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.
Medicare remittance, claim line
| Item | Amount |
|---|---|
| Allowed | $128.40 |
| Coinsurance, PR-2 (20%) | $25.68 |
| Medicare share before sequestration | $102.72 |
| Sequestration, CO-253 (2%) | $2.05 |
| Paid | $100.67 |
- The 2% applies to Medicare's share, not to the patient's coinsurance.
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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