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No April Fools Joke: 2% Sequester Cut in Medicare Reimbursements is Real

Health Insurance Companies Process 1 in 5 Claims Wrong

Sequester Cuts Medicare Reimbursements – Doctors and Patients Affected as of April 1, 2013

For any Medicare service or procedure performed on or after April 1, 2013, doctor’s Medicare reimbursements will be cut by 2% due to the federal budget sequester cuts.

Now patients will continue to have to pay their co-insurance, deductibles or copays, as always, but – here is the crazy part – they still have to pay their full patient responsibility. 

So if Medicare puts the entire amount of the claim to the patients deductible, the patient will be liable for 100% of the charge. Medicare patients will not get the benefit of a 2% reduction on what they owe.

Medicare sequester payment example

Let’s go through a patient visit to see what to expect in the way of reimbursements and patient responsibilities.

A Medicare patient sees his physician for an Annual Wellness Visit. This generates a $100 service payable by Medicare. Medicare usually pays 80% of the $100, or, in this case, $80. Under the sequester the medical practice will only receive $78.40, which includes the 2% reduction. The physician will no longer receive the full $80 Medicare reimbursement.

Before SequesterAfter April 1st Under Sequester

  Medicare Payment
  Patient Responsibility
     Total Reimbursement 


    Medicare Payment
    Patient Responsibility
       Total Reimbursement 


So who wins here?

Well, the federal government does because they are now paying less money on claims.

Who loses?

The physician and the patient. Physicians lose because they are now getting paid less for their services. Their reimbursements are already getting squeezed by not only Medicare, but also by commercial insurance companies. With less money, medical practices will have to cut expenses and staff, which affects the quality of care.

Patients lose because they still have to pay the full amount that Medicare makes them responsible for. They don’t receive any reduction or discount in what they have to pay.

I would argue that the Medicare patient on a fixed income needs the reduction the most. On top of that, doctors may just decide to drop Medicare completely, meaning less access to good healthcare providers for elderly patients who may need it most.

Oh, and did I forget to mention that the Meaningful Use incentive payments for physicians installing Electronic Health Records (EHR) are also going down by 2% due to the sequester after April 1st?

Click on the following link or the image to the left to read the CMS Medicare FFS Provider eNews notice dated March 8, 2013 for more information: CMS-Sequestration


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What are your thoughts on this 2% Medicare reduction and the winners and losers?
I would love to hear from you. Share your comment below.

is a 20 year veteran of healthcare having managed medical practices. He advises medical practices, physicians and practice administrators on how to run their practice and manage their medical billing and revenue cycle management. Manny speaks, blogs and makes videos at www.CaptureBilling.com, a blog that is tops in the medical billing and coding field. READ MORE

14 Responses to No April Fools Joke: 2% Sequester Cut in Medicare Reimbursements is Real

  1. Medicare reimbursement can be a delicate topic for many people. Thank you for being informative and discussing the topic with tact.

  2. If the provider “assigns” charges to Medicare, the provider cannot charge more than the Medicare approved amount. He/she loses the 2% because Medicare reimburses 2% less, and he/she is not allowed to pass the loss to the patient. However, if the provider does not “assign” charges to Medicare, the provider can charge up to 15% more than the Medicare approved amount, and the patient has to pay the full amount. Medicare reimburses the patient the medicare approved amount minus the 2%. Thus the patient is stuck paying the extra 15% and the 2% sequester amount. Typical Medigap policy (e.g. plan F) will reimburse the 15% Medicare excess charge, but not the 2% sequester amount, so the patient pays.

  3. Question? I notice that if the Medicare client has a secondary insurance the secondary insurance doesn’t always account for the sequestered amount. For example, the secondary payer shows the allowable Medicare amount and then how much Medicare paid but doesn’t account for the sequestered amount and pays extra. In a number example it would look like this Medicare: $195 charge, allowable amount $58.99 where then adjustments $134.81 (contractual), $1.20 (legislated/regulatory penalty), and then the $0.94 sequestered amount. This leaves $11.80 but the secondary insurance pays $12.74 which is exactly $0.94 more than they are supposed to. It’s like they don’t account for the sequestered amount. Do we keep this amount or send it back to the secondary insurance?

    • No one. We add it to the adjustment amount. Some practices will have a separate write-off code for the sequestered because they want to track it but it is not necessary. You will never see the money. Blame the government.

      • I received a bill from my doctor, it lists her office visit fee…$250.00, insurance payment. $-73.97…Adjustment.Contractual…-$131.71…..Sequestration-reduction in federal spending..$1.51….co-payment…$10.00….Bill for $23.66?????? What is she billing me for, is she ripping me off????

        • Hi Rosalie —

          Actually based on the numbers you provided you should be responsible for $42.81. But that number is not correct either.

          Working backward, based on the Medicare payment of $73.97 which is 80% of the allowable you should be responsible for the remaining 20% or about $18.50. I am not sure about the copy you mentioned because Medicare has co-insurance. Without seeing the doctor bill and Explanation of Benefits (EOB) I can’t say if the $26.66 the doctor billed is correct or not.

          I would suggest you look at the EOB that was mailed to you directly from Medicare. That letter should tell you exactly what your financial responsibility is. Also, you can call the doctors office and have them walk through the bill with you.

          Hope this helps.

  4. The doctor office does not get paid the full amount of what his charges are, because there is a Medicare adjustment that is deducted before the 80% is figured. The patient pays 20%.

    So am I right that the doctor is only reimbursed 78% now?

    • Correct Sharon. Plus if the doc is not using an EHR and has not gone through Meaningful Use there will be an additional cut.

  5. A clarification on the secondary insurer. First it is clear that Medicare is cutting its payments. What is not clear is who pays that 2% medicare underpayment. Unless a patient has a contract with his/her secondary insurer that the insurer picks up the remaining difference in the charges then it is the patient that loses the money, not the provider. I know of no provider that is legally required to lose (not collect from the patient) that 2%.

    Your statement “Medicare patients will not get the benefit of a 2% reduction on what they owe” seems to imply that sequestration was supposed to reduce patients financial burden – not at all Congress’s intent.

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