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.
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.
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.
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.