Sequestration

Sequestration is the mandatory across-the-board reduction to Medicare payments (2% since 2013) applied after adjudication — a legitimate cut, but one worth reconciling so it isn't confused with an underpayment.

Sequestration is an automatic, across-the-board percentage cut to Medicare fee-for-service payments, mandated by federal budget law and set at 2% since it took effect in 2013 (with brief pandemic-era suspensions and phase-ins). It's applied after the claim is adjudicated — the allowed amount and patient responsibility are calculated normally, then Medicare's payment portion is reduced by the sequestration percentage before it's paid. On the remit it usually appears as a distinct adjustment (often CARC 253, 'sequestration — reduction in federal payment'). For a practice, sequestration is a legitimate, non-appealable reduction — it's not a payer error and not recoverable. The reason it belongs in a revenue-cycle glossary is reconciliation: because it's a small, systematic cut applied to Medicare and Medicare Advantage payments, it can blur into the noise and get confused with an actual underpayment, or conversely mask one. Knowing that a 2% reduction on the Medicare payment portion is expected lets you subtract it cleanly and see whether the rest of the payment matches what it should. It's a case where understanding a cut is legitimate is exactly what keeps you from wasting an appeal on it — and what keeps a real underpayment from hiding behind it.

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