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# What Does Sequestration Mean in Medicare Medical Claims?

- September 24, 2022
- Posted by Kristen Edwards

24 Sep

The Medicare budget Control Act 2011 says that there will be a significant reduction in the reimbursements of the cost of services claimed under Medicare. This federal reduction is specifically called sequestration in medical terms. Medicare claim reduction regulation applies to the claims from April 2013, which is 2% of the total amount claimed, which is also called Medicare Sequestration Payment reduction. The blog covers all the connected questions related to what does sequestration mean and how it is going to affect providers’ revenue?

## What does sequestration mean?

The reduction of 2% through the Medicare budget control act 2011 on the Medicaid providers to meet certain monetary goals is called sequestration. Medicare providers are receiving reduced Remittance Advice (RA) because of the reduction of mandatory sequestration payment.

Providers are obligated to use the Claim adjustment reason code – CARC 253 when submitting the claims for sequestration reduction. When the code is applied to the claim it will look like CO 253 as Sequestration- reduction in the name of federal payments.

For the Medicare FFS (Fee-For-Service) program, the claims submitted with the dates-of-services/discharge After April 1, 2013, are applied with the sequestration reduction under Medicare until further amendments to the budgetary goals.

source:aamc.org

Not only are providers slashed with a 2% reduction, but the claims for durable medical equipment DME, supplies, prosthesis, orthotics, and claims under DME Competitive Billing Programs are also in the continuation of the reduction relatively for 2% on the same basis of date of services and date of the rental equipment and the supply date on/after April 1, 2013.

The adjustment for claims on the payments will also be applied after determining the coinsurance, applicable Medicare Secondary Payment Adjustments, and applicable deductibles.

### Things to consider while dealing with sequestration

- The Medicare sequestration is applied on all the claims and adjusted claims for the services and the equipment used after the date -of service or date-of-discharge, and date-of-rented equipment respectively after April 1, 2013, and the reduction of 2% will continue till further notice.
- When submitting Medicare claims for reimbursements, code CARC 253 will be used in the claims to mention sequestration reduction.
- The deduction will be applied to the total amount left after deductibles and any other coinsurance or secondary Medicare insurance policies are applied.

## Frequently Asked Questions

### 1. How sequestration is calculated in medical billing?

After the deductibles are taken out providers get 80% of the approved amount. Suppose $50 is left after deductibles, which makes $40 ($50.00 x 80% = $40.00). However, in order to apply the sequestration reduction of 2%, a further reduction will be made on $40 which will be $39.02 ($40.00 x 2% = $0.08).

### 2. What does sequestration mean over EOB?

The reduction on the Medicare bills is made to achieve the budgetary policies where the resources provided are permanently canceled.

### 3. What does sequestration mean in medicine?

The meaning of a sequester differs depending on the place of its usage.

In medicine;

- To remove or separate a layer of tissue from the body or the portion where it is naturally occurring.
- In bone, separating the piece of a dead bone from the active or sound one.

### 4. Update on Medicare sequestration 2020?

Medicare sequestration Act 2011 was suspended by December 2020. The Coronavirus Aid, Relief, and Economic Security – CARES Act canceled the reduction made in the payment adjustment of 2% to the Medicare FFS (Fee-For-Services) claims.

### 5. What is an adjustment in sequestration?

Payment adjustments in sequestration are determined after all the deductions are applied to the total amount claimed. Medicare payment includes the Fee schedule, deductibles, and applicable coinsurance with any associated adjustment for Medicare secondary payment.

### 6. What is the fee for Medicare sequestration?

Medicare sequestration affects the amount that Medicare would reimburse to a particular beneficiary. The fee for non-participating Medicare fee schedule amount is $95.00 where 50.00dollars are applied to the deductible.

### 7. Is sequestration still in effect?

CARES Act which is later amended by Act to Prevent Across-the-Board Direct Spending Cuts, Consolidated Appropriations Act, 2021 (P.L. 116-260), and 9P.L.117-7) for other reasons temporarily amended and suspended Medicare sequestration from May 2020 through December 2021.

### 8. What to expect for the termination of Medicare sequestration?

The sequestration remains for four years in general after the court allows the provision of the sequestration for Medicare claims.

### 9. When did the sequestration for Medicare start?

Medicare sequestration started on April 1 when the Centers for Medicare and Medicaid Services – CMS started holding payments anticipating actions taken by Congress. It was held to make sure that the providers won’t get affected by the federal cuts.

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