Official CARC description: “Sequestration - reduction in federal payment.” Here’s what it actually means, why it fires, and how to get the claim paid.
The mandatory 2% federal budget cut on Medicare payments. Informational, expected, and permanent for now — the only “fix” is posting it correctly.
Liability group: CO = Contractual Obligation — the provider absorbs it — the amount cannot be billed to the patient. If the denial is wrong, the money is recovered by correcting or appealing the claim, not by balance-billing.
Also written: CO-253, CO253, “denial code 253”, “253 denial code” or “reason code 253” — same CARC, different ERA formatting.
Post as a contractual adjustment to a dedicated sequestration code
Never bill the patient for the sequestration amount
Reconcile: it should be exactly 2% of the payer's payment portion
No action needed beyond correct posting
Never appealable — it's federal law, not a payer decision. If the math is off (more than 2% of the paid amount), that's a reprocessing request, not an appeal.
Fill in the denial facts — use placeholders, never real patient data (the letter keeps [PATIENT NAME]-style fields so you can merge real details privately). A payer-ready draft with an enclosure checklist comes back in ~20 seconds.
Your appeal letter draft will appear here.
The official CARC description for CO 253 is: “Sequestration - reduction in federal payment.” In practice: The mandatory 2% federal budget cut on Medicare payments. Informational, expected, and permanent for now — the only “fix” is posting it correctly.
Denial code 253 under the CO group (Contractual Obligation) means: Sequestration - reduction in federal payment. The number is the reason; the CO prefix decides who is liable — the provider absorbs it — the amount cannot be billed to the patient. If the denial is wrong, the money is recovered by correcting or appealing the claim, not by balance-billing.
Yes. CO 253, CO-253, CO253 and “denial code 253” are the same CARC — clearinghouses, payer portals and PM systems just print it differently. Only the group prefix (CO, PR, OA or PI) changes the meaning, because it changes who has to absorb the amount.
CO stands for Contractual Obligation — the provider absorbs it — the amount cannot be billed to the patient. If the denial is wrong, the money is recovered by correcting or appealing the claim, not by balance-billing.
Never appealable — it's federal law, not a payer decision. If the math is off (more than 2% of the paid amount), that's a reprocessing request, not an appeal.