Senate Republicans Propose 6% Medicaid Provider Tax Cut, New Work Requirements

Senate Republicans have proposed deeper cuts to Medicaid, including new work requirements for parents of teenagers, as a means to offset the costs of extending President Donald Trump’s tax breaks. This proposal is part of the draft legislation for Trump’s “big, beautiful bill,” which aims to make the tax breaks more permanent. The Senate draft maintains the current $10,000 deduction for state and local taxes, known as SALT, which has drawn criticism from Republican lawmakers from high-tax states who had advocated for a $40,000 cap in the House-passed bill. Negotiations on this issue are ongoing.

The Senate draft also enhances Trump’s proposed tax break for seniors, offering a larger $6,000 deduction for low- to moderate-income senior households earning no more than $75,000 a year for singles and $150,000 for couples. This draft provides a comprehensive look at the changes GOP senators want to make to the 1,000-page package approved by House Republicans last month. GOP leaders are pushing to fast-track the bill for a vote by Trump’s Fourth of July deadline.

Sen. Mike Crapo, R-Idaho, the chairman, stated that the proposal would prevent a tax hike and achieve “significant savings” by slashing green energy funds and targeting waste, fraud, and abuse. This comes as Americans broadly support levels of funding for popular safety net programs, with many seeing Medicaid and food assistance programs as underfunded.

Trump’s big bill is a central part of his domestic policy agenda, encompassing various GOP priorities. Fundamental to the package is the extension of some $4.5 trillion in tax breaks approved during his first term, which are set to expire this year if Congress fails to act. There are also new tax breaks, including no taxes on tips, as well as more than $1 trillion in program cuts.

After the House passed its version, the nonpartisan Congressional Budget Office estimated the bill would add $2.4 trillion to the nation’s deficits over the decade and leave 10.9 fewer people without health insurance, largely due to the proposed new work requirements and other changes. The biggest tax breaks, some $12,000 a year, would go to the wealthiest households, while the poorest would see a tax hike of roughly $1,600. Middle-income households would see tax breaks of $500 to $1,000 a year.

Both the House and Senate packages propose a massive $350 billion buildup of Homeland Security and Pentagon funds, including some $175 billion for Trump’s mass deportation efforts, such as the hiring of 10,000 more officers for Immigration and Customs Enforcement. This comes as protests over deporting migrants have erupted nationwide and as deficit hawks question the vast spending on Homeland Security.

Senate Democratic Leader Chuck Schumer warned that the Senate GOP’s draft “cuts to Medicaid are deeper and more devastating than even the Republican House’s disaster of a bill.” As the package moves to the Senate, the changes to Medicaid, SALT, and green energy programs are part of a series of tradeoffs GOP leaders are making to push the package to passage with their slim majorities.

Criticism of the Senate’s version came quickly after House Speaker Mike Johnson warned senators off making substantial changes. Republican Rep. Nicole Malliotakis of New York posted that the $10,000 cap in the Senate bill was not only insulting but a “slap in the face to the Republican districts that delivered our majority and trifecta” with the White House.

Some of the largest cost savings in the package come from the GOP plan to impose new work requirements on able-bodied single adults, ages 18 to 64 and without dependents, who receive Medicaid. While the House first proposed the new Medicaid work requirement, it exempted parents with dependents. The Senate’s version broadens the requirement to include parents of children older than 14, as part of their effort to combat waste in the program and push personal responsibility.

Already, the Republicans had proposed expanding work requirements in the Supplemental Nutritional Assistance Program, known as SNAP, to include older Americans up to age 64 and parents of school-age children older than 10. The House had imposed the requirement on parents of children older than 7. People would need to work 80 hours a month or be engaged in a community service program to qualify.

One Republican, Missouri Sen. Josh Hawley, has joined a few others pushing to save Medicaid from steep cuts, including to the so-called provider tax that almost all states levy on hospitals as a way to help fund their programs. The Senate plan proposes phasing down that provider tax, which is now up to 6%. Starting in 2027, the Senate looks to gradually lower that threshold until it reaches 3.5% in 2031, with exceptions for nursing homes and intermediate care facilities.

Hawley slammed the Senate bill’s changes on the provider tax, stating, “This needs a lot of work. It’s really concerning and I’m really surprised by it. Rural hospitals are going to be in bad shape.” The Senate also keeps in place the House’s proposed new $35-per-service co-pay imposed on some Medicaid patients who earn more than the poverty line, with exceptions for some primary, prenatal, pediatric, and emergency room care.

Senate Republicans are seeking a slower phase-out of some Biden-era tax breaks to allow continued development of wind, solar, and other projects that the most conservative Republicans in Congress want to end more quickly. Tax breaks for electric vehicles would be immediately eliminated. Conservative Republicans say the cuts overall don’t go far enough, and they oppose the bill’s provision to raise the national debt limit by $5 trillion to allow more borrowing to pay the bills.

Sen. Ron Johnson, R-Wis., stated, “We’ve got a ways to go on this one.” The proposed changes to Medicaid and other programs are part of a broader effort by Senate Republicans to offset the costs of extending Trump’s tax breaks, which are set to expire this year. The Senate draft maintains the current $10,000 deduction for state and local taxes, known as SALT, which has drawn criticism from Republican lawmakers from high-tax states who had advocated for a $40,000 cap in the House-passed bill. Negotiations on this issue are ongoing.