Republicans are seeking to limit a tax loophole that gives states more federal matching funds. Many state budgets could be hurt.

The Senate’s deep cuts to Medicaid in the tax and spending megabill are setting off alarm bells among some Republicans, complicating leadership’s effort to get the legislation passed by July 4. It seeks to clamp down on two tactics states use to boost Medicaid funding to hospitals: state-directed payments and Medicaid provider taxes.

The Senate’s budget bill, introduced Monday, would take even deeper bites out of Medicaid to help pay for tax cuts President Donald Trump wants to extend from his first term, rocking the state’s last hope that Republicans’ appetite could be substantially moderated.