Healthcare Reform in the United States

The American healthcare system is expensive and inequitable not because of bad luck but because of structural design failures: patients purchase care without knowing what it costs, providers are paid for the volume of services they deliver rather than for whether those services improve health, incumbent hospitals and pharmaceutical companies have used regulation and patent law to block competition, and no party in the transaction bears a penalty for poor health outcomes. This bill proposes to fix five of the most consequential of those failures at once, covering more of the uninsured, making insurance actually usable for families who already have it, lowering drug prices, enforcing mental health coverage rules that have been ignored for nearly two decades, and creating a functioning market for long-term care insurance where one no longer exists.

What this bill would change

• Drug prices that actually reach patients. Middlemen called pharmacy benefit managers currently pocket rebates that drug companies pay to get their products covered, rather than passing those savings on to patients at the pharmacy counter. This bill requires those rebates to go directly to patients when they fill a prescription, and expands Medicare's ability to negotiate lower prices on drugs that face no real competition.
• Coverage for 10 to 12 million uninsured adults. About 1.4 million low-income adults are caught in a legal gap: they earn too much for traditional Medicaid but too little to qualify for subsidized private coverage, because their states refused a federal program expansion. This bill closes that gap with a federally funded plan that requires no state cooperation.
• Insurance you can actually afford to use. Millions of Americans have insurance on paper but face deductibles so high they skip care anyway. This bill caps deductibles and limits the total amount any family can be required to pay out of pocket in a year.
• Mental health coverage that works in practice, not just on paper. Federal law has required insurers to cover mental health the same way they cover physical health since 2008. Most have not complied. This bill attaches financial penalties large enough to change that behavior.
• A real option for long-term care costs. Medicare does not cover nursing home or in-home care for people who can no longer live independently. The private insurance market for this coverage has largely collapsed. This bill creates a federal backstop that makes that market viable again and protects the savings of families who planned ahead.

Let's dig deeper on these changes one by one.

Lowering Drug Prices

American patients pay roughly 2.78 times what people in comparable wealthy countries pay for the same prescription drugs. For insulin, which has been on the market for a century, the gap approaches ten to one compared to international prices. This is not because American drugs are better or American research is more expensive. It reflects how the pricing system is built: drug companies set list prices with no government counterparty negotiating on behalf of buyers, and a layer of intermediaries called pharmacy benefit managers (PBMs) negotiate rebates from manufacturers in exchange for favorable coverage placement, then keep much of those savings rather than passing them to patients.

This bill attacks both problems. On the PBM side, Medicare and Medicaid plans must immediately pass 100 percent of manufacturer rebates to patients at the pharmacy counter, applied as a discount off what the patient owes. Commercial insurance plans phase in to 100 percent pass-through over six years, with the schedule written into law so it cannot be weakened by future regulatory decisions. Pharmacists are also freed from contract clauses that have prohibited them from telling patients when paying cash would be cheaper than using their insurance; the dispensing system will now automatically alert the pharmacist when the cash price is lower.

On the Medicare negotiation side, the federal government's ability to negotiate drug prices has historically been blocked by statute. The Inflation Reduction Act of 2022 created limited authority to negotiate prices for 10 drugs initially, increasing slowly over time. This bill removes that annual cap, allowing Medicare to negotiate any drug that has no therapeutic alternative and no generic or biosimilar competitor (a biosimilar is a biological drug that works the same way as an already-approved biological medicine, produced by a different manufacturer after the original's patent expires). The negotiated price cannot drop below 120 percent of the average price paid by Australia, Canada, France, Germany, and Japan for the same drug, using net prices (actual prices paid after discounts) rather than list prices. Manufacturers who refuse to negotiate face an excise tax on their U.S. sales that escalates to 95 percent in the second year of refusal. The authority carries a seven-year sunset that requires Congress to vote on continuation after an independent review of its effects on prices and pharmaceutical investment.

A family managing a parent's insulin-dependent diabetes under Medicare would see the rebate passed directly to them at the pharmacy, rather than flowing to the insurer and the benefit manager. If insulin is among the drugs selected for Medicare negotiation, the negotiated price ceiling would apply to their out-of-pocket cost at the point of sale.

