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Senate Republicans hit a major setback in their race to pass a massive tax and spending package on Thursday, as a chamber official ruled against a key Medicaid provision, putting in doubt plans for a vote by the end of the week.

The nonpartisan Senate parliamentarian, who plays a key role in determining what provisions can stay in the fast-tracked bill, said the GOP change to how states can tax Medicaid providers does not adhere to rules for passing the bill with a simple majority. This was a key provision to help offset the costs of the bill's tax cuts.

Senate Republicans a day earlier had proposed a $15 billion rural health stabilization fund to address the slashing of a provider tax that is a critical source of funding for many states.

Democrats, who are making arguments before the parliamentarian to slash key sections of the bill, called the ruling a win.

"With more decisions to come, this guidance results in more than $250 billion in health care cuts removed from the Republicans' big bad bill," said Sen. Ron Wyden, D-Ore., and the top Democrat on the Senate Finance Committee. "Democrats fought and won, striking health care cuts from this bill that would hurt Americans' walking on an economic tightrope. 

"This bill is rotten to its core, and I'll keep fighting the cuts in this morally bankrupt bill until the end," Wyden added. 

Multiple Republican officials familiar with the discussions told NPR that Republicans will continue to rework some provisions to address the parliamentarian's guidance. Republicans are also downplaying the significance of the setback and the framing by Democrats.

Medicaid provisions have been among the most complicated provisions to negotiate in the bill. One issue is a directive that states cut the tax they impose on Medicaid providers from 6% down to 3%, effectively halving the amount that states will receive in tax revenue from those providers. Critics say the change will result in major challenges for rural hospitals that rely on that money because it becomes part of a big pot of tax revenue for states that plays into the complex formula that determines how much federal funding is received as part of the joint program run with states.

Other provisions were flagged by the parliamentarian, including one barring Medicaid from covering gender affirming care and denying coverage to some Medicaid recipients who are not U.S. citizens.

Senate Republicans had hoped to begin voting on the legislation this week, but it's unclear if they'll meet their deadline to send it to President Trump's desk by the July 4th deadline. They are also facing intense pressure from Trump to pass the bill this week, and several members of the conference are due for a White House meeting today.

Despite the new guidance from the parliamentarian, Press Secretary Karoline Leavitt told reporters that Trump's July 4th goal remains in place. 

"The President is adamant about seeing this bill on his desk here at the White House by Independence Day," she said during a briefing at the White House Thursday afternoon. 

When asked whether Trump thinks the parliamentarian should be removed, Leavitt said she had not spoken with the president about that and would "let him speak on it."

"He knows this is part of the process and the inner workings of the Senate," she added. "He remains very much engaged in these conversations and in this process with lawmakers in both the Senate and the House side, and the whole White House does as well."

The stakes are high for both Trump and Republicans on Capitol Hill, given that the legislation carries the bulk of the president's domestic agenda. The GOP leaders have has struggled to resolve major sticking points. While Senate committee leaders have made several significant changes to the bill in recent days, the issue of funding for rural hospitals emerged as a major roadblock.

The new Medicaid language was added to the House-passed bill in the Senate, drawing objections from Sen. Susan Collins, R-Maine, Sen. Josh Hawley, R-Mo. and Sen. Thom Tillis, R-N.C. On Wednesday, the Senate Finance Committee on Wednesday put out the compromise stabilization fund that would direct $15 billion over a 5-year period to states in need. However, that fell short of what other senators say was needed.

Collins has said the fund needed to be closer to $100 billion, and warned colleagues from racing to a vote this week without carefully resolving the issue. Hawley has argued the Senate changes would force drawn-out negotiations with the House, delaying final passage of the legislation. Tillis, who is running for reelection in 2026, served in the state house in his home state before coming to Congress and warned states wouldn't be able to make up the gap in funding due to the new cuts in the bill.

Senate GOP leaders are also waiting for a determination of whether major tax provisions in the bill meet the strict rules for what can be included. The parliamentarian is still reviewing those elements to make sure each has a direct impact on the budget, among other regulations. Several other provisions in the House version, such as one barring nationwide judicial injunctions, have already been cut in that review.

There is also lingering debate over the fate of energy tax credits in the bill, changes to the safety net program for low-income families known as the Supplemental Nutrition Assistance Program or snap and a provision on public lands.

Senate Republicans are also navigating differences with House GOP lawmakers who represent districts in New York and California who insist they need to preserve a state and local tax break, known as SALT. That section of the bill was negotiated with House Speaker Mike Johnson for their constituents who pay high state and local taxes.

Senate Majority Leader Thune can only afford to lose three GOP votes in order to pass the bill.

Fiscal hawks in the Senate, such as Sen. Ron Johnson, R-Wisc., and Sen. Rand Paul, R-Ky., have raised concerns about new deficit spending and could both potentially vote against the plan as a result.

However, even if Thune is able to resolve all of the issues in his chamber, several different factions of House Republicans are warning they will oppose the latest bill that's emerging from the Senate. Thune has repeatedly called Trump the "closer" for the massive legislation, and he's betting political pressure from the White House will force Republicans to back the package.

NPR's Elena Moore contributed to this report.

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The nonpartisan Senate official whose office determines if legislation fits within the rules of the chamber dealt Senate Republicans a blow on proposed changes to Medicaid.

Medicaid changes don't meet Senate rules in 'big, beautiful bill' says parliamentarian

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