A comparison of hospital performance under the partial-payer Medicare PPS and state all-payer rate-setting systems.

Although the passage of PL 98-21 was accompanied by a flurry of interest in all-payer rate regulation, the popularity of all-payer systems has waned recently. This article attempts to determine if the move away from all-payer systems constitutes a lost opportunity. The performance of the partial-payer Medicare PPS is contrasted with that of the all-payer systems in Maryland and New Jersey. The analysis suggests that all-payer systems not only control costs more effectively than partial-payer systems, but also have inherent structural features conductive to limiting cost shifting and to funding uncompensated care. Analysis of data suggests that from the perspectives of payers, providers, and patients, all-payer rate-setting is more equitable than partial-payer systems.