States can now opt out of Medicare, Medicaid—but at what cost?

What it does

This bill creates a new federal waiver process allowing states to opt out of major federal health programs (Medicare, Medicaid, ACA exchanges, TRICARE, federal employee health benefits) and instead implement their own universal health care plans, provided they cover at least 95% of residents with benefits at least as comprehensive as what federal programs would provide. The federal government would pass through to the state the funding it would have spent on those programs, adjusted for inflation and caseload growth, and states could keep any savings they achieve.

Why we flagged it

The bill's core function is to shift health care authority from federal to state level by creating a waiver mechanism that allows states to replace federal programs with state-designed universal systems. It is fundamentally a devolution of federal health care responsibility, not a new federal program.

What the text implies

• States with lower tax bases or political opposition to universal care may decline waivers, creating a two-tier system where some residents have federal protections and others depend on state-only systems with potentially lower standards.
• The bill's requirement that states achieve 95% coverage in 5 years with a 12-month grace period before waiver termination may be insufficient time for states to build new administrative infrastructure, potentially triggering waiver revocation and coverage disruption.
• Federal funding pass-through is determined by HHS 'in coordination with the State' but the bill does not specify dispute resolution if states and HHS disagree on the amount, creating potential underfunding risk.
• The Independent Assessment Panel includes labor representatives and patient advocates but no insurance industry or employer representatives, potentially biasing recommendations toward more expansive coverage mandates that could increase state costs.
• States may use waiver authority to restrict private supplemental insurance ('duplicative or supplemental'), which could reduce consumer choice and create political pressure to limit coverage scope to control costs.

Who it affects

The bill could benefit citizens in states that successfully implement universal coverage with better access and lower costs, but it also creates significant risk: states with weaker political will or fiscal capacity could end up with worse coverage than current federal programs, and the loss of federal minimum standards could create a patchwork of unequal health security across the country. The requirement for 95% coverage and benefit parity provides some protection, but enforcement and adequacy

Who stands to gain

• State governments (receive federal funding pass-through)
• Health care providers in states with universal systems (potentially higher negotiated rates)
• Uninsured populations in participating states (gain coverage)

Named in the bill

HHS Secretary, State governments, Medicare (Title XVIII), Medicaid (Title XIX), CHIP (Title XXI), ACA Exchanges, TRICARE, Federal Employees Health Benefits Plan (FEHBP), Independent Assessment Panel for Comprehensive Health Care, Indian Health Service, Office of Personnel Management, Department of Defense — and 2 more

Where it stands

3 cosponsors: 3 Democrats.

• Jul 15, 2025 — Introduced · Congress.gov: “Introduced in Senate”
• Jul 15, 2025 — Referred to Senate Committee on Finance · Congress.gov: “Read twice and referred to the Committee on Finance”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.