Reimbursement Reductions for Medicare Sequestration Are Back

The temporary relief from Medicare sequestration that was provided by Congress early in the COVID-19 pandemic is finally coming to an end.

The Budget Control Act of 2011 (BCA) set automatic budget cuts for certain categories of federal spending starting in 2013, requiring a 2% reduction in Medicare payments to healthcare providers. However, early in the pandemic, as part of The Coronavirus Aid, Relief and Economic Security (CARES) Act, the sequestration cuts were temporarily suspended in an effort to ease providers’ financial challenges that were brought on by the public health crisis. The CARES Act placed a moratorium on sequestration from May 1, 2020 through December 31, 2020, and further legislation continued the suspension through March 31, 2022 as the pandemic dragged on.

Although The Department of Health and Human Services has once again extended its declaration of a public health emergency through at least mid-July, Congress did not act to further extend the moratorium on sequestration. Payment cuts are now being phased back in, beginning with an initial 1% reduction to Medicare fees that began on April 1, 2022 — with sequestration fully restored on July 1, 2022 when the reduction increases to 2%.

The return of BCA-mandated sequestration is just one of many Medicare fee issues confronting physicians. Provider groups are already mobilizing to advocate for the mitigation of other reductions expected for 2023, such as the 4% cuts required by the Statutory Pay-as-You-Go Act of 2010 (PAYGO) as well as the Medicare conversion factor decrease that will be needed to meet budget neutrality requirements if Congress fails to appropriate additional funds.

Provider organizations are increasingly calling for more permanent fixes for the fee-setting process of Medicare’s physician payment system in order to avoid this volatility each year. In a February 25, 2022 joint letter to Congress, nearly 100 physician and health professional organizations called for lawmakers to work with the provider community to identify policy solutions that will provide greater stability for the program going forward.

Updates to Medicare reimbursement are just one aspect of the key market factors that will impact physician compensation in the coming years. BFMV has provided consultations and FMV opinions for healthcare transactions and physician compensation for health systems and medical groups nationwide. For assistance with new compensation structures or the review of an existing arrangement, contact us.