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Advanced Ledger - Sequestration

What is a Sequestration?

In its simplest form a sequester is a general cut in government spending. In 2011 the government put into place the Budget Control Act of 2011, which required mandatory reductions in Federal spending.

Who is affected?

Medicare A and Medicare B claims with dates-of-service on or after April 1, 2013 would be subject to the sequester. This means that any claim with a date-of-service after April 1, 2013, will incur a 2-percent reduction in payment from Medicare. This is also applicable to Durable Medical Equipment (DME) payers.

The cut is only applied to the payment itself, and not the ‘allowed amount that providers accept when they accept the Medicare fee schedule. The 2% cut is only imposed on the 80% of the allowed charge that participating physicians would receive from Medicare. The remaining 20% (copays, deductibles) that is collected from the patient will be based upon the full ‘allowed amount’.

How long will the sequestration last?

The Budget Control Act requires that 1.2 Trillion in Federal spending cuts be achieved over the course of 9 years; unless Congress takes action to change the law. This means that the sequestration will be active until 2022.

How does the sequestration affect MacPractice users?

Offices that submit to Medicare are of course going to be affected by this law. Upon receiving an EOB (explanation of benefits) or ERA (electronic remittance advice) a new claim adjustment reason code (CARC) of CO-253 will begin to appear on remittances. This is an indicator of the 2% Medicare reduction. Since the sequestration does NOT effect the allowed amount, but rather the payment, these reductions will need to be MANUALLY posted in MacPractice. This can be done one of two ways.

  1. The 2% reduction can be considered an extra ‘write-off’ and because of this can be added to the existing write-off amount in the payment window.
  2. The reduction can be added to the ‘negative adjustment’ field in the payment window. This will be easily discernible amount when it comes to reporting. ‘Medicare Negative Adjustment’ can be filtered in a variety of reports.

Why does MacPractice not automatically post the 2% reduction for me?

The data that is included in the ERA file that MacPractice receives back from Medicare isn’t broken down into a format that can be automatically posted. The manual posting gives offices an opportunity to post the reductions in the best way they see fit.

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