Coverage for People Left Without Insurance

The Affordable Care Act (ACA), passed in 2010, was designed to extend Medicaid to adults earning up to 138 percent of the federal poverty level. But in 2012, the Supreme Court made that expansion optional for states. Ten states declined, leaving roughly 1.4 million adults in a coverage gap: they earn too much for their state's traditional Medicaid program but too little to afford subsidized private marketplace coverage, because the subsidies for marketplace plans were designed to start where Medicaid coverage was supposed to end.

This bill creates a federal Medicaid Gap Fallback (MGF) program, administered by the Centers for Medicare and Medicaid Services (CMS). The program automatically enrolls any adult in a non-expansion state who earns below 100 percent of the federal poverty level and has no other coverage. It is 100 percent federally funded: states that chose not to expand Medicaid cannot block enrollment by refusing to contribute their share. CMS builds the enrollment infrastructure directly and can use data from federal programs to identify and enroll eligible people without requiring individual applications in every case. The program covers the same benefits as the ACA Medicaid expansion package. It requires a congressional reauthorization vote at the end of year five, based on independent cost and performance reviews published before the deadline.

In counties where fewer than two private insurers participate in the marketplace, this bill also creates a Rural Coverage Option (RCO), a federally operated public insurance plan at the silver tier. The silver tier is the standard middle-tier plan sold through ACA marketplaces. The rural public plan carries a deductible no higher than 5 percent of the county's median household income and caps total out-of-pocket costs at 10 percent. If a private insurer subsequently enters that market and meets coverage standards, the public plan begins a two-year wind-down. Any insurer that triggers a wind-down must stay for at least three years afterward, with a financial bond that is forfeited to the government if they exit early.

Deductibles and Out-of-Pocket Costs

A deductible is the amount a patient must pay out of their own pocket before insurance begins covering most costs. For a family enrolled in a silver-tier marketplace plan today, the deductible can exceed $4,500 per person and the total annual out-of-pocket maximum can be over $9,400. For families earning between $50,000 and $80,000, that is a meaningful financial barrier. Research consistently shows that high cost-sharing leads people to skip preventive care, delay treatment for chronic conditions, and avoid follow-up visits, which increases both their health risks and, eventually, the total cost of their care.

Starting 36 months after this bill is enacted, plans sold in the individual and small-group markets must cap silver-tier deductibles at $3,500 per person and $7,000 per family. Total annual cost-sharing for those plans (including all deductibles, copayments, and coinsurance, which is a percentage of a bill the patient pays after meeting the deductible, but not monthly premiums) cannot exceed 8 percent of the household's income for the year. This means a family earning $60,000 cannot be required to pay more than $4,800 in out-of-pocket costs, regardless of what their plan documents say. High-deductible plans paired with Health Savings Accounts (HSAs), which are tax-advantaged savings accounts used to pay medical expenses, remain available as a separate option for families who prefer that structure, since the savings account itself serves the cost-buffering function the cap is designed to provide.

A family of four earning $70,000 a year, currently enrolled in a silver-tier marketplace plan with a $6,000 deductible, would see their maximum deductible drop to $7,000 for the family and their total annual cost exposure capped at $5,600 under the income-scaled limit.

Mental Health Parity Enforcement

The Mental Health Parity and Addiction Equity Act (MHPAEA), passed in 2008, requires insurers to cover mental health and substance use disorder (SUD) treatment on the same terms as physical health care. In practice, insurers have routinely violated this law using administrative mechanisms rather than explicit exclusions: requiring prior authorization (insurer approval obtained before a provider can deliver a covered service) for mental health services that physical health services do not require, paying therapists and psychiatrists at rates so low that most refuse to accept insurance, maintaining behavioral health networks so thin that patients nominally covered by insurance cannot find an in-network provider within a reasonable distance. Roughly 60 percent of U.S. counties have no inpatient psychiatric beds. Most therapists do not accept insurance. The law exists; enforcement has not.

This bill creates the first financial penalties large enough to change that. Plans must file an annual Comparative Analysis Report demonstrating that their behavioral health denial rates and reimbursement levels are genuinely equivalent to their medical and surgical coverage. Any plan whose behavioral health denial rate exceeds its medical denial rate by more than 10 percentage points for two consecutive years is automatically referred for federal enforcement. Confirmed violations carry a penalty of $10,000 per affected enrollee per year, with no cap for large plans.

On the payment side, the bill establishes a federal minimum reimbursement rate for behavioral health providers, set at 90 percent of what the same plan pays for comparable medical services, rising to full parity over three years. The low reimbursement rates that have driven therapists and psychiatrists out of insurance networks are the primary reason most behavioral health care is either uninsured or out-of-network. Raising the floor changes the economics of network participation.

