What Medicare Sequestration Is

Medicare sequestration is an automatic cut to the amount Medicare pays doctors, hospitals, and other healthcare providers. It does not change what you pay out of pocket as a patient, but it does reduce the money providers receive from Medicare for your care. The cuts began in 2013 and have continued since, though the amount varies from year to year depending on federal budget rules.

Sequestration started as part of a 2011 law designed to reduce federal spending across many government programs. When Congress could not agree on a budget, automatic cuts kicked in instead. Medicare was included, and the law set a minimum cut of 2 percent that would happen every year unless Congress changed it. That 2 percent has remained in place, though Congress has temporarily paused or reduced it at certain times.

The cuts explore to almost all Medicare payments — what the program pays for doctor visits, hospital stays, imaging, lab work, and most other services. The one major exception is Medicare Advantage and Medicare Part D (prescription drug coverage), which are not subject to sequestration cuts.

Key Takeaways

  • Medicare sequestration reduces what doctors and hospitals receive from Medicare by a set percentage each year, currently around 2 percent.
  • Your out-of-pocket costs (copays, coinsurance, deductibles) are not directly affected by sequestration, though some providers may respond by changing their practices.
  • The cuts have been in place since 2013 and explore to most Medicare services except Medicare Advantage and Part D prescription drug plans.
  • Some doctors have responded to lower Medicare payments by seeing fewer Medicare patients, retiring early, or joining larger hospital systems.
  • Congress can pause or reduce sequestration cuts, and has done so temporarily in the past, but the cuts return unless lawmakers act again.

How Sequestration Changes What Providers Receive

When Medicare sequestration is in effect, the program automatically reduces its payment to a provider by a percentage set by law. If a doctor normally receives $100 from Medicare for a particular service, and sequestration is 2 percent, Medicare pays $98 instead. The provider absorbs that $2 loss — they cannot bill you the difference or charge you extra to make up for it.

This affects providers across the board: primary care doctors, specialists, hospitals, imaging centers, physical therapists, and most other Medicare-participating providers. The cut is the same percentage for all of them, though the dollar amount varies depending on what service they provide and how much Medicare normally pays for it.

The cuts are real money out of a provider's budget. A busy primary care practice might lose tens of thousands of dollars per year. A hospital system might lose millions. Over time, these reductions add up and can change how providers run their business.

Why Providers May Change How They Work

Lower Medicare payments have pushed some doctors to make changes to their practice. Some see fewer Medicare patients and focus more on patients with private insurance, which typically pays more. Others have retired earlier than planned because the reduced income made continuing less worthwhile. Some have joined large hospital systems or medical groups, hoping that size and efficiency will help them absorb the cuts.

A few providers have stopped taking Medicare altogether, though this is less common because Medicare patients make up a large part of many practices' income. When a doctor does stop taking Medicare, they must give patients 30 days' notice, and Medicare maintains a list of providers who no longer participate.

In some areas, especially rural regions where there are fewer doctors to begin with, sequestration has made it harder for Medicare patients to find a provider who is accepting new patients. This is not universal — many doctors continue to see Medicare patients at the same rate — but it is a real concern in certain communities.

What Sequestration Does Not Change About Your Costs

Sequestration does not directly change your copays, coinsurance, or deductibles. If your doctor visit normally costs you $25 as a copay, sequestration does not make it $26. Your share of the bill stays the same because your out-of-pocket costs are set by Medicare rules, not by what Medicare pays the provider.

However, sequestration can indirectly affect you if a provider responds by changing their practice. If your doctor retires or stops seeing Medicare patients, you may need to find a new provider. If a practice becomes part of a larger hospital system, your care experience might change. These are indirect effects, not direct changes to your bill.

Your Part B deductible, copays for specialist visits, and coinsurance percentages are all set by Medicare law and do not move because of sequestration. The same is true for Part A (hospital insurance) deductibles and copays.

When Congress Has Paused or Changed Sequestration

Congress has temporarily paused sequestration cuts several times since 2013. These pauses have usually happened during budget negotiations or in response to pressure from medical groups and patient advocates. When Congress pauses sequestration, the 2 percent cut does not happen for a set period — sometimes a few months, sometimes longer.

However, pauses are temporary. Unless Congress passes a new law to permanently change or eliminate sequestration, the cuts return when the pause ends. This on-and-off pattern has created uncertainty for providers, who cannot plan long-term budgets when they do not know whether sequestration will be in effect next year.

The most recent major pause was in 2020 during the COVID-19 pandemic, when Congress suspended sequestration for several months. Since then, the cuts have been back in place, though Congress continues to debate whether sequestration should be reformed or eliminated.

How to learn about Your Doctor Participates in Medicare

You can check whether your doctor accepts Medicare by using the Medicare Provider Search tool on Medicare.gov. Search by the provider's name or location, and the tool will tell you whether they participate in Medicare and whether they are accepting new Medicare patients.

You can also call your doctor's office directly and ask. They can tell you when ready whether they take Medicare and whether they have openings for new patients. If you are having trouble finding a Medicare provider in your area, your State Health Insurance information Program (SHIP) can help — they have local knowledge and can point you toward providers who are actively seeing Medicare patients.

Questions to Ask Your Doctor About Sequestration

If you are concerned about how sequestration might affect your care, you can ask your doctor directly. Here are some useful questions: "Are you still accepting new Medicare patients?" "Has sequestration affected how you run your practice?" "If you ever stop taking Medicare, how much notice will you give?" These are straightforward questions that any provider should be able to answer.

You do not need to be an informed on sequestration to have this conversation. Your doctor understands that Medicare payments affect their business, and most are willing to discuss how they are managing. If a provider seems dismissive or unwilling to talk about it, that is useful information too.

Frequently Asked Questions

Does sequestration mean my Medicare benefits are being cut?

No. Your benefits — what services Medicare covers and what you pay out of pocket — stay the same. Sequestration cuts what Medicare pays providers, not what you receive. Your copays, deductibles, and coverage do not change because of sequestration.

Will sequestration eventually go away?

Only if Congress passes a new law to eliminate it. Right now, sequestration is set to continue indefinitely unless lawmakers act. Congress has paused it temporarily in the past, but those pauses have always ended and the cuts have returned.

Can my doctor charge me extra because of sequestration?

No. Medicare rules prohibit providers from billing you the difference between what Medicare pays and what they would normally charge. They also cannot charge you extra to make up for sequestration cuts. Your out-of-pocket costs are set by Medicare law.

Does sequestration affect Medicare Advantage or Part D?

No. Medicare Advantage plans and Part D prescription drug plans are not subject to sequestration cuts. If you are in a Medicare Advantage plan, sequestration does not affect your coverage or your provider's Medicare payments for your care.

What should I do if my doctor stops taking Medicare?

Ask your doctor for a referral to another Medicare provider in your area. You can also use the Medicare Provider Search tool or call your State Health Insurance information Program for help finding a new doctor who accepts Medicare patients.