Medicare and Budget Sequestration

Changes from March 29, 2022 to September 26, 2023

This page shows textual changes in the document between the two versions indicated in the dates above. Textual matter removed in the later version is indicated with ~~red strikethrough~~ and textual matter added in the later version is indicated with blue.

Medicare and Budget Sequestration
~~March 29, 2022~~September 26, 2023
Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally
by a uniform percentage. The sequester is a budget enforcement tool that was by a uniform percentage. The sequester is a budget enforcement tool that was ~~established by~~
~~Patricia A. Davis~~
Ryan J. Rosso established by Congress in the Balanced Budget and Emergency Deficit Control Act of Congress in the Balanced Budget and Emergency Deficit Control Act of ~~1985 (BBEDCA, also~~
~~Specialist~~ Analyst in Health Care in Health Care
1985 (BBEDCA, also known as the Gramm-Rudman-Hollings Act; P.L. 99-177, as known as the Gramm-Rudman-Hollings Act; P.L. 99-177, as Financing amended) and was intended to amended) and was intended to
~~Financing~~
encourage compromise and action, rather than actually encourage compromise and action, rather than actually being implemented (also known as being implemented (also known as

triggered). Generally, this budget enforcement tool ). Generally, this budget enforcement tool has been incorporated into laws to either has been incorporated into laws to either
discourage or encourage certain budget objectives or goals. When these goals are not met, either discourage or encourage certain budget objectives or goals. When these goals are not met, either

