Sequestration takes effect, but how will it affect you?

Like a cruel April Fool's joke (without the joke), sequestration began Monday with big implications for you and your practice.

Under the current sequester, Medicare payments to doctors, hospitals, and other health care providers, as well as to health plans and drug plans, are to be reduced by 2 percent for services provided on or after April 1. This also covers physician-administered drugs included on your claims.

Medicare contractors will apply the cut to the payment itself, not the underlying "allowed charge" in the Medicare fee schedule. As a result, beneficiary copayments and deductibles will not change. In other words, Medicare imposes the 2 percent cut only on the 80 percent of the allowed charge that a participating physician would receive directly from Medicare. The 20 percent copayment amount (and any applicable deductible) that the physician collects from the patient will be based on the full allowed charge amount.

With respect to unassigned claims for services provided by nonparticipating physicians, the 2 percent cut will be applied to the Medicare payment made to the beneficiary (but not to the limiting charge amount). If you are a nonparticipating physician, reducing your charges on unassigned claims will not insulate your Medicare patients from the cut; it will only take money out of your own pocket.

The Budget Control Act requires that $1.2 trillion in federal spending cuts be achieved over the course of nine years. This means federal spending will be subject to sequestration until 2022 unless Congress takes action to change the law or reaches a new budget agreement to address deficit and spending concerns. (The Medicare cut will never be higher than 2 percent, however, and the Medicare cuts each year are not cumulative.)

With all the fiscal deadlines facing Congress this year, the sequester will remain a subject for debate. However, it is not expected that the sequester cuts will be lifted before Sept. 30, which is the end of the current federal fiscal year.

– Kent Moore, Senior Strategist for Physician Payment for the American Academy of Family Physicians