The bill also appropriates $8 billion over five years for states to build or expand inpatient psychiatric units, crisis stabilization centers, and mobile crisis response teams, the community infrastructure that was systematically dismantled over the past half-century. An additional $600 million expands the National Health Service Corps (NHSC), the federal program that places providers in shortage areas, with priority for mental health professional shortage areas.

An insurer covering 200,000 people that has systematically denied mental health prior authorization requests at twice the rate it denies medical requests, and has done so for two consecutive years, would face potential penalties of up to $2 billion per year for the period of confirmed violation.

Long-Term Care

Medicare, the federal health insurance program for Americans 65 and older, covers hospitalization and physician visits. It does not cover long-term custodial care: the ongoing help with bathing, dressing, eating, and daily living that people with dementia, Parkinson's disease, or other progressive conditions need over months or years. A private room in a nursing home costs a national median of $127,750 per year. Home health aide services run tens of thousands of dollars annually. Private long-term care insurance, which is designed to cover these costs, has been retreating from the market for years as insurers underestimated how long people would live and how much care would cost; fewer than a dozen companies still offer it. The only public safety net for long-term care is Medicaid, but Medicaid requires a person to spend down nearly all of their savings to roughly $2,000 before qualifying. A retiree who saved throughout their working life faces the same requirement as someone who saved nothing.

This bill creates a Federal Long-Term Care Reinsurance Fund. Once a policyholder's total paid claims exceed $150,000 in cumulative benefits, the federal fund covers 80 percent of additional costs. This removes the actuarial uncertainty that drove private insurers out of the market. Actuarial uncertainty refers to the difficulty of predicting how long policyholders will live and how much care they will need, which caused insurers to underprice policies and then exit rather than sustain losses. By sharing that risk with the federal government, certified private products can be priced reliably again. Certified products must cover at least three years of care at a daily rate of at least $150 (indexed to inflation), cover both nursing home and home-based care, and maintain an 80 percent minimum loss ratio (meaning the insurer must pay at least 80 cents in claims for every premium dollar collected). The fund is capitalized at $5 billion over 10 years.

The bill also establishes a federal Medicaid asset protection floor of $85,000 per individual ($170,000 per couple), set directly in federal statute so it cannot be changed by administrative action. A person who needs long-term care can keep $85,000 in savings and still qualify for Medicaid once other assets are spent. The figure is indexed to inflation with an annual cap of 2 percent. Any future increase requires an act of Congress. For families with more savings, purchasing a federally certified long-term care insurance policy provides dollar-for-dollar additional Medicaid asset protection beyond the floor.

Health Savings Account contribution limits are also raised: from $4,150 to $6,500 per year for individuals and from $8,300 to $13,000 per year for families, with an additional $3,600 per year available to people 50 and older specifically designated for long-term care savings. HSA funds can be used to pay premiums on certified long-term care insurance policies.

A 70-year-old diagnosed with early-stage dementia whose lifetime nursing home costs reach $300,000 would have the first $150,000 covered by their private insurance policy. Of the remaining $150,000, the federal reinsurance fund would cover 80 percent ($120,000). The policyholder's total out-of-pocket exposure above the insurance floor would be $30,000, plus whatever they paid in premiums.

How the different political groups see it

Progressive Democrats

Progressive Democrats value the Medicaid Gap Fallback above all other provisions in this bill. For over a decade, roughly 1.4 million low-income adults in states that refused Medicaid expansion have had no realistic path to coverage. The fallback creates that path, federally funded, without requiring state cooperation. Progressive Democrats also value the mental health enforcement provisions, which impose financial consequences large enough to make systematic parity violations unprofitable for the first time since the law was passed in 2008.

What Progressive Democrats concede is substantial. They wanted a public health insurance option available to everyone, or a single public payer that would replace private insurance. The coverage expansion in this bill runs entirely through Medicaid and a narrow rural public plan that triggers only in counties where private insurers have already stopped competing. The employer-based insurance system that ties coverage to employment, which Progressive Democrats identify as a structural problem producing labor market distortions and coverage gaps, is untouched. The expanded Medicare drug negotiation authority carries a seven-year sunset, which a future Congress could allow to expire without a repeal vote. The long-term care approach, which builds around private insurance backed by a federal reinsurance fund rather than a public benefit, is a structure they view as helping people who can afford to buy a policy while leaving out those who cannot. They accepted these limitations because the alternative was no bill, and 10 to 12 million people cannot wait for a better political moment.

