When a practice gets paid for a bill, a small amount is deducted, and this amount is termed sequestration. This term is confusing to some, and it pertains to automatic, predetermined amounts equated to a government budget cut. After the mandatory cut, the practice gets the balance amount from Medicare.
What exactly does sequestration entail? Well, the term sequestration means to set aside or to isolate. From a government perspective or spending, sequestration means an automatic, standardized budgetary cut. From a medical billing point of view, sequestration refers to reductions in Medicare payments.
Sequestration originated in Medicare from the Budget Control Act that was introduced in 2011. This law was passed to reduce the national deficit of the United States of America. The law resulted in a two percent reduction in Medicare payouts to providers of healthcare services.
Sequestration in dentistry is marginal and might not affect a dental practice to a large extent. While Medicare is impacted by sequestration, it does not cover basic dental offerings such as fillings, cleanings, and dentures. There are times, however, when a dental practice might suggest procedures or solutions such as surgeries that Medicare covers. In such cases, sequestration will affect the reimbursement amount that a practice would receive.
Hence any healthcare service provider that gets a 2% reduction in payment on the remittance advice, the same can be attributed to a mandatory sequestration payment cut. One would find a CARC 253 (Claim adjustment reason code) used to identify a reduction due to sequestration. This code will be featured as CO 253 on the remittance advice and ‘sequestration-reduction in federal payment’ as the reason.
Sequestration will apply to all Medicare Fee-for-Service (FFS) programs. All claims with dates of service or discharge from 1 April 2013 will have a mandatory 2% reduction in Medicare payment. This act is still valid as of today.
The adjustment in all claims payouts applies to all claims after accounting for applicable deductibles, coinsurance, or any applicable Medicare secondary payment adjustments. Beneficiary payments for coinsurance or deductibles are exempt from a 2% payment reduction.
A dental practice bills a patient for surgery and other services for an approved amount of 300 dollars. An amount of 50 dollars is applied to the deductible. Hence a payment of 250 dollars is payable from the insurance organization. The insurance organization would generally reimburse 80% of the approved amount after the deductible has been paid.
This would amount to 200 dollars (250 x 80%). The patient would need to pay the balance 20% coinsurance amount of 50 dollars (250 – 200 = 50). However, a 2% reduction in sequestration of the 250 dollars is applicable. Hence the amount received by the dental practice would be 196 dollars instead of 200 dollars.
Reduction due to sequestration can apply to numerous claims submitted to Medicare Fee-For-Service, including hospital visits, physician services, medical equipment, outpatient care, and more.
Some select situations are possible where a reduction due to sequestration may not apply. These include a few Medicare Advantage plans and a few instances that pertain to critical care hospitals.
Patient payments such as deductibles and coinsurance will not be liable for sequestration.
A dental practice must be alert in recognizing the impact of sequestration on all Medicare reimbursements. For submission of claims for services that are subject to sequestration, a CARC 253 code must be included as this code implies sequestration reduction in federal payouts.
The usage of the CARC 253 code and its verification on the remittance advice ensures that the reduction is ascribed to the correct reason. This preserves transparency in billing for the practice and Medicare.
One can expect a standard 2% reduction in Medicare reimbursements. While the percentage may seem small and the dollar value minuscule, the overall loss can be quite considerate if the practice has to factor in the overall volume of claims subject to sequestration. The practice needs to be vigilant on the quantum of revenue derived from Medicare payments.
A deficit control measure termed sequestration implies a 2% percent reduction in payments made for fee-for-service healthcare practitioners for services to Medicare recipients. The amount deducted is computed from the approved payment amount after subtracting the deductible. The co-insurance amount is not subject to sequestration.
