State Public Option Act
The State Public Option Act would create a Medicaid-based state public option by allowing states to offer a voluntary “buy-in” into Medicaid for residents who are not concurrently enrolled in other health insurance plans. Beginning January 1, 2026, eligible residents could enroll through the state’s ACA-style Exchange and pay premiums and cost-sharing under set rules. The bill would fund this buy-in with an enhanced federal administrative match (90%), require states to handle premiums and charges in a way aligned with ACA-style protections, and coordinate premium tax credits and cost-sharing reductions with the Medicaid buy-in. It also expands access to primary care by guaranteeing Medicare-like payment rates for certain primary care services, broadens provider types, and requires comprehensive sexual and reproductive health services (including abortion) to be covered in Medicaid. Additional provisions touch quality measurement updates, financing for newly eligible individuals, and related conforming amendments. In short, the bill aims to give Americans a low-cost, high-quality public option by letting states offer a Medicaid-like buy-in, while expanding provider payments, coverage rules, and subsidies to support that option. It also imposes new coverage requirements (notably abortion-related services) and creates several funding and oversight mechanisms to implement and monitor the program.
Key Points
- 1State Medicaid buy-in option starting 2026: States may allow residents who are not enrolled in other coverage to buy into Medicaid through the state’s Exchange, with enrollment potentially limited to certain periods. A new category, “Previously Undescribed Individuals” (XXIV) is created for eligibility under this buy-in.
- 2Premiums, cost-sharing, and subsidies: Individuals in the buy-in would be subject to premiums and cost-sharing capped at 8.5% of household income, with ACA-style cost-sharing limitations applying. The bill also allows enrollment in the buy-in to be treated for purposes of premium tax credits (36B) and cost-sharing reductions, including advanced payments of credits through a new federal-State coordination program.
- 3Enhanced federal funding for administration: The federal government would provide an enhanced match (90%) for reasonable administrative expenses related to running the Medicaid buy-in. States collecting premiums would have those funds offset in the federal medical assistance pool, and states with excess premium collections would owe a 50% rebate to HHS.
- 4Premium tax credits and advanced determinations: The bill creates an arrangement for the federal government to advance premium tax credits to reduce monthly premiums for individuals buying into Medicaid (via a process similar to ACA advanced determinations), with coordination between the state Medicaid program and the Treasury.
- 5Managed care and provider payment rules: The bill expands eligibility for Medicaid managed care to include buy-in enrollees and imposes a payment floor for primary care services (at least 100% of Medicare Part B rates, with several expansions to include family medicine, internal medicine, pediatrics, OB-GYN, advanced practice clinicians, and certain clinics) and related payment methodologies when care is delivered through capitation or other value-based arrangements.
- 6Increased FMAP for newly eligible individuals: The federal matching rate for medical assistance to newly eligible individuals would be extended over multiple 12-month periods (increasing supports over seven consecutive periods), creating a longer window of enhanced federal funding for new enrollees.
- 7Coverage of comprehensive sexual and reproductive health services: Beginning January 1, 2026, comprehensive sexual and reproductive health services (including abortion and abortion-related services) would be included as medical assistance. States would be required to cover these services within the Medicaid plan as a condition of plan approval, and certain sections are amended to ensure coverage requirements apply.
- 8Quality measurement and funding: The Secretary would review and update Medicaid quality measures to ensure they are appropriate for the buy-in population, with reporting updates to follow by 2032 and a $50 million appropriation in 2026 to support these efforts.
- 9Effective dates and conforming amendments: Many changes (notably the buy-in provisions, premium credits, abortion coverage, and primary-care payment reforms) would take effect in 2026, with various conforming legislative changes across related Social Security Act sections to integrate the new programs.