Last Modified: 7/11/2024
Location: FL, PR, USVI
Business: Part A, Part B
Q: Does the 2% payment reduction under sequestration apply to the payment rates reflected in Medicare fee-for-service (FFS) fee schedules or does it only apply to the final payment amounts?
A: Payment adjustments required under sequestration are applied to all claims after determining the Medicare payment including application of the current fee schedule, coinsurance, any applicable deductible, and any applicable Medicare secondary payment adjustments. All fee schedules, Pricers, etc., are unchanged by sequestration; it’s only the final payment amount that is reduced.
Q: How is the 2% payment reduction under sequestration identified on the electronic remittance advice (ERA) and the standard paper remittance (SPR)?
A: Claim adjustment reason code (CARC) 253 is used to report the sequestration reduction on the ERA and SPR.
Q: What is the verbiage for CARC 253?
A: “Sequestration - reduction in federal payment.”
Q: Will the 2% reduction be reported on the remittance advice in a separate field?
A: For institutional Part A claims, the adjustment is reported on the remittance advice at the claim level. For Part B physician/practitioner, supplier, and institutional provider outpatient claims, the adjustment is reported at the line level.
Q: How will the payments be calculated on the claims?
A: The reduction is taken from the calculated payment amount, after the approved amount is determined and the deductible and coinsurance are applied.
Example: A provider bills a service with an approved amount of $100, and $50 is applied to the deductible. A balance of $50 remains. We normally would pay 80% of the approved amount after the deductible is met, which is $40 ($50 x 80% = $40).
The patient is responsible for the remaining 20% coinsurance amount of $10 ($50 - $40 = $10). However, due to the sequestration reduction, 2% of the $40 calculated payment amount is not paid, resulting in a payment of $39.20 instead of $40 ($40 x .02 = $.80).
Q: How are unassigned claims affected by the 2% reduction under sequestration?
A: Though beneficiary payments toward deductibles and coinsurance are not subject to the 2% payment reduction, Medicare’s payment to beneficiaries for unassigned claims is subject to the 2% reduction. The non-participating physician who bills on an unassigned basis collects his/her full payment from the beneficiary, and Medicare reimburses the beneficiary the Medicare portion (e.g., 80% of the reduced fee schedule amount.
Note: The “reduced fee schedule” refers to the fact that Medicare’s approved amount for claims from non-participating physicians/practitioners is 95% of the full fee schedule amount). This reimbursed amount to the beneficiary would be subject to the 2% sequester reduction just like payments to physicians on assigned claims. Both are claims payments, but to different parties. If the limiting charge applies to the service rendered, providers cannot collect more than the limiting charge amount from the beneficiary.
Example: A non-participating provider bills an unassigned claim for a service with a limiting charge of $109.25. The beneficiary remains responsible to the provider for this full amount. However, sequestration affects how much Medicare reimburses the beneficiary. The non-participating fee schedule approved amount is $95, and $50 is applied to the deductible. A balance of $45 remains. Medicare normally would reimburse the beneficiary for 80% of the approved amount after the deductible is met, which is $36 ($45 x 80% = $36). However, due to the sequestration reduction, 2% of the $36 calculated payment amount is not paid to the beneficiary, resulting in a payment of $35.28 instead of $36 ($36 x .02 = $.72).
We encourage physicians, practitioners, and suppliers who bill unassigned claims to discuss with their Medicare patients the impact of the sequestration reductions to Medicare payments.
Q: Is this reduction based on the date of service or date of receipt?
A: In general, Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2% reduction in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME competitive bidding program, will be reduced by 2% 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.
Q: If a durable medical equipment capped rental period started before April 1, 2013, are the rental payments for months after April 1, 2013, subject to the 2% reduction?
A: Any claims for rental payments with a “FROM” date of service on or after April 1, 2013, will be subject to the 2% reduction, regardless of when the rental period began. For example, if a capped rental wheelchair was provided in February 2013, the monthly rental payment for May 2013 would be subject to the 2% sequestration reduction. The initial and subsequent monthly rental payments billed with a “FROM” date of service beginning on or prior to March 31, 2013, would not be affected by the 2% reduction.
Q: How long is the 2% reduction to Medicare fee-for-service claim payments in effect?
A: The sequestration order covers all payments for services with dates of service or dates of discharge (or a start date for rental equipment or multi-day supplies) on or after April 1, 2013.
See CMS’
April 16 MLN Connects weekly eNews 
for more information.
Q: Are drugs excluded from the 2% reduction?
A: No. All fee-for-service Medicare claim payments are subject to the 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.
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