Moderate Democrats

Moderate Democrats value the combination of coverage expansion and cost protection. The Medicaid Gap Fallback is a direct answer to the coverage gap that has persisted since 2012. The deductible and out-of-pocket caps address the practical problem that millions of insured people still avoid care because of cost. The mental health parity enforcement provisions, including the reimbursement floor for behavioral health providers, address a failure that Moderate Democrats have argued is both a coverage problem and a workforce pipeline problem: therapists leave insurance networks because insurance does not pay them enough to stay.

What Moderate Democrats concede is that the bill does not fully close the income cliffs that make marketplace subsidies unstable, does not reform the Medicare physician payment formula that steers medical students away from primary care, and leaves the out-of-pocket protections applicable only to individual and small-group market plans. The 160 million Americans with employer-sponsored insurance are not covered by the deductible cap or the income-scaled cost limit. Moderate Democrats accepted these limitations partly because of coalition math and partly because changing the employer-based system would have required addressing the tax exclusion for employer health benefits, a change that would have cost votes on both sides of the aisle.

Moderate Republicans

Moderate Republicans value the market competition and transparency provisions more than any other element. Certificate of Need (CON) laws, which allow incumbent hospital systems to block new competitors from building facilities by requiring government approval, are tied to federal matching funds for the first time: states that do not repeal CON requirements for outpatient facilities within five years lose access to enhanced Medicaid payments. Antitrust review requirements for healthcare mergers close a documented loophole that has allowed hospital systems with dominant local market positions to acquire physician groups and outpatient centers without scrutiny. Scope-of-practice rules that require physician supervision for nurse practitioners and physician assistants in primary care shortage areas are preempted, expanding access without new spending.

What Moderate Republicans concede is primarily the Medicaid Gap Fallback, which creates a federally administered coverage program that enrolls adults in states that chose not to expand Medicaid, without requiring state consent. They are also uncomfortable with the mechanism used to apply prior authorization standards to employer health plans: conditioning the federal income tax exclusion for employer-provided insurance on compliance. The tax exclusion for employer health benefits has structured American employer coverage since 1954. Moderate Republicans also wanted the tax preference for employer insurance converted to a universal portable credit, which would have leveled the playing field between employer and individual coverage. The bill instead adds an above-the-line deduction (a tax deduction anyone can claim regardless of whether they itemize, reducing taxable income before calculating what is owed) for individual-market premiums without touching the employer exclusion, which they view as an additive fix rather than a structural correction.

Conservative Republicans

Conservative Republicans value the provisions that reduce regulatory barriers and administrative overhead. PBM transparency requirements, which force quarterly public disclosure of every payment made between drug manufacturers and benefit managers, address what Conservative Republicans describe as a cartel structure dressed up as a market. Gag clause prohibitions, which allow pharmacists to tell patients about lower-cost alternatives for the first time, and the automatic price-comparison alerts built into pharmacy dispensing systems are consumer protection measures that do not involve government price-setting. Expanded Health Savings Account limits give individuals more control over their own healthcare dollars. CON reform conditions federal funding on states eliminating the rules that let incumbent hospitals block competitors, which Conservative Republicans view as a basic market competition reform.

What Conservative Republicans concede is also significant. The Medicaid Gap Fallback is the provision they opposed most directly. Their objection is not that low-income adults should remain uninsured, but that the program operates without work requirements for able-bodied adults, creates a spending commitment that grows over time, and overrides state coverage decisions through federal enrollment infrastructure. The ACA's essential health benefit mandates, which require individual-market plans to cover a defined set of services regardless of what the purchaser wants, are not touched by this bill. Conservative Republicans have argued for years that those mandates eliminated the market for lean, affordable catastrophic coverage. The bill's deductible caps and actuarial value floors actually tighten the ACA cost-sharing structure rather than loosening it. Conscience protections for religious healthcare institutions, which they raised throughout deliberations, are not included.

