April 14, 2022

Reinstatement of Medicare Sequestration

By Timothy Mikita, Manager, Assurance Services

Reinstatement of Medicare Sequestration Clinical Services

It has been just over two years since the COVID-19 pandemic impacted the world. On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which suspended the Medicare 2% sequestration that applied to all Medicare fee-for-service (FFS) claims. The suspension went into effect on May 1, 2020. It was extended several times, but was recently phased in effective April 1, 2022, at a rate of 1%.

On March 10, 2022, the Senate passed an omnibus appropriations bill in the amount of $1.5 trillion that will fund the federal government for fiscal year 2022. This bill specifically contained significant healthcare-related provisions that directly impact healthcare providers, specifically by reinstating cuts to Medicare reimbursement. This bill brings back the Medicare sequestration payment reduction at 1% beginning on April 1, 2022, which will continue through June 30, 2022. On July 1, 2022, the Medicare sequestration payment reduction will increase to the pre-pandemic amount of 2%.

What does this mean for healthcare providers? As the Medicare sequestration payment reduction resumes, it’s important that healthcare providers budget for this change in 2022 and beyond. This Medicare sequestration payment reduction will directly impact the operating margins that for many providers are already tightly budgeted. Providers should proactively ensure this Medicare payment reduction is taken into account while revising current budgets and preparing for the future.