Key Medicaid changes gutted from Senate GOP bill by Byrd Rule ruling

A controversial change to the Medicaid provider tax rate in Senate Republicans’ version of the “big, beautiful bill” has been knocked out by Senate rules. Senate Budget Committee Democrats announced on Thursday that the Senate Parliamentarian Elizabeth MacDonough ruled against a slew of core provisions within President Donald Trump’s colossal bill, including tweaks to Medicaid that divided Republicans in the upper chamber.

Indeed, MacDonough ruled that the harsher Medicaid provider tax rate crackdown in the Senate’s version of the bill did not comport with the Byrd Rule, which provides guardrails for the budget reconciliation process. This ruling, along with the stripping out of other provisions such as denying states Medicaid funding for having illegal immigrants on the benefit rolls, preventing illegal immigrants from participating in Medicaid and CHIP, and preventing Medicaid and CHIP funding from going toward gender-affirming care, has gutted many of Republicans’ key cost-saving Medicaid changes and likely set back their plan to put the mammoth bill on Trump’s desk by July 4.

Senate Democrats vowed to inflict as much pain as possible on Republicans through the “Byrd Bath,” where provisions are gone through line-by-line to see whether they comply with the Byrd Rule. Senate Finance Committee Ranking Member Jeff Merkley accused Republicans of “scrambling to rewrite parts of this bill” as more and more provisions are knocked out by the parliamentarian.

The changes to the provider tax rate were a stark departure from the House GOP’s version of the bill. Senate Republicans went further than the House’s freeze of the rate for non-ACA expansion states and included a provision that lowers the rate in expansion states annually until it hits 3.5%. However, this change angered a handful of Republicans like Sens. Susan Collins and Josh Hawley, who have warned that revisions to the health care program could shut down rural hospitals and impact working Americans.

The parliamentarian argued in her ruling that “ending states’ ability to tax health care providers would severely limit states’ ability to provide health care to millions of Americans who depend upon Medicaid for their care.” In order for Senate Republicans to pass the president’s agenda through the Senate with a reduced 51-vote threshold, provisions within the bill must adhere to the Byrd Rule, which requires that policy changes must have a budgetary and spending impact.

News of the provision’s removal comes as lawmakers were floating a possible fix to the crackdown in the form of a stabilization fund for rural hospitals. One proposal floated by the Senate Finance Committee would start a fund that distributes a total of $15 billion over the next five fiscal years to states that apply for the program.