Americans over 65 are getting better hospital care since the government limited Medicare payments, but more patients are being sent home sick, and many of those are dying, according to a study published Wednesday.

"The good news is that over time, there's better care delivered by doctors and nurses during hospitalization, and the new payment system didn't interrupt that," said Dr. Katherine L. Kahn, who headed the study for the Rand Corp., a think tank in Santa Monica, Calif."However, associated with the introduction of the new payment system, and probably caused by it, there was an increase in patients discharged with instability," which "somewhat reduced the gains in survival overall," she said.

The study found that the rate at which Medicare patients were sent home in unstable condition - such as with rapid heartbeat or confusion - jumped from about 10 percent before Medicare payments were limited to about 15 percent after.

About 16 percent of unstable patients are likely to die within 90 days of release, compared to about 10 percent of those discharged in stable condition, the study reported.

The study in the Journal of the American Medical Association examined the case histories of more than 14,000 patients at 297 hospitals. The $3.9 million project, funded by the government, compared hospital care in 1981-82 and 1985-86.

Under a policy begun in 1983, the government reimburses hospitals a flat rate for each Medicare patient, depending on the patient's illness. Previously, the government paid whatever costs Medicare patients ran up while hospitalized.

The new system has slowed the rise in the cost of Medicare, which covers Americans over 65. But it has raised fears that care would be compromised through shortened hospital stays and the use of cheaper procedures.

Rand researchers found that hospital stays have indeed become shorter, dropping from an average of 14.4 days to 11. But the number of patients receiving poor or very poor care while hospitalized declined from 25 percent to 12 percent.

Also, the death rate for people treated for congestive heart failure, heart attack, pneumonia, stroke or hip fracture declined slightly.