Medicare Payment Changes: Understanding the 2% Sequestration Reduction
Attention healthcare providers! Your Remittance Advice (RA) may show a 2% decrease due to a mandatory "sequestration" payment reduction. Don't panic! This guide explains what it means and how it affects your reimbursements.
Why the Reduction?
Sequestration is a government-mandated cost-cutting measure that applies to various programs, including Medicare. Since April 2013, Medicare Fee-for-Service (FFS) claims have been subject to a 2% reduction, identified by claim adjustment reason code (CARC) 253 as "CO 253 - Sequestration-reduction in federal payment."
What Claims are Affected?
The 2% reduction applies to claims with dates-of-service or dates-of-discharge on or after April 1, 2013, for most services, including DME, prosthetics, orthotics, and supplies.
How is the Reduction Calculated?
The reduction is applied to the calculated payment amount, not the original approved amount. This means it takes deductibles and coinsurance into account.
Example:
Provider bills: $100
Deductible: $50
Balance: $50
Normal payment (80%): $40
Patient coinsurance: $10
Sequestration reduction: $0.80 (2% of $40)
Final payment: $39.20
Important Points to Remember:
Sequestration applies to all fee-for-service Medicare claims, except for durable medical equipment under the Competitive Bidding Program.
The reduction is temporary and may be subject to change.
The latest update:
The CARES Act temporarily suspended the 2% reduction for claims with dates-of-service from May 1 to December 31, 2020. However, it is currently expired.
Looking Ahead:
Major provider groups are lobbying Congress to extend the moratorium on this reduction. Stay informed about any potential changes through reliable healthcare news sources.
Need Help?
Medical Billers and Coders (MBC) can help your practice navigate these changes and ensure accurate billing. We offer a range of services, from revenue cycle management to ICD-10 coding support.
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