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Glossary · Payments

What is Medicare sequestration?

Sequestration is a 2% across-the-board cut to Medicare fee-for-service payments, applied after the allowed amount is set and reported with adjustment code CO-253.

Example · fictional data

Medicare remittance, claim line

ItemAmount
Allowed$128.40
Coinsurance, PR-2 (20%)$25.68
Medicare share before sequestration$102.72
Sequestration, CO-253 (2%)$2.05
Paid$100.67
  1. The 2% applies to Medicare's share, not to the patient's coinsurance.
How sequestration shows up on one Medicare line.

Federal budget law has reduced Medicare fee-for-service payments by 2% since 2013, apart from a pause during the COVID-19 emergency. The cut applies to the amount Medicare pays, after deductibles and coinsurance, and appears on the remittance as CO-253.

Why it matters for payment checks

A Medicare payment that’s 2% below the expected amount isn’t an underpayment. A check that ignores sequestration flags every Medicare line, and real short pays get lost in the noise. Some Medicare Advantage contracts pass sequestration through as well, depending on their terms.

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