Nursing home residents may soon face higher costs and reduced services, as planned Medicare spending cuts take effect this fall.

IIt's an indirect -- and, some say, unanticipated -- consequence of more routine cost-cutting for the nation's biggest health-care provider. On July 29, the Centers for Medicare and Medicaid Services (CMS) announced that, starting in October, it will begin cutting their reimbursement rates to nursing homes by 11.1% to make up for $4 billion shortfall last year. And while that doesn't directly raise residents' costs, there may be pressure on nursing homes to make up the shortfall somewhere, says Toby Edelman, a senior policy attorney with the Center for Medicare Advocacy. Already the news has hurt shares of nursing home companies, as investors worry that profits will shrink.

For residents and the adult children who care for them, higher costs would add to already mounting charges. In 2010, nursing home residents paid an average of $219 per day for a private room, up nearly 5% from a year previous, according to the MetLife Mature Market Institute. Many are also coping with recent losses to their retirement portfolios.

If costs don't go up, or even if they do, the cuts are also likely to result in a lower quality of care if homes cut back on staff or services to make up the shortfall. Many of these homes are public companies that have shareholders to answer to. Medicare payments are responsible for more than 20% of nursing homes' revenues, according to an analysis by the Medicare Payment Advisory Commission. Following the news, shares of SunHealthcare have fallen 49% this month, and Skilled Healthcare is down 39%. "We will focus in the near term to mitigate the impact of the rate cuts by reducing expenses," Boyd Hendrickson, CEO of Skilled Healthcare, recently told the Wall Street Journal.

Others suggest the companies and their investors are overreacting. The cuts are in part a response to recent government reports (read the PDF) that Medicare has been overpaying nursing homes the past few years; the adjustment is designed to make the reimbursement rates more accurate, not stingier. "We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients," a spokesperson for CMS wrote in an email. "However, we intend to carefully monitor changes in utilization and staffing patterns to ensure that patients continue to receive high quality care."

Seniors may have some recourse. While they may face rising rates, you can negotiate for extra amenities or a room upgrade, according to a survey of long-term-care costs from Genworth Financial. Be sure to check out sites like Medicare.gov, which compares nursing homes, and call the local branch of non-profit Area Agency on Aging, which can recommend homes or put you in touch with a patient advocate, says Mary Johnson, a Social Security and Medicare policy analyst with The Senior Citizens League, one of the nation's largest non-partisan groups that supports seniors. And "if there are large fee increases that seem unexpected after admission, review the nursing home agreement [to make sure these are within the rules] and visit the nursing home management if there's a discrepancy," she says. "Always negotiate -- if you don't ask you'll never get."