Updated megabill includes key compromises on taxes and Medicaid

Senate Republicans have included compromises on key Medicaid and tax issuesin updated text for their sweeping domestic policy bill.

In an effort to placate GOP moderates on the fence on the legislation, Senate Republicans are planning to provide a $25 billion stabilization fund for rural hospitals over five years. It’s a significant bump up from the $15 billion offer Senate Republican leadership had made to a group of Medicaid moderates, who have balked at the steep cuts to the health program contained in the marque legislation.

Senate Republicans would also delay planned cuts to provider taxes that fund state obligations to Medicaid. The changes would still incrementally lower the allowable provider tax in Medicaid expansion states from 6 percent down to 3.5 percent.

But the drawdown would begin in 2028, one year later than planned — in a nod to concerns from senators like Sen. Thom Tillis (R-N.C.), who warned this week that resulting cuts to Medicaid could have disastrous electoral consequences in the midterms.

The changes come as Senate Republicans are racing ahead with plans to hold a vote on their legislation Saturday. President Donald Trump still wants the bill on his desk by July 4, though Republicans, as of Friday evening, did not have the votes to start debate.

The language also reflects changes to the state and local tax deduction sought by blue state House Republicans. The New York, New Jersey and California Republicans have been in prolonged negotiations with Sen. Markwayne Mullin (R-Okla.) and Treasury Secretary Scott Bessent over a boost to the deduction, which Senate Republicans universally want lowered.

The new Senate text keeps House Republicans’ plan to increase the deduction from $10,000 to $40,000, but it would snap back to current levels after 2029. The new language likely shaves off at least $100 billion from the approximately $350 billion price tag of the House plan.

It’s still unclear, though, if the compromise would get all of the hardcore SALT Republicans to “yes.” In a Friday lunch with Senate Republicans, House Speaker Mike Johnson said he still had one holdout on the SALT deal -— a likely reference to Rep. Nick LaLota (R-N.Y.), who indicated on Friday that, if there had been a deal, he was not part of it.

The text for the Finance committee, which has jurisdiction over tax policy and Medicaid, could still see major changes. That’s because the language still hasn’t been fully updated to reflect rulings from the parliamentarian, Elizabeth MacDonough, on whether the contained provisions comply with strict budget rules.

The tax panel had their final meetings with MacDonough Friday night, but it’s unclear how she would weigh in, if at all, on tax provisions enacted under a novel accounting tactic called “current policy baseline. That tactic takes the unprecedented step of zeroing out trillions of tax cut extensions. Senate Republicans are relying on it to make a slew of provisions, from individual to business tax cuts, permanent.

David Lim contributed to this report.