The Senate parliamentarian delivered a crucial setback to Republicans on Thursday, ruling that a core Medicaid provider tax overhaul in President Donald Trump’s sweeping tax-and-spending bill violates Senate procedural rules.

The provision, intended to save $250 billion by slashing state taxes on hospitals and health providers, was a linchpin in offsetting the bill’s trillions in tax breaks, primarily benefiting corporations and wealthy Americans. With Democrats uniformly opposed, Republican leaders must now scramble to revise or remove the provision entirely, as defying the nonpartisan parliamentarian’s guidance is virtually unprecedented. The ruling intensifies pressure on GOP senators racing against Trump’s July 4 deadline for passage, with the bill’s fate now hanging in the balance.

The fallout extends beyond Medicaid: The parliamentarian also rejected GOP measures blocking immigrants from healthcare programs and restricting gender-affirming care under Medicaid, further eroding the bill’s planned savings. Republican leaders had leaned heavily on these health cuts to fund permanent extensions of Trump’s 2017 tax cuts, which expire this year. Senate Finance Chair Ron Wyden (D-OR) hailed the rulings as a victory, stating they excised “morally bankrupt” cuts threatening vulnerable Americans. Yet for Republicans, the decisions risk ballooning the bill’s deficit impact, which the Congressional Budget Office already estimated at $2.8–$3.4 trillion over a decade.

Republican rifts deepen over rural hospital fears Even before the parliamentarian’s ruling, the Medicaid cuts faced fierce resistance within the GOP. Senators Josh Hawley (R-MO), Susan Collins (R-ME), and Thom Tillis (R-NC) warned the provider tax reductions would cripple rural hospitals reliant on those funds—potentially triggering closures in their states. Hawley revealed Trump personally directed him late Wednesday to revert to the House’s milder approach (freezing provider taxes instead of cutting them), signaling disarray in Republican strategy. Hospital associations nationwide echoed alarms, predicting the Senate’s deeper cuts would “wipe out balance sheets” and devastate healthcare access.

To placate critics, Senate GOP leaders floated a $15 billion rural hospital fund as a safety net. But Collins demanded at least $100 billion, calling the initial figure woefully inadequate, while fiscal hawks like Sen. Rick Scott (R-FL) deemed even $15 billion excessive. Tillis, facing reelection in battleground North Carolina, bluntly warned colleagues the cuts could cost Republicans the 2026 midterms, comparing the political fallout to Democrats’ Obamacare implosion in 2014. Meanwhile, House Republicans from New York and California threatened to sink the bill over unrelated state tax (SALT) disputes, highlighting the fragile coalition.

What’s next: Narrow path to passage With the parliamentarian’s decision constraining GOP options, Republican leaders now face three untenable choices: strip the Medicaid provisions, revise them to comply with rules (a complex task under time pressure), or force a floor vote requiring 60 senators to override objections, a near-impossible threshold given Democratic unity. The ruling also undermines Trump’s ultimatum for passage by July 4, though Majority Leader John Thune (R-SD) insisted Republicans have “contingency plans” and are “plowing forward.” Treasury Secretary Scott Bessent added urgency by noting the U.S. is nearing its debt limit deadline in August, complicating the timeline further.

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