Here are the five things you should know about sequestration:
1. What is sequestration?
It is the mandatory 2% payment reduction in the Medicare fee-for-service (FFS) program required by the Budget Control Act of 2011.
2. Who does it affect?
All providers of medical services
that are reimbursed under the Medicare fee-for-service (FFS) program (i.e.,
Part A and Part B) are subject to the 2% reduction. This also includes those entities that bill for durable
medical equipment (DME), prosthetics, orthotics, and supplies.
3. When does it begin?
FFS claims with dates of service or
dates of discharge on or after April 1, 2013. Payments for DME, prosthetics, orthotics and supplies will
be based upon whether the date of service, the start date for rental
equipment or multi-day supplies, is on or after April 1, 2013.
4. How is the 2% calculated?
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 $100.00.
- Medicare normally would pay 80 percent of the approved amount ($100.00 x 80 percent = $80.00).
- The patient is responsible for the remaining 20 percent coinsurance amount of $20.00 ($100.00 - $80.00 = $20.00).
- However, due to the sequestration reduction, 2 percent of the $80.00 calculated payment amount is not paid, resulting in a payment of $78.40 instead of $80.00 ($80.00 x 2 percent = $1.60).
Billing Note: The 2% reduction will be noted on the
explanation of payment as Claim Adjustment Reason Code 223. (CARC 223 is defined as 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.)
5. Where do I get more information?
Documentation was issued by CMS on
March 8, 2013 and can be found via this link:
You can also contact your local Medicare Administrative
Contractor for further information.
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