Medicare Sequestration

Medicare 1% soon to be 2% sequestration reduction!

Your billing team should have started to see as of April 2022 a 1% sequestration coming on your Medicare and possibly your Medicare Advantage Organization (MAO) claims.
This 1% will go up to 2% in total as of July 2022 and up to 4% by 2023. This is not a reduction in the CMS Fee Schedule so should not impact your payments from private payors who are based on a percentage of Medicare rates.

Why the sequestration?
Congress approved the $1.5 trillion fiscal 2022 federal appropriations bill without language that would immediately address the more than 10% in successive statutory cuts to Medicare reimbursements, beginning with a 1% sequester cut on April 1. The AOA and other physician groups had pegged the omnibus spending bill as an opportunity to avert not only the April 1 cut, and another 1% sequester cut scheduled for July 1, but also a larger fiscal cliff coming in late 2022 and 2023.

An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes, signed into law on April 14, 2021, extends the suspension period to December 31, 2021.

The Consolidated Appropriations Act, 2021, extended the suspension period to March 31, 2021.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended the sequestration payment adjustment percentage of 2% applied to all Medicare Fee-for-Service (FFS) claims from May 1 through December 31, 2020.

How does it appear on my claims?
Claim adjustment reason code (CARC) 253 is used to report the sequestration reduction. The code will appear as a CO 253 on the RA ‘Sequestration-reduction in federal payment’ as the reason.

Are your Medicare MAO’s following your contract correctly for the sequestration?

These Congressional spending reductions were applied to both payments made directly to providers for Original Medicare services and to the monthly payments made to MAOs. CMS issued guidelines to MAOs to explain if and when the MAO could “pass through” the sequestration withholding to providers based on two factors: (1) participating [par] vs. non-participating [non-par] status and (2) payment terms of the contract.

The CMS Guidelines state that:

  1. If a provider is non-par, the MAO may pass the sequestration reduction through to the provider.
  2. If the provider is par (i.e. has executed a contract with the MAO), then the MAO must pay the provider in accordance with the terms of the contract.
  3. If the fee schedule in the contract reflects language that the provider will be paid “a percentage of the published Medicare fee schedule,” then all payments must be calculated in accordance with that provision.
  4. If the fee schedule in the contract reflects language allowing the MAO to adjust payments for sequestration, then the payment can be reduced up to 2%. An example of an adjustment provision follows:
  5. Payment to Provider shall be ____% of the current Medicare Allowable net of any adjustments to Medicare payment methodologies, as updated or amended. The final payment amount to Provider shall be reduced in the same manner as the reduction in the final payment amount that CMS is applying to provider payments, e.g., sequestration, pursuant to the Budget Control Act of 2011, or any successor legislation. This provision shall apply for the duration of the time in which sequestration reductions are applied to provider payments.
Published On: June 14, 2022Categories: Legislation, PatientsTags:

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