The Institute of Medicine (IOM) of the National Academy of Sciences was commissioned by Congress to study the current system for the payment of diagnostic clinical laboratory services provided to Medicare beneficiaries. The current system was established in 1984 and has grown in complexity and is of diminishing contemporary relevance. The IOM recommended that a single, rational, nationalfee schedule be established and that it be initially based on the National Limitation Amount (NLA) currently mandated as the national fee cap. To estimate the potential budgetary impact of this recommendation, we merged the 1999 Part B Extract and Summary System and the 1999 Clinical Diagnostic Laboratory Fee Schedule (CLFS). By using an estimated 193 million allowed services from this data set and the current mean fee of $9.14 per test, current spending is approximately $1,768 million. The impact of raising the CLFS to the NLA will be approximately $1,792 million, or $9.26 per test. The estimated cumulative budgetary effect, factoring in the current forecast for the Consumer Price Index, is an increase of approximately $993 million over 5 years and $2,359 million over 10 years.