A single-payer system based on Medicare rates poses inherent challenges

The major concern among critics of the Medicare-for-All approach is the question of how such a plan would be funded. Would the State of California come up with additional funds to pay for the shortfalls that occur for all payers? In California, Medi-Cal comprises one-third of all admissions.^a  Medi-Cal pays ABC Hospital, described in the main article, less than 60% of what Medicare would pay for all discharges.^b   It remains unclear whether all patients would be covered for all admissions, regardless of ability to pay. It was determined that Medicare pays less than 90% of ABC Hospital’s full costs.

Each hospital will have different challenges and opportunities. For example, major academic medical centers would be challenged to find the profits they historically would have used to help support and subsidize their medical education and residency programs. Unless the issue of outlier payment is addressed, most hospitals would see high-risk, high-outlier services as unaffordable and to be avoided, thereby creating an access-to-care issue for the nation’s sickest patients.

Footnote:

a. The Medi-Cal DRG payment method uses All Patient Refined Diagnosis Related Group (APR-DRG) software that is created, owned and licensed by the 3M Company.

b. This payment rate reflects the experiences of the hospitals on which ABS Hospital is based.