Medical labs, including big industry players LabCorp and Quest Diagnostics, are fighting a health care reform proposal that they say could sicken their industry and add to seniors’ out-of-pocket medical expenses.

The Senate Finance Committee, in its effort to pay for the health system overhaul, is likely taking a look at adding a co-payment for lab work done for Medicare patients.

Currently, there is no co-payment required for Medicare lab work.

The Congressional Budget Office has estimated that charging seniors a 20 percent co-payment for lab services, such as blood tests, would save the government nearly $24 billion over a decade.

But lobbyists for the labs say that would simply shift those costs over to seniors who can ill afford it. In addition, they argue, having to bill seniors for typically very small amounts of money — averaging about $6 — would be overly burdensome on labs’ bottom lines and could put some in the sector out of business.

“This is the most inefficient way to raise revenue, and it will devastate the clinical laboratory business,— said Bob Waters of Drinker Biddle & Reath, who represents the National Independent Laboratory Association and the American Association of Bioanalysts. “It will put my members out of business.—

Alan Mertz, president of the American Clinical Laboratory Association, which represents the biggest labs like Quest and LabCorp, said his group is working to get its message to Capitol Hill.

“The entire laboratory industry has been extremely, strongly opposed to adding a co-payment for laboratory services in Medicare,— Mertz said.

Late last week, a coalition of the labs sent a letter to Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) conveying its “strongest opposition— to the proposal. “While we appreciate the importance of covering the uninsured, this suggestion needs to be rejected as a financing mechanism, because it is unworkable, inequitable, and would irrevocably harm a critical component of our health care infrastructure,— the letter said.

The letter’s 26 signatories, in addition to the ACLA, Quest and LabCorp, also included Genzyme Genetics, Roche Diagnostics Corp. and Siemens Healthcare Diagnostics.

This year isn’t the first time the issue has come up. In 2003, when Members were looking for offsets to help pay for the Medicare prescription drug benefit, a lab co-payment was proposed. That proposal was met with a lobbying effort from the clinical labs and was eventually killed.

“Not only does it shift costs to seniors, but the other reason Congress rejected it last time is [that] the average lab bill right now for a senior’s encounter with a doctor is $30,— Mertz said. That would make the average co-pay worth about $6. “The lab will end up spending $5 or $6 to collect $5 or $6, and then for the ones that are uncollectible, Medicare requires you to keep sending bills.—

And in the case of seniors with chronic diseases that require frequent lab tests, those Medicare patients could be on the hook for thousands of dollars in costs, Mertz said.

Waters, who is working with Mertz’s group, said the effort would require the clinical lab industry to send out more than “a quarter of a million bills— every day to seniors. “When Congress looked at this as part of the Medicare prescription drug debate, they realized that this just wasn’t sensible or workable,— Waters said.

In addition to working through the associations, the labs have tapped outside lobbyists.

LabCorp retained a team at Kelley Drye & Warren that includes Dana Wood, a one-time aide for then-Sen. David Durenberger (R-Minn.), and William Klinefelter, a one-time legislative and political director for the United Steelworkers.

Lobbying records show that LabCorp also works with National Environmental Strategies lobbyists Marc Himmelstein and Kent Burton on health care issues.

Quest has reported spending $320,000 on federal lobbying for the first half of this year, funneling a small piece of that work to Colling Swift & Hynes.

The ACLA has sent lobbying work to Alston & Bird and Mehlman Vogel Castagnetti.