Senate Acts to Avert Medicare Sequester Payment Reductions — House Needs to Act

March 26, 2021

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In the nick of time, the U.S. Senate passed legislation on March 25, 2021, to delay a 2 percent across-the-board cut to Medicare through the rest of 2021. The vote was 90 to 2. Without the delay, all Medicare providers would have experienced reductions in the program’s reimbursement. However, the U.S. House of Representatives will have to vote on this measure when it returns from spring recess.

The Budget Control Act of 2011 mandated federal budget cuts totaling more than $1 trillion over nine years, including the 2 percent annual Medicare payment cuts. Congress delayed those cuts through March 31, 2021, with a provision in last year’s Coronavirus Aid, Relief, and Economic Security Act. The reductions would have put more pressure on providers already hit hard by the pandemic.

The next House votes are scheduled for April 13, 2021. The Centers for Medicare and Medicaid Services (CMS) is being urged to hold claims until the House acts. Previously, when there were to be automatic payment reductions, CMS held claims knowing Congress was about to act to delay payment reductions.

However, even though the House is expected to pass this measure when it returns, there are still more cuts ahead, unless Congress acts again.

On March 18, 2021, the House passed legislation that would delay the 2 percent sequester cuts and delay further cuts that would be automatically triggered to offset spending in the recently passed American Rescue Plan.

Under the Statutory Pay-As-You-Go Act of 2010 (PAYGO), the Office of Management and Budget (OMB) must maintain five- and 10-year scorecards that report the estimated cumulative changes in revenues and outlays generated by new legislation. If either scorecard indicates a net increase in the deficit, OMB must order a sequestration to eliminate the overage. According to Congressional Budget Office estimates, the American Rescue Plan increases the deficit by $1.9 trillion over both the five- and 10-year scorecards.

Without enactment of subsequent legislation to offset the deficit increase, waive the recordation of the bill’s effects on the scorecard, or otherwise mitigate or eliminate the statutory PAYGO requirements, OMB would be required to issue a sequestration to reduce spending. The PAYGO law limits reductions in Medicare spending to four percentage points. The law entirely exempts many large accounts, including low-income programs and Social Security. These cuts could go into effect around Sept. 1, 2021, unless Congress acts. While the House has passed legislation to delay the reductions, the future of such legislation in the Senate remains unclear.