Sequester law’s Medicare provider cuts wouldn't begin until April 1

February 28, 2013 by: Burt Schorr

Sequestration is set to cut big hunks of spending from hundreds of federal activities, from the Head Start program to a second carrier for the Persian Gulf, with March 1 as the start date for putting the actual reductions in motion.

But under the law requiring the sequester, the Budget Control Act of 2011, the cut in Medicare provider payments won’t kick in until April 1, an Office of Management and Budget (OMB) spokesman confirms.

Other cut details: The provider reductions will be the maximum 2% allowed by the law, an HHS spokesman says. For home health agencies, which are paid by 60-day episodes of care, the cuts “will be determined by the day of discharge. Payments for discharges on or after April 1 would be reduced by 2%,” the spokesman explains.

A 2% cut, once it begins, could be almost as devastating for the home health industry as the interim payment system (IPS), which preceded the current prospective payment system. It closed the doors of nearly one-third of agencies between 1998 and 2000, says John Reisinger, owner of Innovative Financial Solutions for Home Health in Tampa, Fla.

The nearly 12% average profit margin on Medicare patients the Medicare Payment Advisory Commission (MedPAC) predicted for freestanding agencies in 2013 exaggerates the health of many agencies because Medicare doesn’t consider some standard expenses, such as marketing and telehealth, to be allowable costs, Reisinger contends.

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