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Sequestration Forces 2% Medicare Pay Cut

An expected 2% Medicare pay cut went into effect for Medicare and other public health programs on Friday, March 1, 2013, after Congress and President Obama failed to reach an agreement on avoiding budget sequestration before the mandated March 1 deadline.1 The sequestration deadline had been extended 2 months from January 1 due to the approval of a last-minute fiscal cliff package that established a one-year delay of a separate 26.5% scheduled Medicare pay cut.2

According to the Congressional Budget Office, the reductions in Medicare doctor rates will begin with services provided on or after April 1, despite the sequestration order being issued on March 1.1 The cut is capped at 2% for payments made for services provided by physicians and hospitals, as well as monthly payments to Medicare private insurers and Part D prescription drug plans.1 More than $85.4 billion will be cut from the federal budget in 2013; reductions to Medicare will represent about 12% of the total reductions, or $9.9 billion, due in part to lower payments to physicians and other healthcare professionals for providing services.1

These cuts are automatic—no changes in billing practices are required of physicians. Instinctive Data will update you with additional information regarding the adjusted Medicare fee schedule as soon as it becomes available.


1. Fiegl C. 2% Medicare pay cut set under sequestration. American Medical News. Posted March 1, 2013. http://www.ama-assn.org/amednews/2013/02/25/gvsd0301.htm. Accessed March 4, 2013.

2. Westgate A. Medicare pay cut averted but uncertainty remains for physicians. Physicians Practice website. http://www.physicianspractice.com/blog/medicare-pay-cut-averted-uncertainty-remains-physicians. Published January 2, 2013. Accessed March 4, 2013.