updated 3/30/2009 4:21:12 PM ET 2009-03-30T20:21:12

The Obama administration Monday placed new curbs on private insurance plans that are popular with seniors in Medicare, but have been criticized for marketing abuses and high costs to the government.

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Medicare officials said the changes include winnowing the number of versions of a plan that insurers can offer, protecting patients with chronic diseases from excessive copayments and banning a practice by some plans of charging patients more for brand name drugs.

"The overall theme here is to make sure there is less confusion and more transparency, so consumers can make well-informed choices," said Jonathan Blum, who runs the Medicare division that oversees private plans.

The new policies reflect an administration effort to put its stamp on private plans in Medicare, which flourished under Republicans but are seen by some Democrats as undermining the traditional program. The plans are offered by major insurers such as United Healthcare and Humana.

"I think it'll move toward cleaning up the marketplace so it's easier for folks to compare plans," said Paul Precht, policy director of the Medicare Rights Center, an advocacy group. Stronger minimum standards for the plans mean "when you get sick, it's harder to stick you with higher costs," he added.

About 10 million seniors get comprehensive medical coverage through such plans, and another 17 million are signed up in private drug plans. Every year, they get the opportunity to sign up or change plans during an open enrollment period.

Confusion or choice?
In a separate move, the administration has proposed payment cuts of 3.75 percent overall to private medical plans that serve seniors. Insurers claim the cut could be as high as 5 percent for some plans, and they'll have to pass on the cost through higher premiums or fewer benefits.

The changes to be announced Monday are in an annual "call letter," a contracting document that sets the rules for insurers wanting to offer coverage in 2010. Insurers must submit their bids by June 1.

Officials said the reduction in the number of Medicare plans is meant to cut down confusion, not reduce choice. Most insurers offer several variations on a basic plan. Nearly 1,400 plans out of some 7,000 have fewer than 10 members, officials said. Medicare will closely scrutinize the private plans' bids for 2010 to eliminate offerings that only tweak a basic plan.

"These low-volume plans crowd the field and make selecting a plan much more difficult," said a Medicare statement.

Medicare will also take a close look at pricing policies that try to shift costs to beneficiaries with chronic illnesses.

Insurers are allowed considerable leeway to design their Medicare coverages. Some, for example, offer plans that charge much higher copayments for a nursing home stay, cancer drugs or kidney dialysis than does the traditional Medicare program. That sends a signal to patients that people with those conditions are not welcome. The administration said it will limit copayments to the amounts charged under traditional Medicare.

Finally, Medicare will ban a practice that some prescription drug plans use to increase patients' costs for brand name drugs. In addition to a higher copayment for the brand medication, these plans also tack on the difference between the cost of the brand drug and a generic version. While higher copayments will still be allowed, plans will no longer be able to pass on the difference between the underlying costs of the brand and generic medications.

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