Medicare Sequestration Calculator
Medicare takes 2 percent off what it pays, after the deductible and coinsurance. Enter one claim line to see the cut, what Medicare pays, and how the line reads on your remittance.
- Allowed amount100.00
- Less deductiblePR-1(50.00)
- Less coinsurance at 20%PR-2(10.00)
- Medicare's payment before the cut
- Less sequestration at 2%CO-253(0.80)
- Medicare pays39.20
Deductible plus coinsurance. Sequestration never changes it.
CO-45 plus CO-253. Neither can be billed to the patient.
| Code | Meaning | Amount |
|---|---|---|
| CO-45 | Charge above the allowed amount | 50.00 |
| PR-1 | Deductible | 50.00 |
| PR-2 | Coinsurance | 10.00 |
| CO-253 | Sequestration, a reduction in federal payment | 0.80 |
| Paid | Medicare's payment to you | 39.20 |
Balances: 150.00 charged = 39.20 paid + 50.00 CO-45 + 50.00 PR-1 + 10.00 PR-2 + 0.80 CO-253
Show the 835 adjustment segments
CAS*CO*45*50.00**253*0.80~ CAS*PR*1*50.00**2*10.00~
In the electronic remittance, each group code gets one CAS segment, with up to six reason codes and amounts in it.
Which rate applies
The rate depends on the date of service, or the discharge date for an inpatient stay.
| Dates of service | Reduction |
|---|---|
| Before April 1, 2013 | None |
| April 1, 2013 to April 30, 2020 | 2% |
| May 1, 2020 to March 31, 2022 | None |
| April 1, 2022 to June 30, 2022 | 1% |
| July 1, 2022 onward | 2% |
The 2 percent comes from the Budget Control Act of 2011. Under current law it runs into 2032. A separate cut of up to 4 percent was expected in 2026, and Congress cancelled it in November 2025.
How the 2 percent is worked out
Medicare first works out its normal payment: the allowed amount, less any deductible, less the patient's coinsurance. Then it takes 2 percent off that payment. First Coast, a Medicare contractor, gives the standard example: a $100 approved amount with a $50 deductible leaves $50, Medicare's 80 percent of that is $40, and the 2 percent cut makes the payment $39.20 instead of $40.
The cut comes off Medicare's payment only. The patient's deductible and coinsurance stay the same. On an assigned claim the $0.80 carries the CO group code, so it is yours to write off, not the patient's to pay.
Reading CO-253 on a remittance, posting it, and how Medicare Advantage plans handle it are covered in CO-253, the sequestration adjustment.
What this calculator leaves out
- Medicare as secondary payer. The 2 percent still comes off Medicare's payment, but Medicare's secondary payment follows its own rules. This calculator assumes Medicare is primary.
- Medicare Advantage. Plans set their own payment terms. Whether a plan passes the cut on depends on its contract with you.
- Rounding. Your remittance can differ by a cent, depending on how each step was rounded.