Senate GOP Unveils Medicaid, Tax Portions of Trump Agenda Bill

Reactions reveal the delicate balance needed to get the critical legislation approved by both houses.

The U.S. Capitol is seen as the House Rules Committee prepares to meet for an overnight markup of the One Big Beautiful Bill Act in Washington on May 20, 2025. Kevin Dietsch/Getty Images

The Senate Finance Committee released portions of a revised version of the One Big Beautiful Bill Act, reigniting the debate over changes to the Medicaid program and the State and Local Tax Deduction.

The draft goes beyond the Medicaid cost-saving measures passed by the House, despite a plea from House Speaker Mike Johnson (R-La.) that Senators not tinker too much with the legislation.

At the same time, the Senate draft does not address the current $10,000 cap on State and Local Tax deduction, which some House Republicans had fought for.

Committee Chairman Mike Crapo (R-Idaho) presented the bill on June 16 as a boon to the middle class but seemed to acknowledge that further negotiations would be needed.

“I look forward to continued coordination with our colleagues in the House and the Administration to deliver President Trump’s bold economic agenda for the American people as quickly as possible,” Crapo said in a statement.

The House passed its version by a single vote last month after weeks of debate and compromise.

Senate Majority Leader John Thune (R-S.D.) faces a similarly delicate balance, as he can afford to lose only three Republican votes and still pass the bill.

The legislation is critical for Republicans hoping to enact and fund major parts of President Donald Trump’s second-term agenda, including increased border security, extending the 2017 tax cuts that are set to expire this year, and improving the nation’s military readiness.

Medicaid

The financial burden for the $914 billion Medicaid program is shared between the state and federal governments, with the federal government covering around two-thirds of that cost.

The Senate draft would reduce the federal portion in part by shrinking—but not closing—a legal maneuver that allows states to tax Medicaid providers.

Currently, 49 states levy various taxes on health care providers and return most of the money to providers in the form of increased payments, which increases their federal reimbursement without providing additional services to beneficiaries.

Prominent leaders have criticized the practice, including former President Joe Biden, who called it a scam.

The Senate version would reduce the amount that states can collect in provider taxes.

Currently, states can tax Medicaid providers an amount up to 6 percent of their Medicaid revenue. The Senate’s draft bill would lower that to 3.5 percent.

Provider taxes now provide the majority of state-generated Medicaid revenue.

The Congressional Budget Office estimated that eliminating the tax would reduce the federal deficit by $612 billion over 10 years. Reducing the tax to 2.5 percent would reduce the deficit by $241 billion, and lowering it to 5 percent would bring a $48 billion reduction.

The House version of the bill prevents states from enacting new provider taxes but does not alter the status quo.

GOP Concerns

The Congressional Budget Office estimated that some 8 million people would lose health insurance over a 10-year period based on the House-proposed changes.

“It ought to be just a basic, foundational principle: it is wrong to cut health care for the working poor,” Sen. Josh Hawley (R-Mo.) said in a CNN interview in May.

Hawley said the bill did allow an exception for 5.2 million who are projected to lose coverage due to the House-proposed requirement that single, able-bodied adults spend 80 hours per month at work, educational activities, or community service to maintain coverage.

“I know that will reduce the number of people on Medicaid,” Hawley told reporters on June 15. “But I’m for that because I want people who are able bodied but not working to work.”

Other GOP Senators have voiced concern about going too far with changes to Medicaid.

“I’ve been very concerned about the impact on children, on people with disabilities, on seniors who are eligible for both Medicare and Medicaid, and for low-income families,” Sen. Susan Collins (R-Maine) said in a May 28 televised interview.

Sen. Jerry Moran (R-Kan.) has stated his concern that alterations to Medicaid could make it harder for rural hospitals to operate.

Sen. Lisa Murkowski (R-Alaska) told reporters on June 6 that she had heard “a lot of concern on the Medicaid side” from her constituents regarding the bill.

Sen. Bill Cassidy (R-La.) said he believes qualified beneficiaries will continue to have Medicaid coverage. “No one’s losing health care—unless you count the 1.4 million illegal immigrants getting Medicaid on your dime,” Cassidy wrote on social media on June 3.

State and Local Tax Deduction

The Senate draft bill offers no change to the $10,000 cap on federal income tax deduction for money paid in state and local taxes.

The House version raised the cap to $40,000 for people making less than $500,000 per year, starting in 2025.

This increase was demanded by House Republicans from high-tax states, including New York and California.

For example, the owner of a home assessed at $1.5 million in Dutchess County, New York, could be liable for property taxes of more than $30,000 per year.

Rep. Nicole Malliotakis (R-N.Y.) said the Senate’s proposal was “a slap in the face to the Republican districts that delivered our majority.”

Rep. Mike Lawler (R-N.Y.), a vocal proponent of raising the cap, said the Senate’s SALT proposal would be “dead on arrival” in the House.

Other Provisions

The Senate draft leaves in place several other changes to Medicaid included in the House bill, including the expanded work requirements as well as requiring Medicaid recipients who make more than 100 percent of the federal poverty level to make co-payments for certain expenses, and penalizing states that allow people illegally residing in the United States to enroll in Medicaid.

The Congressional Budget Office estimated that the Medicaid changes would reduce deficit spending by more than $715 billion from 2025 through 2034—a number that did not include the Senate’s lowered threshold for provider taxes.

All of this merely slows the expansion of the program, according to Crapo.

“Even with these reforms, spending on Medicaid is projected to grow by billions of dollars over the next 10 years,” he said in a written summary of the draft.