, the bill sets aside $2 billion in startup funding split between a Plan Reserve Fund and a Data and Technology Fund for fiscal year 2027.

The New Public Option: What It Means for Your Doctor

The biggest policy lever here is how this new public option gets its network. Generally, the plan will pay providers at the same rates as the original Medicare program (Parts A and B). However, the Secretary has the authority to increase these rates by up to 50% in rural areas, which is a significant bump intended to ensure access in underserved communities (SEC. 2, Provider Reimbursement Rates).

Here’s the part that hits providers hard: Starting January 1, 2028, any provider who wants to participate in existing Medicare or a state Medicaid program must also participate in this new Medicare Exchange health plan (SEC. 2, Provider Participation). There is an opt-out process for “exceptional circumstances,” but the default is mandatory participation. If a provider tries to restrict access for Medicare-X patients—say, only accepting them on Tuesdays—they can be excluded from all Federal health care programs, including Medicare and Medicaid (SEC. 3).

Fixing the Finances: Subsidies and the Family Glitch

For those who buy insurance through the ACA Marketplace, the bill offers immediate relief by expanding the premium tax credit, effective for tax years beginning after December 31, 2025 (SEC. 5). First, it removes the income cap that currently limits eligibility for tax credits to those earning less than 400% of the federal poverty line. This means higher-income individuals and families who still face high premium costs will now be eligible for financial assistance.

Second, the bill fixes the notorious “Family Glitch.” Currently, if an employee’s self-only coverage through work is considered affordable (costing less than 9.5% of household income), their entire family is blocked from receiving tax credits, even if the cost to cover the whole family is astronomical. The new rule changes this: family members can now qualify for Marketplace tax credits if the cost of family coverage under the employer plan exceeds 9.5% of the household income (SEC. 5, Fix for the "Family Glitch"). This is a massive win for working families struggling with employer plan costs.

Lowering Premiums and Drug Costs

Beyond the public option and tax credits, the bill tackles costs on two other fronts. It establishes a nationwide reinsurance program, backed by $10 billion in authorized funding over three years (2028–2030), to pool the costs of the highest-cost patients in the individual market (SEC. 4). This mechanism is designed to stabilize and lower premiums across all individual health plans, both on and off the exchanges.

It also grants Medicare the authority to negotiate prices for prescription drugs by striking the existing legal restriction (SEC. 6). This change takes effect immediately upon enactment and could have a significant ripple effect on drug costs for everyone, not just Medicare beneficiaries, by lowering the ceiling on what pharmaceutical companies can charge.

Finally, the bill authorizes $150 million ($50M for the DOJ’s Antitrust Division and $100M for the FTC) to ramp up antitrust enforcement and study anticompetitive practices in the health care sector, aiming to improve consumer access to affordable care by breaking up monopolies or challenging questionable mergers (SEC. 7).