What Medicare Sequestration Is

Medicare sequestration is an automatic budget cut that reduces the amount Medicare pays doctors, hospitals, and other healthcare providers for the services they deliver. When sequestration is in effect, Medicare payments to providers drop by a set percentage — typically 2 percent, though Congress can change this amount. The cut applies across nearly all Medicare services, with a few exceptions like dialysis and certain preventive care.

Sequestration began in 2013 under a federal law called the Budget Control Act of 2011. It was designed as a pressure tactic to force Congress to reach a budget agreement. Instead of reaching that agreement, Congress has extended sequestration repeatedly, and it remains in place today. The cuts affect what providers receive, not what you pay out of your own pocket as a beneficiary — your copayments, coinsurance, and deductibles stay the same.

Key Takeaways

  • Sequestration reduces what Medicare pays providers by a set percentage, currently around 2 percent, but does not change your copayments or deductibles.
  • The cuts have been in effect since 2013 and explore to most Medicare services, including hospital care, doctor visits, and imaging.
  • Some providers may respond by limiting the number of Medicare patients they accept or by raising their own fees to offset the reduction.
  • Congress can suspend or modify sequestration through legislation, and the cuts have been paused temporarily several times since 2013.

How Sequestration Changes What Providers Receive

When a doctor or hospital treats a Medicare patient, they submit a bill to Medicare. Medicare then calculates what it will pay based on a fee schedule — a list of set amounts for each service. Sequestration reduces that payment by a percentage before the provider receives it. If Medicare would normally pay a doctor $100 for an office visit, sequestration might reduce that to $98.

The reduction happens automatically at the point of payment. Providers do not have to explore for it or take any action; Medicare straightforward pays less. This affects all types of providers — primary care doctors, specialists, hospitals, imaging centers, physical therapists, and others — though a small number of services are exempt, including dialysis, vaccines, and certain preventive screenings.

Because the cuts are relatively small (usually 2 percent), many providers continue to accept Medicare patients. However, some may respond by seeing fewer Medicare beneficiaries, raising their own fees for services Medicare does not cover, or adjusting their practice in other ways to maintain their income.

Why Sequestration Stays in Place

Sequestration was meant to be temporary — a threat that would push Congress to cut spending or raise revenue. The idea was that the cuts would be so unpopular that lawmakers would reach a budget deal to stop them. That deal never happened. Instead, Congress has extended sequestration multiple times, sometimes suspending it for a few months during emergencies (like the COVID-19 pandemic) and then letting it resume.

Ending sequestration would require Congress to pass new legislation. Some lawmakers argue the cuts should end because they harm healthcare access. Others argue they should stay because they reduce federal spending. As a result, sequestration has become a permanent feature of Medicare funding, even though it was never intended to be.

How Sequestration Might Affect Your Care

Your out-of-pocket costs — copayments, coinsurance, and deductibles — do not change because of sequestration. You pay the same amount whether sequestration is in effect or not. However, sequestration can indirectly affect your care in a few ways.

Some providers may limit how many Medicare patients they accept, which can make it harder to find a doctor who is taking new Medicare patients. Others may shift their focus to services that are exempt from sequestration or to patients with private insurance, which pays at higher rates. In areas with fewer providers, this can mean longer wait times or having to travel farther for care. Most beneficiaries do not experience major disruptions, but access can vary by location and specialty.

If you have trouble finding a provider, your local Area Agency on Aging or your State Health Insurance information Program (SHIP) can help you locate doctors and specialists who are accepting Medicare patients in your area.

When Sequestration Has Been Paused or Changed

Congress has suspended sequestration temporarily several times since it began. The cuts were paused during the COVID-19 pandemic to allow hospitals and providers to focus on the emergency response. They have also been suspended for brief periods during other crises or budget negotiations. However, each suspension has been temporary, and the cuts have resumed afterward.

The percentage of the cut can also change if Congress passes new legislation. For example, Congress has adjusted the rate in the past, and it could do so again. Staying informed about changes to sequestration can help you understand shifts in provider availability or payment policies in your area.

What You Should Know About Your Benefits

Sequestration does not change your Medicare coverage or your benefits. You still have the same hospital insurance (Part A), medical insurance (Part B), and prescription drug coverage (Part D) that you would have without sequestration. Your deductibles, copayments, and coinsurance amounts remain the same.

If you are concerned about finding a provider or accessing care, contact your Medicare Advantage plan (if you have one) or your local SHIP office. They can tell you which providers in your area are accepting new Medicare patients and can help you understand your coverage options. You can also call Medicare directly at 1-800-MEDICARE to ask about provider availability in your region.

Frequently Asked Questions

Does sequestration mean I will pay more for my Medicare services?

No. Sequestration reduces what Medicare pays providers, not what you pay. Your copayments, coinsurance, and deductibles stay the same. The cut happens on the provider side of the payment, not yours.

Will sequestration cause doctors to stop accepting Medicare?

Some providers may limit the number of Medicare patients they accept, but most continue to see Medicare beneficiaries because the 2 percent reduction is manageable for many practices. Access varies by location and specialty. If you have trouble finding a provider, contact your local SHIP or call 1-800-MEDICARE for help.

Can Congress end sequestration?

Yes. Congress can pass legislation to suspend or permanently end sequestration at any time. It has done so temporarily several times since 2013. Ending it would require lawmakers to agree on how to offset the cost or to accept higher federal spending.

Does sequestration affect all Medicare services equally?

No. Most services are subject to the cut, but some are exempt, including dialysis, certain vaccines, and some preventive screenings. The cut applies to hospital care, doctor visits, imaging, therapy, and most other services.

How can I learn about sequestration is currently in effect?

Sequestration has been in effect since 2013 and remains active today, though Congress has suspended it temporarily at times. You can call 1-800-MEDICARE or visit Medicare.gov to learn about the current status and how it may affect provider payments in your area.