Senate GOP Dealt Blow on Medicaid Cuts

Senate Republicans suffered a massive blow to their efforts to pass a major budget reconciliation bill Thursday morning when the Senate parliamentarian threw out several cost-saving provisions related to Medicaid.

The changes to financing for state-administered Medicaid programs were essential to offsetting the tax cuts included in President Donald Trump’s One Big Beautiful Bill. The ruling that they cannot be included sent Republicans into a scramble to get the bill passed by the President Donald Trump’s July 4 deadline. The savings were critical to securing the votes of fiscally conservative Republicans.

The Senate parliamentarian specifically ruled against provisions in the Senate Finance Committee’s portion of the bill, including cuts to healthcare provider taxes, federal Medicaid reimbursements, and immigrant eligibility for Medicaid.

Budget reconciliation bills in the Senate only require a simple 51-vote majority, so congressional majorities often use the process to ram through partisan legislation that would not pass the normal 60-vote majority threshold.

The Senate parliamentarian, under the Byrd Rule, must review reconciliation bills line-by-line to remove provisions that are extraneous to the budget process.

No official scores from the Congressional Budget Office had been made public, but provider tax reform and migrant eligibility restrictions for Medicaid were slated to save hundreds of billions of dollars.

Sen. Jeff Merkley (D-OR), the leading Democrat on the Senate Budget Committee, said in a statement Thursday that Democrats are continuing to fight provisions in what his party has labeled as “this Big, Beautiful Betrayal of a bill.”

“Democrats are fighting back against Republicans’ plans to gut Medicaid, dismantle the Affordable Care Act, and kick kids, veterans, seniors, and folks with disabilities off of their health insurance – all to fund tax breaks for billionaires,” Merkley said.

One of the most significant provisions nixed by the parliamentarian would have reduced the amount that states could charge in provider taxes. Such tax arrangements have long been decried by Republicans as a gimmick to boost federal contributions to state Medicaid budgets.

States charge provider taxes and then use the revenue to pay those same providers for their services. For those expenditures, the states are then able to claim larger matching shares from the federal government.

Brian Blase, president of the conservative think tank Paragon Health Institute, told the Washington Examiner that it is “disappointing that Senate Democrats are working so hard to protect corporate welfare” by arguing against GOP reforms to provider taxes. “I trust Senate Republicans will find a path forward to make these provisions that reduce the provider tax scam compliant with their parliamentary rules,” Blase said.

In addition to the financial snag, the Senate parliamentarian also nixed the provision in the bill that would have prohibited federal Medicaid and Children’s Health Insurance Program, or CHIP, funding for transgender medical procedures, including puberty blockers, cross-sex hormones, and surgeries.

The parliamentarian is still reviewing a provision in the bill that would prohibit Medicaid dollars from going to any health facility that provides elective abortions, a measure that anti-abortion advocates have been striving to use to defund Planned Parenthood and other abortion providers since the 1970s.