A proposal under consideration by a Senate panel to impose a co-pay fee for common medical lab procedures has aroused protest from laboratory industry groups and the nation's top seniors' group, which argue that it would amount to a cut in Medicare services.

The groups say that the Senate Finance Committee is discussing a proposal to raise $23 billion to help pay for a broad health-care legislation through a 20% co-insurance fee for laboratory procedures undergone by Medicare beneficiaries.

Lab tests help diagnose and track a broad range of health problems, from high cholesterol to diabetes to kidney problems. The small co-pay for patients receiving the tests could be as low as $2 for some tests under the co-pay proposal, but laboratory companies suggest the co-payments would also be expensive to collect from patients.

A bipartisan group of six Finance Committee members is currently negotiating the bill, which is considered a key piece of the efforts from Congress and the White House to expand health insurance coverage. If the Finance panel included the co-pay proposal as part of a larger health-care bill, political fallout from floating the co-pay fee could be heavy.

A July 31 letter signed by more than two dozen companies and groups, including divisions of Roche Holding AG (RHHBY) and Siemens AG (SI), as well as Quest Diagnostics Inc. (DGX), sounded alarms about the proposal that cite its effect on Medicare beneficiaries.

"The result of this proposed policy is not a cost savings to our health care system, but rather, a staggering new $23 billion cost shift to seniors," the letter states.

AARP, the nation's largest advocacy group for older people, has also registered concerns. David Certner, legal counsel and legislative policy director for the group, indicated that the AARP would oppose legislation that included the co-pay proposal.

"While we are supportive of some of some of the savings they're trying to get from the Medicare program...we have told them that we cannot support a bill that basically cuts benefits for our beneficiaries," Certner said. "Any additional co-payment on services would be considered a cutback in benefits."

Sen. Kent Conrad, D-N.D., in July said that the co-pay proposal is "on the table" in the committee's discussions, but a committee aide said Wednesday that members of the Finance panel "are still discussing a wide range of provisions and have not finalized or agreed to any policies or scores."

Medicare is the country's largest purchaser of clinical laboratory services and paid $7.1 billion for lab tests in 2008. The co-pay would represent a major step by the federal government to reduce the costs of lab services, which rose an average of 9% between 1999 and 2006.

Many services under Medicare Part B, which covers doctors' visits and medical equipment, are already subject to a 20% co-pay requirement. The Congressional Budget Office in a December 2008 report said that one rationale for imposing a lab co-pay is that it "would make cost-sharing requirements under [Medicare Part B] more uniform and therefore easier for enrollees to understand."

The CBO report also suggested that some Medicare beneficiaries "might be less likely to request or undergo laboratory tests of little expected benefit if they had to pay part of the costs themselves." If fewer tests were ordered, Medicare's costs for the procedures would presumably fall or at least grow at a less staggering rate.

But Alan Mertz, president of the American Clinical Laboratory Association, argued that unlike consumers deciding between generic and brand-name pharmaceutical drugs, patients told to get lab tests have little choice but to receive the tests.

"I've never been to a doctor where they say, 'Let's go over which test you need,'" Mertz said.

And some industry observers say that, proportionally, lab companies would be harder hit than other medical sectors that negotiated cost-cutting initiatives with the Senate Finance panel.

"I think it goes beyond fair and reasonable if you look at comparable deals by the hospital groups and [pharmaceutical companies]," said Ipsita Smolinski, a senior analyst at Capitol Street in Washington, which advises investors.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; patrick.yoest@dowjones.com