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Sharp Medicare cutbacks planned
©Los Angeles Times, WASHINGTON -- Medicare is planning to slash its payments for some crucial outpatient procedures -- including implanting defibrillators like the one Vice President Dick Cheney got June 30 to keep his heart rhythm steady. The proposed cutbacks, which will cover devices and drugs, are driven by a congressional edict to limit spending on innovative, high-tech medical care in an attempt to restrain soaring costs for outpatient treatments. Congressional and industry officials told the Los Angeles Times that the federal Center for Medicare and Medicaid Services, or CMS, will issue new rules within the next few days. They would take effect Jan. 1 and mandate substantial reductions in payments for a wide range of services, including chemotherapy treatments for cancer and the implantation of pacemakers. But medical experts warn that the move to save money could backfire: Hospitals may merely opt to keep patients overnight for these procedures to collect the larger amounts of federal reimbursements allowed for inpatient care. The result could mean that millions of Medicare patients may stay in the hospital unnecessarily, and the taxpayers' total bill for Medicare outlays will increase because of the added cost of keeping someone in the hospital. The potential clash of federal regulations and medical needs is the latest episode in the perennial government struggle to control Medicare costs. As medical care gets more sophisticated and more expensive, consumers demand the latest treatments, and Congress tries to keep voters happy without busting the federal budget. But the effort to save money on outpatient care could have a perverse effect, warned Dr. Michael Karpf, vice provost of the University of California, Los Angeles, Hospital Systems and director of the UCLA Medical Center. If the rules take effect and hospitals experience big financial losses on outpatient procedures, "we will have to admit the patients" for a hospital stay, Karpf said. "It's the wrong direction to go. Our patients have understood it is better to go home than to stay in the hospital, and we agree with that." In an unusual bipartisan appeal, key members of Congress have sought a delay in issuing the new rule until more information is available about the costs of the 1,100 high-tech procedures affected by the cutbacks. They hope regulators will take a closer look at how the new technology is used and determine whether some of the procedures should be reclassified as standard medicine. It is vital to "prevent any train wreck in hospital outpatient payments for services using drugs or devices," said a letter from Reps. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee; Nancy Johnson, R-Conn., chairman of the health subcommittee; and Pete Stark, D-Calif., ranking subcommittee Democrat. "We must ensure that seniors have access to efficacious health-care treatments and innovative technologies," the Congress members said in the July 27 letter to Thomas Scully, administrator at CMS. But Scully's staff is in a squeeze created by Congress itself, which passed a law in 1999 limiting high-technology Medicare spending to a ceiling of 2.5 percent of all outpatient spending. Now, spending is breaking through that limit, forcing a cutback, regulators say. "We are still evaluating what the congressionally mandated caps mean for next year," said Bill Pierce, a spokesman for the Department of Health and Human Services, which administers the Medicare program. "We intend to work with Congress to protect Medicare beneficiaries' access to quality care and technology." Medicare, which covers 35-million people age 65 and older and 5-million disabled people, has a complex reimbursement system that is adjusting very slowly to the rapid movement of medical care away from the hospital bed and to the outpatient clinic. Charges for patient care within a hospital are "bundled," with payments designated in advance, depending on the type of ailment or condition. There is a fixed payment, for example, when a person gets coronary bypass surgery. If the hospital can treat and discharge the patient for less than the government payment, it makes a profit. Otherwise, it loses money. The inpatient payment schedule is adjusted each year and is financially generous enough to accommodate developments in rapidly changing technology, such as newer-model pacemakers and cancer-treatment drugs that might cost $3,000 a dose. The new rule will not contain a single across-the-board percentage cut for everything. However, there's concern that some individual products may suffer deep cuts. For example, a simple pacemaker may cost $5,000 and the hospital now receives full reimbursement of $5,000, according to Carol Kelley, executive vice president of AdvaMed, which represents the manufacturers of high-technology medical devices. If the new rule takes effect, she predicted, the payment might be reduced to $1,000, and the hospital would suffer a loss of $4,000. To avoid losing money, UCLA and other hospitals would be likely to encourage doctors and patients to have the procedures done on an inpatient basis. But having a procedure performed with a patient staying in the hospital can double or triple the bill, Karpf said.
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