Mandatory Payment Reductions in the Medicare Fee-for-Service (FFS) Program “Sequestration”

The Budget Control Act of 2011 requires mandatory across-the-board reductions in Federal spending, also known as sequestration. The American Taxpayer Relief Act of 2012 postponed sequestration for 2 months. As required by law, President Obama issued a sequestration order on March 1, 2013.

Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment.

• 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.
• Claim adjustment reason code (CARC) 223 “Adjustment code for mandated federal, state or local law/regulation that is not already covered by another code and is mandated before a new code can be created.” will be used to report the sequestration reduction on the ERA and SPR.