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Medicare Cuts Mean Higher Costs, Less Outpatient Services

Millions of older Americans on Medicare may find themselves paying more out of their pockets for some treatments. And, they could be spending more time in the hospital for procedures now available on an outpatient basis. Jim Axelrod has the how and why of proposed cuts in Medicare.

When Dick Cheney needed a pacemaker. The outpatient procedure was high profile. Starting January 1st, Medicare patients needing the same thing may find it even higher priced.

"It could be higher priced. Or it could be much more inconvenient," says Dr. Michael Karpf of UCLA Medical Center. "Whenever possible, we try to do things on an outpatient basis. This will make it that much more difficult to do so."

Last year, to fight soaring outpatient costs, Congress capped Medicare costs on drugs and high-tech devices like the pacemaker at 2.5% of all spending. To meet the mandate, Medicare may now have to cut what it reimburses hospitals for outpatient care.

Dr. Susan O'Donahue says, "If there's a proposal that takes the reimbursement for a medical therapy below the cost of the actual equipment, you know there's no way that medical care [would] not suffer over time."

These proposed cutbacks could unleash what UCLA Medical Center Director Karpf calls a "perverse incentive."

"If they cut the reimbursement and pay you $1,000 for a $10,000 device, then what we'll have to do is see if we can in fact do it on an inpatient basis where the reimbursement might be better."

Of course that could mean more seniors spending more nights in the hospital and ending up with a greater copay to boot.

O'Donahue says, "Something has to give if there's a fixed amount of money available in the system."

One congressman who oversees Medicare's budget tells CBS News that the ceiling on these procedures and therapies will be raised, but not by as much as hospitals want. He says on some Medicare transactions they win, on some they lose. At the end of the day, it all evens out.
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