‘A Key Piece of the Puzzle’: Setting the Record Straight on Medicare Sequestration

There’s a lot of confusion within the home health industry regarding Medicare sequestration right now. That’s understandable, considering there have been multiple inaccurate reports about where a continued delay actually stands.

To recap, Medicare sequestration is a federal savings mechanism required by the Budget Control Act, which was signed into law in August 2011 with the goal of reducing the U.S. deficit by at least $1.2 trillion over a decade. In essence, sequestration is a 2% cut to Medicare claims from home health agencies, physicians, hospitals and others.

Congress put a temporary pause on those cuts during the early days of the COVID-19 pandemic, giving Medicare-reimbursed health care providers a little bit of breathing room as they dealt with declined visits, worker shortages and a long list of other challenges. The action was particularly helpful to home health operators as they simultaneously transitioned to the Patient-Driven Groupings Model (PDGM).


Specifically, the Coronavirus Aid, Relief and Economic Security (CARES) Act paused sequestration through all of 2020. Toward the end of December, Congress then got together again to extend that temporary stoppage through March of 2021.

That was a “huge win” for home health organizations, according to Jane Shekman, president and CEO of the Northbrook, Illinois-based LifeCare Home Health & In-Home Services.

“Home Health agencies are still recovering from the cuts related to the PDGM changes implemented in 2020 and 2021, [plus the] additions of no RAP payments and five-day submission penalties,” Shekman told Home Health Care News. “Now more than ever, agencies need cash to remain sustainable in these turbulent times.”


The U.S. Centers for Medicare & Medicaid Services (CMS) completely phased out home health prepayments — or Requests for Anticipated Payment (RAPs) — for all providers this year.

With the current sequestration delay set to expire, lawmakers have been going back and forth all month to secure yet another pause. That’s where the confusion begins.

On March 19, the U.S. House of Representatives passed H.R. 1868 by a 246-175 vote. In addition to extending the sequestration delay through the end of 2021, that bill also included provisions to waive pay-as-you-go (PAYGO) budget-enforcement measures designed to offset new increases in federal spending.

Following a 90-2 vote, the Senate passed its own, entirely separate legislation last week. The Senate’s bill — S. 748 — suspends the 2% Medicare cuts through the duration of the public health emergency, but it does not include language changing PAYGO rules.

“The Partnership strongly supports a further extension of sequester relief and applauds the U.S. Senate for passing this bipartisan measure to help stabilize our nation’s health care infrastructure as we continue to experience the added pressures of safely delivering care during the pandemic,” Joanne Cunningham, executive director of the Partnership for Quality Home Healthcare (PQHH), said in a statement.

But because the House and Senate didn’t pass the same legislation, that means there’s no bill sitting on President Joe Biden’s desk to sign into law.

The House now needs to pass last week’s Senate legislation when it returns from its current break sometime during the week of April 13.

“We now urge the House to act quickly and pass this legislation upon its return next month before these cuts to clinicians and providers are reinstated,” Chip Kahn, president and CEO of the Federation of American Hospitals (FAH), said in a statement. “Extending the 2% Medicare sequester moratorium is a key piece of the puzzle to ensure clinicians and hospitals have the critical resources to care for their patients and defeat this virus.”

Policy experts are optimistic that House lawmakers will promptly pass the Senate bill once they’re back in Washington, D.C.

As hospitals and home health providers wait for that near-certainty, CMS will likely avoid any payment reductions on its end. The agency was similarly lenient when advance and accelerated Medicare payments were initially set to become due last year.

“We welcome the extension of the 2% Medicare sequester moratorium by Congress,” Raman Brar, CEO of the Fairfield, Connecticut-based PathWell Health, told HHCN. “At a time of uncertainty due to the pandemic, staff burnout and the PDGM rollout, this financial relief will ensure our nurses, therapists and caregivers are safe and taking care of our patients, who rely so heavily on home health care to get back to normal.”

Sofia Koshevatsky, CEO of the Oakland, California-based HealthFlex Home Health Services, echoed those remarks. Thus far, the pause on sequestration has allowed her home health company to reinvest that 2% cut in programs to protect and train clinicians.

“We have made significant investments in appropriate and required [personal protective equipment] for each and every clinician, as well as continued training for all staff on proper infection control and safety,” Koshevatsky told HHCN. “We are also able to remain competitive during staffing shortages and retain highly skilled clinicians to ensure the highest level of patient care and outcomes. We will continue to invest in all of the areas above as the hold is in place.”

Looking further into the future, the House and Senate may also try to get on the same page when it comes to PAYGO, as that could likewise lead to cuts for home health agencies and other Medicare-reimbursed providers.

“We expect follow-up legislation to be introduced and passed before October that would block PAYGO cuts on Medicare rates,” Jefferies analysts said in a note.

PAYGO cuts to Medicare are capped at 4%. Medicaid spending is exempt from pay-as-you-go reductions, as is Social Security, federal retirement programs, veterans’ programs and other low-income entitlement programs.

In a perfect world, Congress may even see value in getting rid of the 2% Medicare sequestration entirely.

“The 2% in reimbursement savings may not be much, still, it will aid those, especially smaller agencies, to weather the storm and maintain their operations,” Shekman added. “Hopefully, this extension can be postponed over to 2022 or become a permanent change.”

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