TMA Calculates Impact of Medicare Fee Cut

Medicare payments to physicians dropped 2 percent on April 1 because of the federal budget sequester. TMA's Payment Advocacy Department analyzed the impact of the fee reduction and compiled a list of answers to questions you may have.

Here is an example of how the fee cut would affect payment for a service with a Medicare fee schedule amount of $100:

Payment Arrangement       Par Physician       Non-Par/Assigned        Non-Par/Unassigned 
Total Payment Rate       100% = $100     95% = $95       115% of $95 = $109.25
Amount From Medicare Before April 1       80% of $100 = $80     80% of $95 = $76


Payment From Patient Before April 1       20% of $100 = $20     20% of $95 = $19

80% of $95 ($76) paid by Medicare to patient + 20% of $95 ($19) paid by patient + $14.25 balance bill paid by patient

Amount From Medicare After April 1       80% of $100 - 2% cut = $78.40       80% of $95 - 2% cut = $74.48       $0
Payment From Patient After April 1       20% of $100 = $20
    20% of $95 = $19

80% of $95 - 2% cut ($74.48) paid by Medicare to patient + 20% of $95 ($19) + $15.77 balance bill paid by patient


Total Payment After
April 1  

    $98.40     $93.48

Frequently Asked Questions  

Q: Can I pass on the 2-percent cut to my patients and collect it from them?
A: No.

Q: When will the Centers for Medicare & Medicaid Services (CMS) post an updated 2013 fee schedule based on the 2-percent cut?
A: CMS will not post an updated 2013 fee schedule. The fee schedule you use for 2013 will remain the same.

Q: Will CMS apply the fee reduction to claims processed starting April 1? What if I have a claim from March that hasn't been paid yet?
A: CMS will apply the cut to claims with a date of service of April 1or later. CMS will pay claims from January through March at the posted fee schedule amount without a 2-percent reduction.

Q: Will this cut also impact my payment from Medicare Advantage plans?
A: Possibly. It depends on your contract. If you are out of network with a plan and it pays claims based on the 2013 Medicare Fee Schedule, you will see the 2-percent cut reflected in your payment.

Q: If I'm a Medicare-enrolled physician who is non-par and doesn't accept assignment, do I need to calculate the 2-percent cut off what I collect from the patient?
A: No. You will continue collecting the same amount as you did before. Your patients will see the cut taken on the amount Medicare reimburses them, thus you may receive questions from them.

Q: Will CMS hold claims like it does when the fee schedule undergoes changes?
A: No.

Q:  How is the 2-percent reduction identified on the electronic remittance advice (ERA) and the standard paper remittance (SPR)? 
A:  The Claim Adjustment Reason Code (CARC) 223 is used to report the sequestration reduction on the ERA and SPR.

Q: What is the verbiage for CARC 223? 
A: "Adjustment code for mandated federal, state, or local law/regulation that is not already covered by another code and is mandated before a new code can be created."

Action, May 15, 2013

Last Updated On

May 14, 2013

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