updated 1/24/2006 8:46:21 PM ET 2006-01-25T01:46:21

Democrats promised Tuesday to introduce legislation to reverse concessions made to the health insurance industry in a budget bill, claiming GOP lawmakers changed the bill behind closed doors.

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Sen. Hillary Clinton, D-N.Y., and Rep. John Dingell, D-Mich., said Republicans had caved in to powerful health insurance companies during talks on the five-year, $40 billion budget cut — at the expense of Medicare and Medicaid beneficiaries.

At issue is an obscure provision in the budget bill — slated for a final House vote next week — aimed at keeping health insurance plans participating in the Medicare program from obtaining inflated payments from the government. Such payments come when doctors and insurance companies perform a service but exaggerate the extent of the care when billing the government.

More broadly, Medicare’s private insurance plans reap large profits because they tend to cover healthier, less costly-to-treat patients than those participating in Medicare’s traditional fee-for-service system while receiving comparable payments.

The Senate version of the budget bill would have cut $26 billion in payments to managed care health plans over the next decade by cracking down on the practice, known as “upcoding” in government argot. The House-passed bill also curbed the overpayments, but only between 2008-2010.

CBO: $4 billion in cuts, down from $26 billion
The final version of the Medicare provision largely mirrored the House language, costing insurance companies just $4 billion over 10 years, according to estimates by the nonpartisan Congressional Budget Office.

What is more, Democrats say, the GOP-drafted provision takes away the government’s ability to address the overpayments under its own regulatory authority — giving the managed care plans a better deal than they would have if Congress hadn’t tried to rein them in at all.

That prompted Democrats to accuse Republicans of surrendering to the insurance industry as senior lawmakers and staff crafted the final bill behind closed doors. While Medicare’s private plans won concessions, poor and disabled people covered by Medicaid were hit by benefit cuts and new fees.

“I am astounded that they wish to move forward with this budget bill in the House — where it is so plain that working families’ health care has been sacrificed to protect industry’s excess profit from the Medicare program,” Dingell said.

Grassley defends bill
Senate Finance Committee Chairman Charles Grassley, R-Iowa, defended the outcome of last month’s negotiations.

“I appreciate the interest in fixing a ‘giveaway’ to insurance companies,” Grassley said. But he argued that the bill “cuts Medicare payments to insurance companies by $6.5 billion over five years. Even more important, it rescinds the policy leading to those extra Medicare payments.”

A senior GOP aide to the Senate Finance Committee involved in the negotiations said Republicans disagree with CBO’s analysis of the provision. The aide, speaking on condition of anonymity, said Medicare’s overseers at the Health and Human Services Department would retain authority to address the overpayments problem.

Insurance providers said there is no documented proof of overpayment abuses.

“There’s no study to suggest this is taking place,” said Karen Ignagni, president of America’s Health Insurance Plans. She added that private insurers participating in Medicare absorbed 75 percent of the cuts generated by the bill even though they cover only 12 percentage of Medicare patients.

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