ADVOCACY SPOTLIGHT


Understanding Sequestration How it affects ASCs BY STEVE SELDE


Medicare spending is esti- mated to be $765 billion in fiscal year (FY) 2020. Most of that spending, like payments from Medicare


to your ASC and physicians, is sub- ject to a 2 percent reduction to what Medicare pays you, under what is called sequestration.


Why Sequestration Applies to Medicare Spending On the federal level, drafting a bud- get and appropriating funds is a yearly activity of the executive and legislative branches. Over the years, Congress has faced challenges in controlling defi- cits and limiting spending. To address those challenges, Congress resorted to including provisions in legislation that would lower, or sequester, spending across the board. This occurs only if certain conditions are met or triggered. Although there are three of these bud- get rules that could result in sequestra- tion, only one is triggered currently. The sequestration that is currently


in effect is the result of a law from 2011, which established a committee to develop legislation to reduce the deficit by more than a trillion dollars. Unfor- tunately, that committee was not suc- cessful, and corresponding legislation to lower the deficit under the require- ments specified in that 2011 law were not satisfied. This resulted in two types of sequestration being triggered. The type of sequestration most rel-


evant to your ASC is known as the Budget Control Act (BCA) manda- tory sequester. This limits manda- tory spending, like spending under the Medicare program. It also specifies that Medicare benefit payment spend- ing may be not be reduced by more than 2 percent.


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eficiary. Per the Centers for Medicare & Medicaid Services (CMS), seques- tration reductions are made to claims after determining coinsurance, deduct- ibles and applicable Medicare Sec- ondary Payment adjustments. More simply, sequestration applies only to the portion of payment paid by Medi- care. Beneficiary cost-sharing and amounts paid by other insurance are not reduced.


The first BCA mandatory seques- ter order was issued on March 1, 2013, and took effect April 1, 2013. Congress has acted to extend the BCA mandatory sequester, which originally would have ended in FY 2021, through FY 2029.


Sequestration’s Impact on Your ASC Once sequestration is triggered, the Office of Management and Budget (OMB) issues a sequestration order for the applicable fiscal year. OMB’s work in determining sequestration as it relates to Medicare is straightfor- ward because, again, the law spec- ifies that the reduction cannot be by more than 2 percent. As to tim- ing, once OMB issues a sequestra- tion order, Medicare benefit payments are sequestered beginning on the first date of the following month and the sequestration remains in effect for services furnished during the follow- ing year. Your ASC and practicing physi-


cians are reimbursed under Part B of Medicare, largely on a fee-for-service basis for services provided to a ben-


Using a $100 service as an example, the beneficiary is typically responsible for the 20 percent co-insurance, pay- ing the provider $20. The 80 percent of that claim that Medicare is responsible for is reduced by $1.60, which is 2 per- cent of 80, resulting in a Medicare pay- ment of $78.40, and a total payment to the provider of $98.40.


While CMS does not publish rates with sequestration calculated, ASCA’s rate documents, including our rate calculator, are good resources for this information. For healthcare providers and ser- vices that are reimbursed under other parts of Medicare, this calculation might differ. Additionally, payments for services your ASC provides to enrollees in a Medicare Advantage plan might not be impacted by seques- tration. This depends on the terms of your ASC’s contract with a Medicare Advantage Organization. ASCA and other provider groups


advocated against the use of sequestra- tion and its ultimate implementation. Despite efforts to eliminate sequestra- tion, it is part of a larger consideration on balancing the federal government’s budget and federal expenditures, prov- ing to be a difficult policy to remove.


Steve Selde is ASCA’s assistant director of Government Affairs. Write him at sselde@ ascassociation.org.


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