Medicare FFS Payment Reduction Continues

The Medicare fee-for-service program sequestration that began April 1, 2013 has been extended through April 1, 2015. Claims with dates of service on or after April 1, 2013 paid under the FFS program continue to be subject to a 2 percent payment reduction.

Jurisdiction 11 Medicare administrative contractor (J11-MAC) Palmetto GBA explains on its website that the payment reduction applies to all claims paid under the Medicare FFS program, including drugs and durable medical equipment, prosthetics, orthotics, and supplies. Medicare electronic health record incentive payments and payments to beneficiaries for unassigned claims are also subject to the 2 percent reduction.

The reduction is taken from the final payment amount, after the approved amount is determined and the deductible and coinsurance is applied. Physicians, practitioners, and suppliers who bill claims on an unassigned basis are encouraged to discuss with beneficiaries the impact of sequestration on Medicare’s reimbursement.

Palmetto GBA provides this example of how the sequestration affects payments for unassigned claims:

A non-participating provider bills an unassigned claim for a service with a Limiting Charge of $109.25. The beneficiary remains responsible to the provider for this full amount. However, sequestration affects how much Medicare reimburses the beneficiary. The non-participating fee schedule approved amount is $95.00, and $50.00 is applied to the deductible. A balance of $45.00 remains. Medicare normally would reimburse the beneficiary for 80% of the approved amount after the deductible is met, which is $36.00 ($45.00 x 80% = $36.00). However, due to the sequestration reduction, 2% of the $36.00 calculated payment amount is not paid to the beneficiary, resulting in a payment of $35.28 instead of $36.00 ($36.00 x 2% = $0.72).

For Part B claims, the reduction appears at the line level and for Part A claims, the at the claim level, and is indicated on the electronic remittance advice or standard paper remittance with claim adjustment reason code 253.

The Budget Control Act of 2011 requires, among other things, mandatory across-the-board reductions in federal spending, also known as sequestration. As required by law, President Obama issued the sequestration order on March 1, 2013.

Renee Dustman

Renee Dustman

Executive Editor at AAPC
Renee Dustman, BS, MACRA Proficient, is an executive editor at AAPC. She holds a Bachelor of Science degree in Media Communications - Journalism. She has more than 20 years experience in print production and content management, and has worked in a variety of capacities for several publications.
Renee Dustman

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Renee Dustman, BS, MACRA Proficient, is an executive editor at AAPC. She holds a Bachelor of Science degree in Media Communications - Journalism. She has more than 20 years experience in print production and content management, and has worked in a variety of capacities for several publications.

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