Senate Republicans make changes to tax and Medicaid provisions in 'big, beautiful bill'

Senate Republicans on Monday released the largest piece of President Trump’s “big, beautiful bill” with key changes from the House version, like making permanent a set of priority business tax breaks and lowering provider taxes that states use to inflate the federal government’s share of Medicaid payments.

The Senate Finance Committee text would also limit non-citizens from receiving Medicare benefits.

The marquee provisions of the bill are sweeping tax cuts, including a permanent extension of Mr. Trump’s first-term tax rate cuts that are set to expire at the end of the year, like in the House-passed bill.

But in a departure from the House measure, the Senate legislation would also make permanent popular business tax breaks that the House only temporarily extended to limit the cost of its version. 

That includes full expensing for domestic research and development costs and new capital investments, like machinery and equipment, that help boost domestic production. 

The measure would also make permanent a more generous deduction for businesses’ interest expenses.

The Finance Committee included several policies to achieve Mr. Trump’s campaign promises of no taxes on tips, overtime, Social Security and car-loan interest. 

Senate Finance Chairman Mike Crapo, Idaho Republican, said the bill will prevent a more than $4 trillion tax hike by extending the expiring 2017 cuts, enabling families and businesses to save and plan for the future. 

“It delivers additional tax relief to middle-class families still recovering from record inflation under the Biden administration,” he said. “It powers the economy by permanently extending critical pro-growth provisions and introduces new incentives for domestic investment, providing certainty for American job creators to spur domestic economic activity and invest in their workers.”

The bill also makes significant changes to Medicaid, most provisions of which align with the House version. 

One key departure from the House, however, is on Medicaid provider taxes. 

States use taxes on hospitals and other health-care providers to finance their share of Medicaid. But some states use the tax revenue to increase Medicaid payments to the same providers, which then inflate the total cost of their Medicaid programs and the share the federal government must contribute.

The House measure sought to crack down on that by freezing states’ Medicaid provider taxes at current rates and prohibiting them from establishing new provider taxes.

The Senate committee’s bill goes further with a handful of other changes that distinguish between the 40 states and the District of Columbia that opted to expand Medicaid under Obamacare and those that did not. 

Medicaid was created in 1965 under President Lyndon B. Johnson to provide health insurance for low-income people, but it was limited to mothers and children, pregnant women and people with disabilities. 

The program expanded under Obamacare to include low-income, able-bodied adults without dependents earning up to 138% of the poverty level. 

For states that opted into that expansion, the Senate bill would gradually reduce the so-called hold harmless threshold for Medicaid provider taxes — a reimbursement that prevents providers from experiencing a net financial loss from the tax — from 6% now to 3.5% in 2031. 

States that did not expand Medicaid would be prohibited from increasing their provider tax rates or expanding the base of the tax to cover new items or services.

Both the House and Senate would limit non-citizens from receiving Medicaid benefits, but the Senate goes further and also does so for Medicare. 

The provision would remove refugees and migrants granted parole, asylum or related relief from the Medicare rolls. 

Only lawful permanent residents, certain Cuban immigrants and citizens of the Freely Associated States – the Federated States of Micronesia, the Republic of the Marshall Islands and the Republic of Palau – would be able to receive Medicare benefits.

The Senate Finance Committee bill would also raise the debt limit by $5 trillion, a larger increase than the $4 trillion debt limit hike included in the House bill. 

Sen. Rand Paul, Kentucky Republican, has said he will vote against the bill so long as the debt limit increase is included. Senate GOP leaders can afford up to three defections on the party-line bill and still pass it with Vice President J.D. Vance able to break a tie.