Senate Medicaid Cuts Dealt Setback in Trump Megabill

Wall Street Journal – Thursday, June 26, 2025
By Richard Rubin and Joseph Walker

Several of Republicans’ largest proposed spending cuts can’t be done as written in the fast-track budget process they are using to advance their megabill, the Senate parliamentarian determined, dealing a significant blow to the GOP’s hopes of passing their plans quickly.

The ruling affects several of the largest and most controversial cuts in President Trump’s “one, big, beautiful bill,” and Republicans will likely be forced to drop or rewrite them. The changes could amount to hundreds of billions of dollars, making it harder for Republicans to hit their budget targets. A person familiar with Senate Republicans’ plans said they would aim to revise the proposal, working to find a solution that meets their goals.

The ruling, announced by the Senate Democrats who are challenging pieces of the GOP bill, would block Republicans’ plan to limit state “provider taxes,” financing mechanisms that boost federal Medicaid funding. Senate Republicans had already been struggling to reach an agreement on curbing provider taxes, with lawmakers such as Josh Hawley (R., Mo.) and Thom Tillis (R., N.C.) warning about the effects on hospitals. Trump has also expressed misgivings about cutting Medicaid too deeply.

The parliamentarian’s ruling would also stop a provision that lowers federal funding for states that use state money to provide Medicaid to undocumented immigrants.

Republicans are using a special fast-track procedure known as budget reconciliation to pass their tax-and-spending bill, which extends expiring tax cuts, creates new tax cuts, lowers spending on Medicaid and nutrition assistance and adds money for border security and national defense. They are trying to get it through the Senate this week and then back through the House and to Trump’s desk by July 4.

The reconciliation process lets Republicans push the bill through the Senate—where they have a 53-47 majority—on a simple majority vote. But the process comes with strings attached, and those limits are known as the Byrd Rule, for the late Sen. Robert Byrd (D., W.Va.).

Reconciliation bills must be focused on fiscal policy, and changes that have merely incidental federal budget effects can’t be done. It has frustrated both parties in the past, including when Democrats tried and failed to raise the federal minimum wage through reconciliation.

The parliamentarian hears arguments from both parties about whether bills comply with the Byrd Rule and then advises lawmakers on which provisions require a 60-vote threshold to waive the Byrd Rule. That process, known colloquially as the Byrd Bath, has been happening over the past week, and the provisions that fall out are known as Byrd droppings.

“Republicans shouldn’t get away with circumventing the rules of reconciliation,” said Sen. Jeff Merkley (D., Ore.), the top Democrat on the Budget Committee. “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.”

The parliamentarian, Elizabeth MacDonough, is the Senate’s official adviser on rules and procedures. It is a nonpartisan job, and she has held the post since 2012, when she was picked by Democrats. Senators often get frustrated by the parliamentarian, and they can ignore or sidestep her advice. But lawmakers are wary of setting rule-breaking precedents that a future majority could exploit, and they sometimes seek political cover by deferring to the parliamentarian’s advice.

Republicans, including Senate Majority Leader John Thune (R., S.D.), have said that they don’t intend to overrule the parliamentarian.

Among the provisions affected by the recent rulings are ones that would limit the ability of some immigrants to receive premium tax credits for purchasing health insurance. Those changes were expected to generate $129 billion through 2034, according to the Joint Committee on Taxation.

The parliamentarian had earlier curbed Republicans’ plans to change student-loan programs, efforts to force the U.S. Postal Service to sell electric vehicles and a measure that would have required plaintiffs to post potentially enormous bonds when asking courts to issue preliminary injunctions or imposing temporary restraining orders against the federal government.

Lawmakers haven’t yet released any details from the parliamentarian’s review of the bill’s federal tax provisions.

The bill’s restrictions on Medicaid provider taxes would reduce federal spending on the health insurance program for the poor and disabled. States use the taxes to raise money from hospitals and other healthcare providers to increase the matching dollars they get from the federal government, which are then often funneled back to the providers in the form of higher payments.

The Senate’s version specifically targets states that have expanded Medicaid to able-bodied adults under the Affordable Care Act. Expansion states would gradually reduce the maximum tax rate on providers from 6% currently to 3.5% in 2031. States that haven’t expanded Medicaid, such as Texas and Florida, would have their tax rates frozen in place up to the 6% limit.

The Senate’s version of the bill would likely save even more money than a similar provision in the House bill, which is projected to cut $89.3 billion, according to the Congressional Budget Office.

Access the article at its original source.