Provider tax, other healthcare provisions ruled out of Senate tax bill

Modern Healthcare – Thursday, June 26, 2025
By Michael McAuliff

The Senate parliamentarian has blown a giant hole in President Donald Trump’s domestic policy legislation.

Provisions of the One Big Beautiful Bill Act of 2025 that would limit state provider taxes and regulate pharmacy benefit managers are among those the independent legislative branch official deemed ineligible for the measure, casting its future in doubt. The bill aims to renew or extend tax cuts Trump enacted during his first term and slash Medicaid and other healthcare programs by more than $1 trillion over 10 years.

The Senate could still include the stricken policies in the bill, but that would require 60 votes to waive the rules, and the GOP has only a 53-47 majority.

If Senate Republicans don’t find a way to restore the provisions in question, they would lose hundreds of billions of dollars in spending reductions they sought to mitigate the tax cuts’ hit to the federal budget.

The measures Parliamentarian Elizabeth MacDonough ruled against include:

Restrictions on provider taxes states levy to help finance their share of Medicaid costs.

• A ban on PBMs charging Medicaid managed care plans more for drugs than the prices they negotiate with pharmaceutical companies, a practice known as “spread pricing.”
• The restoration of cost-sharing reduction payments to health insurance companies that cover the lowest-income exchange enrollees.
• A ban on cost-sharing reduction payments to insurance plans that cover abortion.
• A Medicaid funding penalty on states such as California, Illinois and Minnesota that use state money to cover undocumented immigrants, along with a slew of other provisions related to Medicaid and exchange coverage of immigrants, including those lawfully present in the U.S.
• A prohibition against Medicaid and Children’s Health Insurance Program coverage of gender-affirming care.

The GOP employed what’s known as budget reconciliation to advance the measure, which subjects it to parliamentary review.

The upside of the reconciliation process is that it doesn’t allow the minority party in the Senate to obstruct legislation with filibusters. The downside is that budget reconciliation bills must be written to alter federal revenues and spending, not primarily to enact new policy. Any senator can object to elements of a reconciliation bill under the “Byrd rule,” named after late Sen. Robert Byrd (D-W. Va.).

The parliamentarian is still weighing some parts of the bill, and more changes could be in store.

Other healthcare provisions under scrutiny include language to rescind a regulation intended to ease Medicaid and CHIP enrollment; to repeal a rule that facilitates enrollment of people with both Medicare and Medicaid into the Medicare Savings Program; to undo a nursing home staffing mandate, which a federal court struck down in April; and to prohibit providers that offer abortion care from participating in Medicaid, which targets the Planned Parenthood Federation of America.

“Republicans are scrambling to rewrite parts of this bill to continue advancing their families lose, and billionaires win agenda, but Democrats stand ready to fully scrutinize any changes and ensure the Byrd rule is enforced,” Budget Committee ranking member Jeff Merkley (Ore.), who is leading Democratic arguments before the parliamentarian, said in a news release.

The nonpartisan Congressional Budget Office has not issued an analysis of the Senate draft of the One Big Beautiful Bill Act, which remains a work in progress although the Finance Committee and Health, Education, Labor and Pensions Committee have completed its healthcare sections.

Yet based on the CBO score of the House-passed version of the bill, it’s clear that excising the provider tax provisions from the Senate measure— which go further than the House legislation — and the other policies would make the net cost of the legislation much higher. Finance Committee ranking member Ron Wyden (D-Ore.) estimated the provisions that MacDonough identified are worth $250 billion over 10 years.

The parliamentarian’s decisions also may shake up the internal GOP debate over provider taxes and other healthcare cuts.

Republican senators such as Josh Hawley (Mo.), Thom Tillis (N.C.), Susan Collins (Maine) and Lisa Murkowski (Alaska) have warned GOP leaders that the provider tax restrictions would be harmful to their states. Removing that part of the bill could hearten these lawmakers.

Yet conservative Republicans such as Sens. Ron Johnson (Wisc.) and Dr. Rand Paul (Ky.), and a significant number of House Republicans who would have to vote for the final package, protested that the legislation doesn’t cut Medicaid and other programs enough and threatened to withhold support before the parliamentarian’s rulings.

Conservative supporters of the budget cuts including Sens. Tommy Tuberville (R-Ala.) and Dr. Roger Marshall (R-Kan.) called on GOP leaders to fire MacDonough.

Republicans could craft new legislative language to achieve similar goals that may pass muster with the parliamentarian.

Senate Majority Leader John Thune (R-S.D.) said the stricken provisions remain important and hinted Republicans may still try to include some of them. He did not specify how.

“There are things that we can do. There are other ways of getting to that same outcome,” Thune said. “These are setbacks — short-term setbacks — speed bumps, if you will. But we’re focused on the goal.”

Thune later said Republicans would not overrule the parliamentarian, which Democrats contend would amount to rewriting Senate procedure and ending the filibuster. “That would not be a good option for getting a bill done,” he said.

Democrats cheered the parliamentarian’s decisions.

“Republicans are hellbent on using the reconciliation process to capture ideological trophies that will leave Americans worse off and fly in the face of their self-proclaimed commitment to states’ rights,” Wyden said in a news release. “This bill is rotten to its core, and I’ll keep fighting the cuts in this morally bankrupt bill until the end.”

Thune has been pushing to get the bill through Congress and to Trump’s desk by July 4. That timing seems highly uncertain now.

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