Sequestration and Medicare: What Optometrists Need to Know

As the AOA has previously reported, across-the-board federal budget cuts known as "sequestration," took effect March 1, 2013.  Reductions in Medicare payments to physicians - including optometrists - and to other providers as well have become part of the deficit cutting process because Congress and the President have been unable to agree on offsetting alternative cuts.   The AOA is meeting with Congressional leaders about the harmful impact of Medicare cuts, and ODs are urged to use the AOA Online Legislative Action Center at to weigh in with their U.S. Senators and House member on this important issue. 

Based on information secured by AOA from the U.S. Centers for Medicare and Medicaid Services (CMS), here is background information and basic guidance for ODs with questions about sequestration and Medicare cuts:   


When will cuts to Medicare claims begin?

In general, payments for Medicare claims with dates of service on or after April 1, 2013, will be subject to a 2 percent reduction.


Are any Medicare benefits being cut due to sequestration?

No. The sequester will not impact benefits covered by Medicare.


How much will my Medicare reimbursement be reduced?

Payment for Medicare fee-for-service claims with dates of service on or after April 1, 2013, will have a 2 percent reduction applied.


How long will the sequester cuts be applied?

The Budget Control Act dictates that the cuts will last for a period of ten years. Without knowing what future Congresses may do to repeal or rework the cuts, at this point Medicare is only releasing guidance that this reduction will apply for the remainder of the current year.


Will durable medical equipment (DME) claims be impacted?

Yes. Payments for claims for durable medical equipment (DME), prosthetics, orthotics, and supplies will be reduced by 2 percent based upon whether the date of service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.


Will the sequester impact Medicare Advantage plans?

Yes. Medicare Advantage plans are impacted by the sequester.  There are a variety of Medicare Advantage payment arrangements such as fee-for-service and capitated plans.  CMS payments to the Medicare Advantage plans will be cut, and the MA plans in turn will pass on those cuts to network and non-network physicians.  If you contract with Medicare Advantage plans, it is best to verify with the insurers to determine how sequestration cuts will be implemented.  For  example, Humana and United Health Care West have issued the following notices:


Humana: :




How does the sequester impact the Electronic Health Record Incentive Programs?

Medicare EHR incentive payments made to optometrists will be reduced by 2 percent. This reduction will be applied to any Medicare EHR incentive payment for a reporting period that ends on or after April 1, 2013. If the final day of the reporting period occurs before April 1, 2013, those incentive payments will not be reduced.  For optometrists, generally this means that bonuses for meaningful use in 2012 being paid in the first few months of 2013 would not be cut.  Payments for meaningful use in 2013 generally will be cut when those payments are made later this year.


Is Medicaid or the Medicaid EHR incentive payments impacted by the sequester?

Medicaid payments are exempt from sequestration cuts and Medicaid EHR incentive payments will not be reduced.


Will my Medicare contractor be issuing a new fee schedule now that the sequestration cuts are in effect?

Fee schedules will not be changed due to the sequester. Only the final payment amount will be reduced.


Will there be any indication of sequester payment reductions on my claims remittance?

Yes, claim adjustment reason code CARC 253 will be used to denote the sequestration reduction on the electronic remittance advice (ERA) and the standard paper remittance (SPR).  The corresponding language for CARC 253 indicates, "Sequestration - Reduction in Federal Spending."


What impact will the sequester have on patient's cost-sharing responsibilities?

Beneficiary payments for deductibles and coinsurance are not subject to the 2 percent payment reduction.  This means that patients can be responsible, in certain circumstances, for making up the difference.



How will claims payments be calculated?

The reduction will be taken from the calculated payment amount, after the approved amount is determined and the deductible and coinsurance are applied. Depending on whether the provider accepts assignment, the payment will be issued differently.  Generally, the doctor who accepts "assignment" (including all participating physicians) would apply the normal deductible and copayment to determine the patient's share at the time of the service, but will later receive 2% less than usual from the government.

Generally, the doctor who does not accept "assignment" will bill the normal amount to the patient at the time of the service, and later the patient will receive 2% less than usual from the government.

If the doctor is not certain what amounts to charge to whom, particularly when other payers might be involved, consider submitting the claim and using the Medicare remittance advice as a guide for billing the patient or other payers.

Examples of payment scenarios are included below:


Optometrist who accepts assignment:   For an assigned claim, after patient has met his/her deductible the patient is responsible for 20% of payment and Medicare pays the remaining 80%.  Under sequestration, for a $100 service, the optometrist would collect $20 from the patient and $78.40 ($80 x 0.98) from the federal government for a total of $98.40.  (The 2% reduction is applied to the amount issued from the federal government to the optometrist)


Optometrist who does not accept assignment:  For an unassigned claim for a $100 service, the optometrist would collect $100 from the patient and the patient would receive $78.40 from the federal government.  In other words, with assigned claims, the doctors have to "write off" the loss of $1.60, while with unassigned claims, the patient is responsible for paying the difference. 


Non-participating optometrist:  The non-participating physician is paid at 95% of the otherwise applicable Medicare allowed amount for a service or $95 in our example (compared to $100).  Of this amount, Medicare would normally pay 80 percent ($76) and the beneficiary would pay the other 20 percent ($19).  Under the sequester, Medicare would pay 98 percent of $76 or $74.48.  In addition, the physician may charge up to 115 percent more than the $95 or up to $109.25 in this example.  Thus, the patient could end up paying another $14.25 or a total of $109.25 and get back $74.48 from Medicare. 


Medicare contractor Wisconsin Physicians Services (WPS) provided an example that includes a deductible:  "A provider bills a service with an approved amount of $100.00, and $50.00 is applied to the deductible. A balance of $50.00 remains. We normally would pay 80% of the approved amount after the deductible is met, which is $40.00 ($50.00 x 80% = $40.00). The patient is responsible for the remaining 20% coinsurance amount of $10.00 ($50.00 - $40.00 = $10.00). However, due to the sequestration reduction, 2% of the $40.00 calculated payment amount is not paid, resulting in a payment of $39.20 instead of $40.00 ($40.00 x 2% = $0.80)."


Medicare contractor WPS also provided an example of an unassigned claim with a deductible:  "A non-participating provider bills an unassigned claim for a service with a Limiting Charge of $109.25. The beneficiary remains responsible to the provider for this full amount. However, sequestration affects how much Medicare reimburses the beneficiary. The non-participating fee schedule approved amount is $95.00, and $50.00 is applied to the deductible. A balance of $45.00 remains. Medicare normally would reimburse the beneficiary for 80% of the approved amount after the deductible is met, which is $36.00 ($45.00 x 80% = $36.00). However, due to the sequestration reduction, 2% of the $36.00 calculated payment amount is not paid to the beneficiary, resulting in a payment of $35.28 instead of $36.00 ($36.00 x 2% = $0.72)."


Will my Physician Quality Reporting System (PQRS) incentive bonus be impacted by the sequester?

AOA is waiting for additional details regarding how the sequester will impact PQRS incentives.


Are drugs excluded from the 2% reduction?

All fee-for-service Medicare claim payments are subject to the 2% reduction. There are no exemptions provided in the law for drugs provided under the fee-for-service program.


AOA members can monitor the AOA News Blog for further updates and contact Kara Webb of the AOA Washington Office at 1-800-365-2219 with questions or comments.