Medicine: Welcome to the No-Care Zone

In Washington, a doctor is summoned from his dinner by a hospital nurse who tells him that one of his patients, a 72-year-old woman suffering from respiratory failure, has exhausted her allotment of Medicare funding. The further cost of her care must come out of the hospital's own pocket, says the nurse. Could he discharge the woman that evening?

In Knoxville, a 70-year-old woman with diabetes, gallstones and signs of congestive heart failure decides after a week in the hospital not to have gallbladder surgery. The hospital insists that she be sent home, despite her frail condition. "It was a mistake," says Dr. Bergein Over-holt. "Within twelve hours she was back in the hospital in a prestroke condition. It was touch and go to save her."

At hospitals across the U.S., similar tales of callous and even life-threatening treatment apparently stemming from changes in the Medicare system seem to be cropping up with disturbing frequency. To concerned doctors and health-care groups, they reflect a growing gap in the American health-care system. Carroll Estes, director of the Institute for Health and Aging at the University of California, San Francisco, calls it the "no-care zone."

In January, Estes' institute released the results of a three-year study concluding that Medicare patients are being released "sicker and quicker" from the nation's hospitals. The study, which examined medical care in 32 communities in eight states, found that the newly ousted patients, still in need of treatment, often have nowhere else to turn for help.

The problem began three years ago, after a major reform of Medicare. Under its earlier provisions, the plan, which covers the health-care costs of citizens who are over age 65 or disabled, paid for all "reasonable" hospital expenses. By the late '70s, however, this blank-check approach had led to a dizzying 17% annual increase in Medicare's hospitalization costs and warnings that the system would be bankrupt by 1990.

To forestall disaster, the rules were changed in 1983. A patient's ailment is now assigned to one of 470 diagnosis-related groups, which categorize treatment for everything from appendicitis to viral meningitis. Each DRG carries a fixed reimbursement rate based on the cost of treating the average patient. If a hospital can treat a patient for less than the DRG rate, it can keep the change; if the patient's care exceeds the ceiling, the hospital absorbs the loss. In theory, hospitals will lose money on complicated cases and save on simpler ones, and Medicare costs will be brought under control.

In financial terms, the DRG system appears to be working. It has helped limit the annual increase in hospital costs to 5% and reduced the average hospital stay for Medicare patients from 9.5 days in 1983 to 7.5 days last year. Many private insurers have introduced DRG systems of their own. Says Jack Owen, executive vice president of the American Hospital Association: "The DRGs have created efficiency and economy."