How the physician fee schedule affects Medicare patients' out-of-pocket spending.

Simulations of the redistributive effects of the new Medicare fee schedule have focused primarily on physicians, but patients may also be affected. Using a national sample of Medicare patients, we studied the fee schedule's potential impact on both components of out-of-pocket spending: copayments and balance bill amounts. While the fee schedule would raise copayments for the average patient, this effect would be more than offset by the balance billing limits (also imposed by Congress). Nevertheless, almost 10% of patients, particularly those who are black or living in rural areas, would experience large increases in their liability. Finally, the fee schedule with balance billing limits also serves as a "catastrophic coverage" program; patients with extraordinarily high medical expenses would enjoy substantial reductions in their out-of-pocket payments.