Medical Billing Services

What is Medicare Sequestration?

Providers seeing a 2 percent payment decrease on their Remittance Advice (RA) is due to a mandatory sequestration payment reduction. 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.

For the Medicare Fee-for-Service (FFS) program, claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will continue to incur a 2 percent reduction in the Medicare payment until further notice. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will continue to be reduced by 2 percent based upon whether the date-of-service or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

The claims payment adjustment will continue to be applied to all claims after determining coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. Though beneficiary payments for deductibles and coinsurance are not subject to the 2 percent payment reduction,

Example

A provider bills a service with an approved amount of $100.00, and $50.00 is applied to the deductible. A balance of $50.00 remains. We normally would pay 80% of the approved amount after the deductible is met, which is $40.00 ($50.00 x 80% = $40.00). The patient is responsible for the remaining 20% coinsurance amount of $10.00 ($50.00 – $40.00 = $10.00). However, due to the sequestration reduction, 2% of the $40.00 calculated payment amount is not paid, resulting in a payment of $39.20 instead of $40.00 ($40.00 x 2% = $0.80).

Key Points in Sequestration

  • The sequestration order covers all payments for services with dates of service or dates of discharge (or start date for rental equipment or multi-day supplies) on or after April 1, 2013, until further notice.
  • Claim adjustment reason code (CARC) 253 is used to report the sequestration reduction on the ERA and SPR.
  • The reduction is taken from the calculated payment amount after the approved amount is determined and the deductible and coinsurance are applied.
  • All fee-for-service Medicare claim payments are subject to a 2% reduction. There are no exemptions provided in the law for drugs or any other health care item or service provided under the fee-for-service program.

Latest Update on Sequestration

Section 3709 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspends the 2% payment adjustment currently applied to all Medicare fee-for-service claims due to sequestration. The suspension is effective for claims with dates of service from May 1 through December 31, 2020.

Major provider groups are asking Congress to extend a congressionally-enacted moratorium on the application of the Medicare sequester cuts into 2021. The American Hospital Association, American Medical Association, American Health Care Association, and National Association for Home Care & Hospice all signed a letter to House Speaker Nancy Pelosi and Congressional Leaders Mitch McConnell, Kevin McCarthy, and Chuck Schumer asking for the extension.

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Medical Billers and Coders

Catering to more than 40 specialties, Medical Billers and Coders (MBC) is proficient in handling services that range from revenue cycle management to ICD-10 testing solutions. The main goal of our organization is to assist physicians looking for billers and coders, at the same time help billing specialists looking for jobs, reach the right place.

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