April 13, 2021 | Jessica Zeff

3 Minute Read

Return of 2% Sequestration Cut Delayed until January 1, 2022

Since 2013, the federal law has required a 2% reduction to the reimbursement (applied to the 80% of the allowed charge) that a participating provider would receive directly from Medicare; this reduction in payment is referred to as “sequestration” because a set percentage of money is automatically removed (or “sequestered”) from the amount of funding that the federal government spends on certain (but not all) government programs.  If you provide care to Medicare beneficiaries, this policy impacts your reimbursement.

In response to the COVID-19 pandemic, with the enactment of the CARES Act in March 2020the -2% Medicare sequestration reduction was paused until December 31, 2020.  As part of the year-end Consolidated Appropriations Act 2021 in December 2020, Congress further delayed reinstating the Medicare sequester through April 1, 2021. 

For the first few months of 2021, stakeholders focused on building support for and requesting passage of the bipartisan Medicare Sequester COVID Moratorium Act (H.R.315/S.748).  This bill would have delayed reinstatement of the automatic Medicare sequester until the public health emergency (PHE) was declared over.   In part due to concerns about tying an expensive policy change to a fluid end-date that would be decided by the Executive Branch, lawmakers instead moved forward with a policy with an expiration date of December 31, 2021.

The PHE is currently set to expire on April 21, 2021, but the Biden Administration has stated that it plans to extend the PHE (which, unless extended, automatically expires after 90 days) repeatedly for the rest of 2021.  It is quite possible that despite these different policy approaches, the termination of the PHE and the expiration of the Medicare sequester moratorium will align. 

On March 19, 2021, the House passed a bill which would both delay the return of sequestration until January 1, 2022 and waive PAYGO requirements to make additional cuts to federal programs to pay for the spending in the American Rescue Plan and then went out of session for a District work period.  On March 25, the Senate passed a version of the bill which only addressed holding off the return of Medicare sequestration through December 31, 2021.  In order for a bill to become a law, the same legislative language has to pass both chambers; therefore, the Senate bill has to go back to the House to be passed.  Usually this process happens rather efficiently, but in this case the House had already begun a two-week recess by the time the Senate passed its bill.  As a result, protection from the sequester officially expired on March 31, 2021. 

In line with precedent, on March 30, the Centers for Medicare and Medicaid Services (CMS) released a statement “In anticipation of possible Congressional action to extend the 2% sequester reduction suspension, we instructed the Medicare Administrative Contractors (MACs) to hold all claims with dates of service on or after April 1, 2021, for a short period without affecting providers’ cash flow.  This will minimize the volume of claims the MACs must reprocess if Congress extends the suspension; the MACs will automatically reprocess any claims paid with the reduction applied if necessary.”

This issue should be resolved very soon.  The House legislative calendar states that the first item that its members will vote on upon returning from recess will be the Senate’s extension of the 2% Medicare sequester moratorium through December 31, 2021. The vote is scheduled to begin after 7:00pm (ET) on April 13, 2021.  President Biden is expected to sign the bill into law without delay.

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