The Republican budget resolution was approved early Friday morning in a 52-46 vote.
The amendment cuts the employer contribution to health coverage for lawmakers.
Eleven Republicans voted for the amendment.
Sen. John Thune (R-S.D.) said "a death in the family should not be a taxable event."
Senators have been voting since noon Thursday as part of the budget amendment process.
Sen. Ed Markey said the amendment undercuts President Obama's authority.
The amendment would have blocked $1.2 trillion in Medicaid cuts.
Sen. Chris Coons said Congress must pay for the fight against ISIS.
The Budget Committee leader said the chamber has taken 17 votes in more than six hours.
They unanimously backed sanctions if Obama can't verify that a deal is being followed.