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Deep cuts in Medicare payments proposed


WASHINGTON - The Bush administration is proposing deep reductions in Medicare payments for a wide range of drugs and medical devices used to treat people who are elderly or disabled.

The proposed cuts are part of a new system of paying hospitals for outpatient services. With advances in medical technology, hospitals report explosive growth in the number and kinds of procedures that can be performed in outpatient clinics, without the need for an overnight stay.

Outpatient care accounts for nearly half the revenue at some hospitals.

The cuts would affect many drugs, devices and high-technology procedures, including cancer drugs and cardiac defibrillators such as the one implanted in the chest of Vice President Dick Cheney to prevent an irregular heartbeat.

Medicare would also pay less for blood products given to people who receive transfusions but do not need overnight hospitalization. The Medicare payment for a unit of red blood cells - about a pint - would be cut 39 percent, to $83 next year, from $137 this year.

Federal health officials said Medicare had been overcharged for many outpatient services. But patients have joined health care providers in protesting the proposed cuts, saying that at the new prices, hospitals will be unable to provide treatment to patients who need it.

"We were shocked when we saw the payment rates," said Christopher T. Mancill, director of reimbursement policy at the American Red Cross.

The payment for inserting a battery-operated pacemaker and defibrillator would be cut 59 percent, to $12,102, from $29,360.

Advocates for doctors and patients expressed concern that hospitals would stop providing services on which they consistently lose money. This could make it more difficult for Medicare patients to obtain life-saving drugs, devices and treatments.

The government, in a preamble to the proposed rules, acknowledges that many of the proposed payments are "far lower" than the 2002 amounts, and it says these cuts are "of concern to us because of the potential impact on access to care." But it contends that the new rates accurately reflect hospital costs.

The Medicare payment for a breast biopsy would be cut 27.5 percent, to $290 from $400. For injection of cisplatin, a commonly used cancer drug, the payment would be reduced 43 percent, to $24 from $42.

Hospitals would get 67 percent less for implanting an infusion pump, used to deliver medication for severe intractable pain. The payment would be cut to $1,346 from $4,079.

Dr. Edward L. Braud of Springfield, Ill., president of the Association of Community Cancer Centers, whose members treat more than half the nation's cancer patients, said: "Hospitals will not be able to continue providing chemotherapy at the proposed rates. Patients will have less access to care."

The new rates illustrate the problems the government has in setting payments for an industry in which goods and services are continually changing because of new technology.

Thomas A. Ault, an expert on Medicare who worked at the Department of Health and Human Services from 1984 to 1997, said: "The new outpatient rates are pretty messed up. The relationship between what Medicare pays and what a service will cost varies erratically."

After considering public comments on the proposal, the government will issue final rules setting payment rates, effective Jan. 1.

Medicare received more than 110 million claims last year for hospital outpatient services, including chest X-rays, breast cancer surgery and emergency room visits for heart attacks and broken bones.

Under Medicare, a hospital normally receives a fixed amount of money, set in advance, for each outpatient service. Similar services are grouped together in more than 500 categories. The government sets a standard payment for each category and pays the same amount for each service in that group.

The formulas used by Medicare to pay doctors, hospitals and other health care providers are set by statute and regulations and are notoriously complex. The Bush administration said the new system of paying for hospital outpatient services was "arguably the most complex and difficult in the history of the Medicare program."

Federal officials said outpatient rates for 2003 were the first ones based on data from claims submitted by hospitals under the new payment system. In the past, the government often relied on data supplied by drug and device manufacturers. The government said the new numbers were more accurate, but health care lobbyists disagreed.

Stephen J. Ubl, executive vice president of the Advanced Medical Technology Association, which represents more than 1,000 companies, said: "Hospitals tend to underreport the costs of high-tech items, and the government compounds the problem by reducing charges for all items by a standard percentage. Hospitals mark up aspirin and bandages more than a $20,000 defibrillator, so when you apply a uniform reduction, it's biased against high-tech, high-cost items."

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