Ban on immigrant Medicaid coverage, provider tax increases axed from OBBBA

(The Center Square) – Republicans' chances of passing the One Big Beautiful Bill Act by next week have narrowed considerably, with the Senate parliamentarian ruling out several Medicaid-changing provisions that held hundreds of billions in savings.

The House-passed OBBBA, a multitrillion-dollar budget reconciliation bill fulfilling President Donald Trump's policy agenda, has already undergone Senate committee revisions and is currently under the parliamentarian's review.

While the core elements of the House's bill remain intact – extending the 2017 tax cuts, boosting national defense resources, and reforming entitlement programs like Medicaid and food stamps – Senate Republicans made significant changes.

One of the more controversial edits related to the bill's healthcare section. The House-passed OBBBA found more than $700 billion in potential savings via Medicaid modifications, including changing eligibility requirements back to pre-COVID-19 standards; imposing work-related requirements on most able-bodied adults without dependents; and closing financial loopholes often exploited by states.

The House plan also reduced the federal matching rate for states that allow illegal immigrants to enroll in Medicaid, barred Medicaid coverage of gender transition surgeries or hormone blockers for minors, and froze the Medicaid provider tax at 6%.

Seeking deeper savings, Senate committees slashed the provider tax cap nearly in half, barring states from taxing Medicaid providers by more than 3.5% by the 2030s and inciting bipartisan pushback.

Committees also expanded the gender transition coverage ban to all Medicaid recipients, not just minors, and barred most noncitizens from using premium tax credits to buy health insurance via the Affordable Care Act Marketplace.

But Republicans' work collapsed Thursday after the Senate parliamentarian found that most of those provisions violated the Senate's Byrd Rule, which limits budget reconciliation bills to provisions with direct budgetary impacts.

Among other healthcare-related items, the parliamentarian axed the federal penalty on states who enroll illegal immigrants in Medicaid; the ban on Medicaid coverage of gender transition procedures; limits on Medicaid eligibility for noncitizens; and the Senate's lowering of the Medicaid provider tax cap.

Republican senators must now either strip these provisions from the bill or lose the ability to pass the legislation via a simple majority vote. Lawmakers may try to rewrite some of the provisions and resubmit them, but will likely still have to find other cost-saving avenues.

The Senate parliamentarian still hasn't ruled on whether a provision barring Medicaid funds from going to abortion providers can stay.