The Medicaid provider tax rate became a flashpoint in a new legislative fight unfolding in the U.S. Senate. A controversial plan to change the Medicaid provider tax rate has hit a major roadblock. Specifically, Senate Republicans’ proposal to cut the rate was ruled out by the Senate Parliamentarian. This decision came in a statement released Thursday by Senate Budget Committee Democrats.
Importantly, Senate Parliamentarian Elizabeth MacDonough ruled that the change violated the Byrd Rule. The Byrd Rule strictly limits what can stay in budget reconciliation bills, which only need 51 votes to pass. As a result, this decision struck a major blow to Republican hopes for swift passage. They had planned to push the so-called “big, beautiful bill” through by July 4.
Moreover, the parliamentarian rejected several controversial measures tied to Medicaid. These included blocking undocumented immigrants from receiving Medicaid, cutting states’ funding if they do, and banning Medicaid funds for gender-affirming care.
Consequently, Democrats welcomed the decision. They vowed to keep challenging provisions that violate Senate rules. For instance, Senator Jeff Merkley, a Democrat from Oregon, called the bill a “Big, Beautiful Betrayal.”
In his statement, Merkley said Republicans are gutting Medicaid to give tax breaks to billionaires. He accused them of targeting children, veterans, seniors, and people with disabilities.
Furthermore, the rejected Medicaid provider tax rate change went even further than the House version. House Republicans proposed freezing the rate. However, Senate Republicans wanted to reduce it in expansion states until it hit 3.5%.
Unsurprisingly, that plan sparked bipartisan backlash. Republican Senators Susan Collins of Maine and Josh Hawley of Missouri raised concerns. They warned that cutting the rate could shutter rural hospitals and harm working families.
To block these changes, Democrats launched a process known as the “Byrd Bath.” During this process, they reviewed each line of the bill. Consequently, they knocked out several Republican priorities.
Meanwhile, lawmakers floated a possible fix. They proposed a $15 billion stabilization fund for rural hospitals. This fund would roll out over five years to qualifying states. In her ruling, Parliamentarian MacDonough noted a serious concern. She warned that cutting states’ ability to tax providers would limit healthcare access for millions.
Therefore, Republicans now face a steeper path. Every element of their bill must meet strict budget rules. For now, changes to the Medicaid provider tax rate are off the table. Ultimately, the Senate decision reshaped the future of the bill. Although Republicans may try again, their timeline has clearly been disrupted.
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