Sequestration

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  • 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
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              2 comments:

              1. Anonymous30 December 2023 at 14:11

                So do we always write off Sequestration amt., even if it is $90.00 or $100.00 ?

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                1. AR31 December 2023 at 22:25

                  If the 2% of the paid amount is $90.00 or $100.00 then yes, it will be a sequestration adjustment.

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