CMS Administrator Marilyn Tavenner has clarified that a 2 percent reduction in Medicare reimbursement under sequestration doesn't apply to payment rates in Medicare fee-for-service schedules.
Ms. Tavenner offered the clarification in a letter to the American Hospital Association. She wrote payment adjustments required under sequestration are applied to claims after determining the Medicare payment. Only the final reimbursement amount — not the Medicare fee schedules — reflects the cuts.
Ms. Tavenner wrote the letter in response to an inquiry the AHA made last August regarding how Medicare Advantage plan providers should implement sequestration cuts. In a letter to CMS, AHA Executive Vice President Rick Pollack expressed concern on behalf of the AHA that some Medicare Advantage providers are erroneously cutting payments to hospitals. Some AHA members and state hospital associations have told the organization a considerable number of the private Medicare plans seem to have misunderstood the sequestration cuts.
Last May, CMS instructed health insurers administering Medicare Advantage plans to review their contracts with hospitals to determine whether or how to apply sequestration cuts. However, CMS cannot interfere in the payment arrangements and contracts between Medicare Advantage organizations and providers, according to Ms. Tavenner.
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