Medicare and Sequestration – What Happens Now?


Due to continuing budget gridlock in Washington, sequestration has been triggered – meaning automatic cuts to a wide range of federal programs, including Medicare payments to providers and health plans. While the Centers for Medicare & Medicaid Services has not yet announced detailed plans for implementing the sequester requirements for its programs, this Alert answers some basic questions about sequestration and how it will impact the Medicare program.

What is sequestration and why is it happening?

Sequestration is a budget process under which spending is cut across-the-board (with certain exceptions) to meet budget goals. The Budget Control Act of 2011 (BCA) mandated that if legislation were not enacted by January 2013 to meet budget targets, sequestration would be triggered to achieve a total of $1.2 trillion in deficit reduction over nine years. The spending cuts were required to be apportioned equally among fiscal years (FYs) 2013 through 2021, and divided evenly between defense functions and non-defense functions (including Medicare provider payments, subject to a cap).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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