This study assessed the injury severity, patient outcome, the cost of care, and the economic impact of Medicare DRG payment policies on patients referred to a Level I trauma center. Only 11 of 283 admitted traumatized patients were Medicare patients. Yet, these 11 Medicare patients left the trauma center with a deficit of $249,601. No significant differences were found between the Medicare and non-Medicare groups for Trauma Score, CRAMS Score, Glasgow Coma Score, Injury Severity Score, ICU or hospital length of stay, disability, or mortality. Under DRG's, Medicare payments ($4,237 ± 2,351/ patient) have fallen to 20% of prior cost-based Medicare reimbursements ($21,542 ± 34,170/patient), are providing only 16% of hospital costs ($26,928 ± 42,713/patient), and are significantly (p<0.0001) less than non-Medicare reimbursements ($15,288 ± 17,111/patient). Despite the high financial losses occurring when the trauma center treats referred traumatized Medicare patients, when all referred Medicare and non-Medicare patient trauma reimbursements are combined, overall trauma revenues have declined by only 4.3% under DRG's. If Medicare DRG payments were to be adopted by all third-party payers, reimbursement ($5,058 ± 4,090/patient) would be significantly (p<0.0001) less than current hospital reimbursements ($14,801 ± 16,537/patient) and costs ($16,121 ± 17,624/patient). These results indicate that although high financial losses result when caring for traumatized Medicare patients, DRG's have not had a major financial effect upon centers receiving referred trauma patients because of the low numbers of admitted traumatized Medicare patients. However, if third-party payers were to enact the Medicare payment system, devastating economic losses would be inflicted upon major trauma centers.