CMS Releases Guidance For 2% Sequester Reduction In Medicare Payment

On March 8, 2013, the Centers for Medicare and Medicaid Services (CMS) issued a message to health care providers and suppliers which clarifies the application of the 2% sequester reduction in Medicare payment.  Specifically, President Obama issued a sequestration order on March 1, 2013, carrying out the requirement under the Budget Control Act of 2011 for mandatory, across-the-board reductions in federal spending, which had been postponed for two months by the American Taxpayer Relief Act of 2012. The federal budget cuts were created because Congress failed to come to an agreement on how to reduce the federal deficit.  Although for most federal programs the effects of the sequestration began immediately, for Medicare Part A and Part B, the sequestration related cuts do not take effect until April 1, 2013, the first day of the first full month after the president’s sequestration order.  CMS’s message explained that the Medicare fee-for-service (“FFS”) claims (Part A and Part B) will incur a 2% reduction in Medicare payments as a result of the sequestration order.  This 2% sequestration cut to Medicare is part of the $1.2 trillion in cuts required by the Sequestration Transparency Act, part of a deal worked out to end last year’s debt-ceiling crisis.  The mandatory Medicare cuts will result in a savings of $11 billion in 2013.  Medicaid is exempt from the cuts.

CMS instructed that Medicare FFS claims with dates-of-service and dates-of-discharge on or after April 1, 2013 will incur a 2% reduction in reimbursement while claims for durable medical equipment (“DME”), prosthetics, orthotics, and supplies will also be reduced by 2% for dates-of-service and start dates for rental equipment or multi-day supplies on or after April 1, 2013.  Notably, CMS will apply the 2% claims payment adjustment after determining any applicable coinsurance, deductible, and Medicare Secondary Payment adjustments.  Further, payment to beneficiaries for unassigned claims are also subject to the 2% reduction, while beneficiary payments for deductibles and coinsurance are not subject to the 2% payment reduction.

While it is still possible that Congress will reach some sort of a compromise before most of the cuts take effect on April 1, providers should prepare for a 2% reduction in reimbursement from the Medicare program beginning in April 2013.

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