Cuts to Medicare Payments Will Begin in One Month Due to Sequestration

Unless Congress passes an alternate deficit-reduction package, Medicare provider payments will be cut by two percent (2%) as part of the spending reductions required by the Budget Control Act of 2011.

The Budget Control Act of 2011 created the sequestration, which specified that cuts to Medicare reimbursements would begin for services provided the month AFTER the sequestration’s start. The sequestration was originally scheduled for January 1st, 2013. However, Congress passed a two-month delay, pushing the sequestration date to March 1st, 2013.

Therefore, if sequestration kicks in as planned, the two percent (2%) payment reduction to Medicare providers and insurers will be for services provided on or after April 1, as recently confirmed by a Health and Human Services spokesman. As such, Providers are expected to see the cuts show up in their Medicare reimbursements approximately around mid-April-depending on the time the CMS typically takes to process their payments.

Break Away from the Static

The cuts will be applied to provider payments for services administered under Medicare Part A and Medicare Part B, and contractual payments to Medicare Advantage Plans (Part C) and Medicare Prescription Drug Plans (Part D), according to the Congressional Budget Office (“CBO”).  The sequestration percentage is capped at two percent (2%) for payments for individual services paid under Parts A and B, and for monthly contractual payments to Part C and Part D providers.   However, Medicaid and the Children’s Health Insurance Program (“CHIP”) are both exempt from the sequestration cuts.

If the sequestration process takes effect, Medicare providers will see more than $11 billion in reimbursement cuts in 2013, according to preliminary Office of Management and Budget (“OMB”) estimates. Moreover, CBO estimates that Medicare budgetary reductions will total $123 billion from 2013 to 2021.

If you have any questions regarding Sequestration and its impact on Medicare, or any other compliance-related issue(s), please feel free to contact me at

Kind regards,
Andre Perrotta, Esq.
Chief Compliance Officer