Sequestration is back – with a 1 percent pay cut

Providers doing business with Medicare will get paid a little less for services rendered this month, as part of an incremental return to pre-COVID business-as-usual for a punitive payment reduction known as sequestration.

Sequestration has been suspended since the beginning of the public health emergency in the spring of 2020, as part of Congressional efforts to provide regulatory flexibilities and financial relief to health care providers during the pandemic.

“Sequestration is returning in 2022 in two incremental stages,” said SimiTree Financial Consulting Director Brian Harris. “The effective date for the first increment was April 1.”

Agencies will see a 1 percent punitive payment reduction on Fee-for-Service (FFS) claims through June 30, Harris said. Full sequestration will resume on July 1, with a 2 percent punitive payment reduction taking effect.

“That will put sequestration back to the 2 percent reduction we saw prior to the public health emergency,” Harris said.

Sequestration is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled to enforce certain budget policy goals. The process was first established in the Balanced Budget and Emergency Deficit Control Act of 1985.

The 2 percent Medicare sequestration has been in effect since 2011.

Congress initially suspended the punitive payment adjustment as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. Sequestration was suspended several times afterward, including twice in 2021.