By Kim Dixon

WASHINGTON (Reuters) - U.S. lawmakers should rein in government subsidies for a fast-growing and lucrative part of the Medicare health insurance program for the elderly and disabled, an advisory group's staffers said this week.

The Medicare Payment Advisory Commission advises Congress on how the program for 44 million elderly and disabled should spend its roughly $400 billion annual budget. The government is the biggest buyer of health care goods and services in the United States.

Private companies like Humana Inc (HUM.N: Quote, Profile, Research) and UnitedHealth Group (UNH.N: Quote, Profile, Research) contract with the government to provide services to about 20 percent of these Medicare recipients through a program called Medicare Advantage (MA).

At issue is a slice of that business where insurers sell plans to employers and some unions to manage their retiree health plans. The plans account for about 17 percent of all MA enrollees, according to the commission, often known as MedPac.

Known as group plans, commission staff said Medicare is subsidizing extra benefits for enrollees in these private plans and the bidding process gives the health plans little incentive to be competitive.

"These group plans appear to be less efficient than individual" Medicare Advantage plans, MedPac staffer Scott Harrison told the Commissioners during a two-day policy meeting that wrapped up in Washington on Wednesday.

Driving group plans' growth are the extra benefits and lower prices paid under the plans, according to Peter Costa, an analyst at FTN Midwest.

"It makes sense for a corporation," to outsource these benefit plans. "In my opinion it's a growth area," said Costa.