Sequester Medicare Rate Cut Goes Into Effect April 1

April 1, 2013

Medicare Advantage, Part A and Part B providers should expect a 2% reduction in payment based on submitted claims for services provided to Medicare beneficiaries beginning April 1, 2013.

The 2% payment adjustment required under sequestration is applied to each claim after payment is calculated based on the current fee schedule and any applicable co-pays, deductibles, and Medicare Secondary Payment adjustments have been applied. All fee schedules and pricers are unchanged by sequestration; only the final payment amount is reduced.

In other words, providers should continue billing consistent with the published 2013 Medicare fee schedule rates according to their geographic region and collect the 20% Medicare co-payment based on those rates. For non-participating providers, calculations for the limiting charge should also be based on the published fee schedule rate, not including the 2% reduction. Providers cannot increase charges to Medicare beneficiaries to offset the reduced payment amount.

The example below illustrates how the reduced payment will be calculated under Medicare Part B for a participating provider:

Medicare Fee Schedule Rate:


Co-payment from Patient:

$100 x 20% = $20

Payment from Medicare:

($100 - $20) - 2% = $78.40



As of the end of March, Congress has not taken action to reverse the series of automatic, across-the-board cuts (sequestration) to federal programs that were were mandated under the Budget Control Act of 2011 (BCA). Under the requirements of the BCA, as amended by January's American Taxpayer Relief Act (ATRA), both defense and non-defense programs became subject to sequestration on March 1, reducing total funding by $85 billion for 2013. The law requires a reduction of federal spending totaling $1.2 trillion over the next 10 years. Several key mandatory programs-including Social Security, Medicaid, and the Children's Health Insurance Program (CHIP)-are held harmless and exempt from sequestration cuts, thus deepening the reduction for affected programs.

ASHA Resources

For questions related to Medicare reimbursement, please e-mail For additional information regarding sequestration and federal legislation, please contact Ingrida Lusis, ASHA's director of federal & political advocacy, at

ASHA Corporate Partners