I think a $7/month subscription to access anything over ~5 articles/month on Medium would get a lot of people to pay, and I don't think it would chase off publishers at this point. The value Medium has created is easily worth as much as Netflix, and without a doubt more valuable than the paywalls other publishers (NYT, WSJ) ask for.
I don't know. Most Medium articles are not really worth paying for, in my opinion, and so paywalling the site would just add it to that collection of sites that I ignore and filter out, like the WSJ, NYT, Wired, etc, etc.