Feasibility

Financial cost. This bill is expensive. The Medicaid Gap Fallback alone is estimated to cost $40 to $60 billion over five years at full enrollment of 10 to 12 million adults, funded entirely by the federal government. The Rural Coverage Option is capitalized at $8 billion over five years. Mental health crisis care infrastructure grants add another $8 billion. Long-term care reinsurance and workforce grants add roughly $10 billion more. The portable premium deduction is estimated to reduce federal tax revenue by $40 to $55 billion per year at full participation. Offsetting savings come from rebate pass-through provisions (which reduce Medicare and Medicaid drug spending), Medicare drug price negotiation (which the Congressional Budget Office is likely to score as generating significant savings over a decade), and reduced uncompensated care costs as the uninsured population shrinks. The net fiscal impact is substantially negative over the first decade, with savings becoming more significant in later years as negotiated drug prices compound. The seven-year sunset on expanded Medicare drug negotiation authority introduces a fiscal cliff: if the authority is not reauthorized, savings projections fall significantly.

Is the spending justified? Two considerations give context to the gross cost figure. First, a meaningful share of the new spending substitutes for costs the federal government and others already bear in less efficient forms. Uninsured adults already receive care, mostly in emergency departments where a single visit costs several times more than a primary care appointment, and those costs are already partially covered through Medicaid Disproportionate Share Hospital (DSH) payments, which are federal transfers to hospitals that serve large uninsured patient populations. Shifting uninsured adults into primary coverage converts some of that implicit spending into a cheaper form rather than adding it from scratch. The Medicaid spend-down that the long-term care provisions partially address represents costs that state Medicaid budgets and middle-class families already bear through asset depletion; federal reinsurance shifts some of that burden to a broader risk pool without creating an entirely new expenditure. Untreated mental illness drives a disproportionate share of emergency department visits, incarceration costs, and homelessness services, all of which carry substantial public costs; the $8 billion in crisis care infrastructure and the mental health workforce expansion are investments that advocates for those programs argue would reduce downstream spending in those other systems, though the evidence on fiscal offset varies by intervention type. Second, on a proportional basis, the bill's new commitments are modest relative to the scale of federal activity in the same domain. The federal government already spends approximately $1.5 trillion annually on Medicare, Medicaid, and tax subsidies for employer-sponsored coverage; the bill's direct new spending over five years represents a fraction of what is already committed. For comparison, the federal defense budget runs roughly $850 billion per year, and the total non-defense discretionary budget, covering education, transportation, scientific research, and all other domestic programs, runs roughly $900 billion annually. Whether this bill's net fiscal cost is justified relative to those alternative priorities is a question of values as much as economics. The factual inputs to that judgment are: what the bill produces in coverage, cost reduction, and access improvements; how much of its gross cost replaces less efficient existing spending; and how the net-new federal commitment compares to what the government already spends in the same domain.

Political feasibility. The bill is structured to hold a cross-partisan majority by giving each faction something it values while asking each to accept something it opposes. Conservative and Moderate Republicans get market competition reforms (Certificate of Need repeal, antitrust review, scope-of-practice expansion, and pharmacy benefit manager transparency) that they have advocated for years. Progressive and Moderate Democrats get the Medicaid coverage expansion, out-of-pocket caps, and meaningful parity enforcement they have sought since 2010. The provisions most likely to generate sustained opposition are the Medicaid Gap Fallback (from the right) and the absence of a universal public option (from the left). The five-year reauthorization requirement on the Medicaid fallback is the provision most vulnerable to a future Congress that is hostile to the program: a reauthorization failure would strip coverage from 10 to 12 million people in an election year, which is a significant political deterrent, but not an absolute one.

Implementation. The bill requires building substantial new federal infrastructure within tight timelines. CMS must stand up Medicaid Gap Fallback enrollment in non-expansion states without state cooperation, which requires federal data-sharing authority and potentially new managed care contracting in counties where no existing Medicaid infrastructure operates. The unified electronic prior authorization system, which must be operational within 36 months, requires CMS to build or certify interoperable technology across thousands of insurers and provider systems. Long-term care reinsurance requires developing certification standards, actuarial monitoring, and claims adjudication for a product category that the federal government has not previously operated. Mental health parity enforcement requires a Comparative Analysis reporting framework and crosswalk methodology that do not currently exist in final form. The bill funds much of this through dedicated fee and penalty revenue, but capacity constraints at CMS and the Department of Health and Human Services (HHS) are a genuine risk. Implementation failure in any of these tracks would reduce the bill's practical impact even if the statutory provisions remain in force.