Health care financing policy for hospitalized black patients

The Medicare diagnostic-related group (DRG) prospective payment model is changing hospital payment. Currently many states are using DRG prospective "all payer systems" for hospital reimbursement. In all payer systems, Medicare, Medicaid, Blue Cross, and other commercial insurers pay by the DRG mode; New York State has had an all payer system since January 1, 1988. This study simulated DRG all payer methods on a large sample (N = 6,134) of adult black medical and surgical patients for a three-year period using both federal and New York DRG reimbursement. Both Medicare and Medicaid patients had, on average, a longer hospital stay and total hospital cost compared with patients covered by Blue Cross and other commercial insurers. Medicare and Medicaid patients also had a greater severity of illness compared with those of Blue Cross and others. All insurers (ie, Medicaid, Blue Cross, Medicare, and commercial) generated substantial financial risk under the DRG all payer scheme. These data suggest that federal, state, and private payers may be under-reimbursing for the care of the hospitalized black patient using the DRG prospective hospital payment scheme. Health care financing policy such as that demonstrated in this study may limit both the access and quality of care for many black patients in the future.