by Kim Dixon

Last Updated: 2008-06-24 15:07:32 -0400 (Reuters Health)

WASHINGTON (Reuters) – The House Tuesday overwhelmingly approved a bill that would shave billions of dollars from health plans that contract with the federal Medicare program.

Payments would be cut to health insurers such as Aetna Inc and Humana Inc under the bill sponsored by Rep. Charles Rangel of New York and Rep. John Dingell of Michigan, both Democrats.

U.S. lawmakers face a June 30 deadline to pass legislation blocking a scheduled 11% pay cut for doctors who accept Medicare patients – considered a highly unlikely outcome in an election year. Cuts to the private plans would help keep doctors’ payments intact.

In the Senate, Republicans and Democrats were working on a compromise that could be announced as early as Tuesday afternoon.

Payments to private plans for indirect medical education, which cover sicker patients seen at teaching hospitals, are one source of cuts. Proponents say the government already pays extra for those services.

"At this point, the (indirect medical education) cuts are inevitable," said Kim Monk, an analyst at investment adviser Capital Alpha Partners. At least $8 billion in cuts seem to be in all the versions, she added.

Congressional advisers have reported that private Medicare plans, known as Medicare Advantage (MA), are paid 13% to 17% more than traditional Medicare.

AARP, an advocacy group for seniors, supports cuts to private plans to help expand benefits for the low income and other reforms.

Other Medicare providers that are likely to be affected include oxygen companies such as Apria Healthcare Group Inc and wheelchair makers like Invacare Corp.

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