Both the House and the Senate have voted to continue the suspension of the 2 percent Medicare Sequestration Cuts through the end of 2021. A final vote in the House is needed to reconcile the two versions of the bill, and that vote is expected sometime in mid-April after the House returns from a spring recess.
Holding Medicare Claims
In anticipation of the 2 percent sequestration suspension, the Centers for Medicare and Medicaid Services (CMS) has instructed all Medicare Administrative Contractors (MACs) to hold Medicare claims with dates of service on or after April 1, 2021, “for a short period without affecting providers’ cash flow.”
According to CMS, “This will minimize the volume of claims the MACs must reprocess if Congress extends the suspension; the MACs will automatically reprocess any claims paid with the reduction applied if necessary.”
By statute, Medicare has a 13-day payment floor waiting period for clean electronic claims and a 29-day payment floor for paper claims once they are received, which also gives MACs some wiggle room to delay payment until Congress takes final action.
History of Sequestration
The 2 percent sequestration cuts have been in effect since 2013 under the Budget Control Act of 2011 as a budget enforcement tool. The BCA-mandated sequestration was supposed to end after FY2021, but that date was recently extended to FY2030 through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act also temporarily suspended sequestration cuts from March 2020 through December 2020, and those cuts were delayed further until March 2021 in a later COVID-19 relief bill passed in December.
Other Budget Enforcement Efforts
The House version of this latest bill also includes the elimination of another budget enforcement tool created by the Statutory Pay-As-You-Go Act of 2010, known as PAYGO, which limits increases to the federal deficit through additional cuts to Medicare and other federal programs. PAYGO was activated to offset part of the cost of the $1.9 trillion American Rescue Plan, recently passed by Congress, and will add an additional 4 percent cut to Medicare payments beginning in 2022.
The Senate bill did not address PAYGO, though analysts from the Jefferies Financial Group expect it to come up again before the next round of budget talks.
“We expect follow-up legislation to be introduced and passed before October that would block PAYGO cuts on Medicare rates,” the analysts told Healthcare Dive.
Paying the Piper
To pay for the additional delay of sequestration cuts through the end of 2021, the Senate bill proposes to increase the 2030 sequestration cuts, according to the American Hospital Association. The bill also calls for several technical changes to the rural health clinic provisions that were included in the Consolidated Appropriations Act of 2021.
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