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Atlantic Posted Fri 03rd of May, 2013 14:50:26 PM

Now that the Medicare Remittance are clearly tracking CO223 for Sequestration Mandate Reductions, would you recommend showing the reduction on the patient's billing invoice?

SuperCoder Answered Mon 06th of May, 2013 18:32:39 PM

Cuts to Medicare due to Sequestration

Alert Details

Congress and the Obama Administration have been unable to agree on the level of budget cuts, tax increases, or a combination of both. A result of this gridlock is that The Budget Control Act of 2011 was signed into law in January, 2013. As required by law, President Obama signed the sequestration order on March 1, 2013.

Sequestration will go into effect April 1, 2013

Sequestration is across-the-board cuts to government agencies including both domestic discretionary spending and defense. It is important to note that some programs are exempt from sequestration including Medicaid, Social Security, the Children’s Health Insurance Program (CHIP), and some veterans programs.

If you are a Medicare-contracted provider, a 2% reduction is anticipated on April 1, 2013 and will impact Medicare Parts A and B, contractual payments to Medicare Advantage Plans (Part C), and Medicare Prescription Drug Plans (Part D). In general, payment for Medicare fee-for-service claims with a date of service or date of discharge on or after April 1, 2013 will be reduced by 2%. This claims payment reduction will be calculated after determining any co-insurance, deductible, and any applicable Medicare Secondary Payment adjustments.

CMS indicates how the 2% adjustments will appear

Very recently, CMS indicated that the remittance would appear the same with the addition of a separate adjustment which would be reflected by the CAR (Claim Adjustment Reason) Code 223 - 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 to reflect the 2% reduction. For Part B providers this would be reflected as a line level adjustment. Part A institutional claims would reflect this adjustment at the claim level. CMS also confirmed that this is a CMS business requirement and that all MAC's have been given this directive.

As a reminder, CMS will not allow providers to pass the 2% reduction to the patient.

As the law is currently written, sequestration is scheduled to last through Fiscal Year 2021. However, it is possible that Congress and the Administration could reach a budget agreement that will end or modify the sequestration provisions. Until the sequestration provisions are modified or eliminated, health care providers should prepare for a 2% reduction for Medicare-covered services and prepare for additional guidance on Medicare and how this reduction will be implemented.

Atlantic Posted Tue 07th of May, 2013 15:34:20 PM

Thank you for the "complete" CMS answer, However, would you recommend showing the reduction on the patient statements ?

SuperCoder Answered Wed 08th of May, 2013 16:37:04 PM

Hi there.

I wasn't sure on this answer so I consulted with billing expert Barbara Cobuzzi. Here is what she had to say:

"There is no regulation to indicate that you have to show the sequester reductions, but it is not a bad idea from a PR perspective so that the practice patients see how the sequester is effecting their physicians. IMO"

I hope this helps.


Leesa A. Israel, BA, CPC, CUC, CMBS
Executive Editor, The Coding Institute
Manager, TCI Consulting & Revenue Cycle Solutions

Atlantic Posted Fri 10th of May, 2013 12:22:01 PM

Thank you. That is exactly our thinking also!

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