- Sequestration is a reduction amount of 2% from federal payment as per the Budget Control Act of 2011.
- The sequestration reduction amount became effective from April 1, 2013 and it applied to Medicare and Medicare Advantage Plans.
- The claim adjustment reason code for sequestration is – “253: Sequestration – reduction in federal payment”.
- A sequestration reduction of 2% is applied only to the paid amount, not to the allowed amount and patient responsibility. For example, for service with a billed amount of $40.00 is allowed for $20.00 and Medicare pays 80% of the allowed amount, so 80% of $20.00 will be $16.00 and the remaining $4.00 will be the patient responsibility as coinsurance.
Payment calculation without sequestration,
Billed Amount = $40.00
Allowed amount = $20.00
Paid amount = $16.00
Patient responsibility (Coinsurance) = $4.00
Payment calculation with sequestration,
The sequestration amount will be 2% of the paid amount ($16.00) which is $0.32, hence Medicare will pay 16-0.32=15.68 and $0.32 will be the sequestration adjustment.
Billed Amount = $40.00
Allowed amount = $20.00
Paid amount = $15.68
Patient responsibility (Coinsurance) = $4.00
Sequestration Amount = $0.32