(Bloomberg) House Democrats have proposed tripling funds for a US children's health insurance programme, getting the money by cutting government payments to private insurance companies that provide Medicare benefits.

The proposed legislation, announced by Democrats yesterday in a conference call with reporters, will be considered in House committee meetings this week. It includes an increase in the US tobacco tax to 84 cents a pack from 39 cents.

Increasing the number of uninsured low-income kids in the health programme to 11 million from the current 6 million, as proposed by the Democrats, is opposed by President George W. Bush. He has threatened to veto a Senate measure that would add 3 million kids to the program by doubling the funding.

"The future of our country is our kids, and if we don't see to it that their health is cared for, the next generation of Americans may not be able to guard and protect our country and the system that is so important to us," said Representative Frank Pallone, a Democrat from New Jersey, in explaining the measure.

The Democrats' proposed legislation, costing an estimated $90 billion over five years, includes an extra $50 billion for the State Children's Health Insurance Program, known as Schip. The ten-year-old programme is designed to help children in families that earn too much for US Medicaid health insurance for the poor, and too little to afford private insurance.

A Senate committee last week approved a measure to add $35 billion, on top of the regular $25 billion five-year Schip allotment, funded by boosting the tobacco tax to $1 a pack.

Democrats said they would worry about reconciling the two measures after getting their proposed legislation through the House.

The House measure also would block a scheduled ten percent cut in physician fees paid by Medicare, the US insurance system for the elderly and disabled, and freeze payments to some providers, including long-term care hospitals and skilled nursing facilities in 2008.

These payment freezes were recommended in March by the Medicare Payment Advisory Commission, an independent government panel, which also said physician payments should not be cut. Doctor fee increases or decreases are set according to a 1998 Congressional formula designed to hold down spending. Congress has overridden cuts the past few years, leaving doctors now facing the ten percent reduction.

The Democrats would also reduce payments to private insurers that offer Medicare benefits, something that House Republicans have said they oppose. The privately run plans, known as Medicare Advantage and sold by companies such as Humana Inc. of Louisville, Kentucky, and UnitedHealth Group Inc. of Minnetonka, Minnesota, are paid on average 12 percent more than the government spends to provide Medicare services directly.

Democrats say that it makes no sense to pay extra money to the private sector to provide Medicare benefits that the government can offer at a lower rate. Health insurance companies say they often offer extra benefits, such as eye care and exercise programs, that help keep enrollees healthier.

The extra cost is paid for by other Medicare beneficiaries, said Democrat backers of the measure. This is "not fair for the other seniors," Pallone said.

More than 80 percent of the elderly in Medicare receive their benefits through the government's fee-for-service system, which reimburses providers directly.

Equalising payments between the private insurance companies and the government's own Medicare payment system would save more than $40 billion, Democrats said. Increasing the cigarette tax would raise an estimated $27 billion more. Other savings would come from reducing the rental period for Medicare oxygen equipment and changing the purchase system for wheelchairs. Republicans said yesterday that cutting payments to Medicare Advantage plans would disrupt services and hurt enrollees. Democrats said they would minimize this by reducing payments gradually over the next four years.

"These are not cuts," said Representative John Dingell, a Democrat from Michigan and chairman of the Committee on Energy and Commerce, which will debate the measure. "They are quite frankly reductions in completely unjustified overpayments."

The insurance industry's lobbying group, America's Health Insurance Plans, has already announced a new effort to get enrollees in Medicare Advantage to lobby Congress against the cuts.