Sequestration - Reduction in Federal Payment

What it means

This code indicates that the payment has been reduced due to a mandatory federal budget cut known as sequestration. It's not a denial of the claim itself, but an automatic across-the-board reduction applied to Medicare (and sometimes other federal payer) reimbursements, typically 2%, as required by federal law. This adjustment is routine and applies broadly, not to a specific error in your claim.

Common causes

• Claim was processed under Medicare or another federal payer subject to the Budget Control Act sequestration rules
• Standard 2% reduction applied to the allowed amount after normal adjudication
• Payer system automatically applies this adjustment to all qualifying claims, regardless of specialty or service type

How to fix it

1. Verify this is a standard sequestration reduction and not paired with another denial code requiring action
2. Confirm the reduced payment aligns with the expected 2% (or current applicable rate) sequestration cut
3. Update your internal reporting or accounts receivable systems to recognize this as a non-billable, non-disputable adjustment
4. Do not bill the patient for the sequestration-related reduction, as it is a payer-side federal adjustment, not a patient responsibility
5. If the reduction seems inconsistent with the expected percentage, contact the payer to confirm current sequestration rates and calculation

Appeal / resubmit

Sequestration reductions are generally not appealable since they result from federal law rather than a payer's coverage or billing decision. If you believe the reduction was miscalculated or applied in error (e.g., wrong percentage or applied to an exempt claim type), contact the payer's provider services line to request verification rather than filing a formal appeal.

Related codes

• 45
• 223

Frequently asked

More free billing tools: all denial codes · denial lookup · Medicare fee calculator

This content is informational only and does not constitute billing or legal advice. Always verify current payer policies and consult a qualified billing or compliance professional for specific guidance.