Medicare bill reducing insurers' pay is blocked

WASHINGTON (Reuters) - A $20 billion Medicare refinancing bill, paid for mostly by reducing Medicare's reimbursement of private health plans, was blocked by U.S. lawmakers on Thursday, raising the likelihood a version with smaller cuts will emerge.

Health insurers such as Humana Inc and UnitedHealth Group would face billions in cuts in two competing versions of the legislation that lawmakers are debating this week.

The legislators face a ticking clock to pass a bill by June 30, or doctors working in the Medicare program would face a 10 percent cut in pay -- a highly unlikely outcome in an election year.

A legislative fix is needed to ward off a pending 11 percent pay cut to doctors who work with Medicare patients. Medicare is the federally run insurance plan for roughly 44 million elderly and disabled.

The bill sponsored by Montana Democrat Sen. Max Baucus and backed mostly by Democrats had more drastic cuts, but failed a key procedural vote on Thursday.

Iowa Republican Sen. Charles Grassley, has a competing version of the legislation. His plan would be less pricey, but he also backs some cuts in reimbursement to private plans.

AARP, the nation's largest advocacy group for older Americans, said the bill would help low-income seniors. In a statement, the group said it is "disturbed" that the bill was blocked.

Scores of other health companies would also be affected by whatever bill emerges, ranging from dialysis companies such as DaVita Inc to oxygen providers such as Apria Healthcare.

Medicare is the top buyer of U.S. health-care goods and services, spending nearly $400 billion a year.

(Reporting by Kim Dixon, Editing by Gary Hill)