through the enactment of a law or the lack thereof, a sequester is triggered and certain federal through the enactment of a law or the lack thereof, a sequester is triggered and certain federal
spending is reduced. spending is reduced.
Sequestration is of Sequestration is of ~~recent~~congressional interest due to its current use as an enforcement mechanism for three budget enforcement rules interest due to its current use as an enforcement mechanism for three budget enforcement rules
created by the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139)created by the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139) ~~and~~, the Budget Control Act of 2011 the Budget Control Act of 2011
(BCA; P.L. 112-25)(BCA; P.L. 112-25). , and the Fiscal Responsibility Act of 2023 (FRA; P.L. 118-5). At present, only the BCA At present, only the BCA ~~mandatory~~ sequester has been triggered and is in effect. Under the BCA, the sequester has been triggered and is in effect. Under the BCA, the
sequestration of mandatory spending was originally scheduled to occur in FY2013 through FY2021. However, subsequent sequestration of mandatory spending was originally scheduled to occur in FY2013 through FY2021. However, subsequent
legislationlegislation~~, including, most recently, the Infrastructure Investment and Jobs Act (P.L. 117-58), extended sequestration for~~
~~mandatory spending through FY2031. (The CARES Act, as amended, temporarily suspended the application of this~~
~~sequestration to Medicare~~ extended sequestration for mandatory spending through FY2031 and the sequestration of only Medicare benefit payments spending through FY2032. (The sequestration to Medicare was temporarily suspended from May 1, 2020, through March 30, 2022, and from May 1, 2020, through March 30, 2022, and ~~limited Medicare reductions~~was limited to 1% from April 1, to 1% from April 1,
2022, through June 30, 2022.)2022, through June 30, 2022.) ~~The BCA discretionary sequester expired at the end of FY2021.~~
~~The Statutory PAYGO sequester is current law~~ The Statutory PAYGO sequester applies to mandatory funding, is current law, and can be triggered if associated budget enforcement rules are broken. Due and can be triggered if associated budget enforcement rules are broken. Due
to the potential impact of the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) on deficits, sequestration under to the potential impact of the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) on deficits, sequestration under
PAYGO was expected to be triggered in early 2022. However, the Protecting Medicare and American Farmers from PAYGO was expected to be triggered in early 2022. However, the Protecting Medicare and American Farmers from
Sequester Cuts Act (P.L. 117-71) deferred the impact of Sequester Cuts Act (P.L. 117-71) deferred the impact of ARPA to 2023. Subsequently, the Consolidated Appropriations Act, 2023, deferred to 2026 the impact of ARPA and other legislation estimated to impact the deficit under PAYGO. ~~ARPA to 2023.~~ Without related congressional action prior to the end Without related congressional action prior to the end
~~of 2022~~of 2025, reductions to Medicare under PAYGO could occur in , reductions to Medicare under PAYGO could occur in ~~2023. If a PAYGO~~2026. The FRA sequester sequester ~~were to be triggered in 2023 or~~
~~another future fiscal year, neither the Statutory PAYGO Act nor the Budget Control Act include any explicit directions as to~~
~~how the two sequesters would be implemented alongside each other~~applies to discretionary funding, is current law, and can be triggered if associated budget enforcement rules are broken (and Congress does not take action to change or waive this rule). .
Medicare is a federal program that pays for certain health care services of qualified beneficiaries. The program is funded Medicare is a federal program that pays for certain health care services of qualified beneficiaries. The program is funded
using both mandatory and discretionary spending and is impacted by any sequestration order issued in accordance with the using both mandatory and discretionary spending and is impacted by any sequestration order issued in accordance with the
aforementioned laws. Medicare aforementioned laws. Medicare ~~is mainly impacted by the sequestration of mandatory funds since Medicare~~ benefit payments benefit payments
(the majority of Medicare expenditures) are considered mandatory spending(the majority of Medicare expenditures) are considered mandatory spending and therefore are subject to the sequestration of mandatory funds. Special sequestration rules limit the extent to . Special sequestration rules limit the extent to
which Medicare benefit spending can be reduced in a given fiscal year. This limit varies depending on the type of which Medicare benefit spending can be reduced in a given fiscal year. This limit varies depending on the type of
sequestration order. sequestration order.
Under a BCA mandatory sequestration order, Medicare benefit payments and Medicare Integrity Program spending cannot be Under a BCA mandatory sequestration order, Medicare benefit payments and Medicare Integrity Program spending cannot be
reduced by more than 2%. Under a Statutory PAYGO sequestration order, Medicare benefit payments and Medicare Program reduced by more than 2%. Under a Statutory PAYGO sequestration order, Medicare benefit payments and Medicare Program
Integrity spending cannot be reduced by more than 4%. These limits do not apply to mandatory administrative Medicare Integrity spending cannot be reduced by more than 4%. These limits do not apply to mandatory administrative Medicare
spending under either type of sequestration order. These limits also spending under either type of sequestration order. These limits also ~~did~~do not apply to discretionary administrative Medicare not apply to discretionary administrative Medicare
spending under spending under ~~a BCA discretionary~~an FRA sequestration order. sequestration order.
Generally, Medicare’s benefit structure remains unchanged under a mandatory sequestration order and beneficiaries see few Generally, Medicare’s benefit structure remains unchanged under a mandatory sequestration order and beneficiaries see few
direct impacts. However, Medicare plansdirect impacts. However, Medicare plans, providers, and suppliers ~~and providers~~ see reductions in payments. Due to varying plan and provider see reductions in payments. Due to varying plan and provider
payment mechanisms among the four parts of Medicare, sequestration is implemented somewhat differently across the payment mechanisms among the four parts of Medicare, sequestration is implemented somewhat differently across the
program. program.
Congressional Research Service Congressional Research Service

Medicare and Budget Sequestration

Introduction
Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally
by a uniform percentage.1 The sequester is a budget enforcement tool that Congress established in by a uniform percentage.1 The sequester is a budget enforcement tool that Congress established in
the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the
Gramm-Rudman-Hollings Act; P.L. 99-177, as amended) intended to encourage compromise and Gramm-Rudman-Hollings Act; P.L. 99-177, as amended) intended to encourage compromise and
action, rather than actually being implemented (also known as action, rather than actually being implemented (also known as triggered).2 Generally, this budget ).2 Generally, this budget
enforcement tool has been incorporated into laws to either discourage or encourage certain budget enforcement tool has been incorporated into laws to either discourage or encourage certain budget
objectives or goals. When these goals are not met, either through the enactment of a law or lack objectives or goals. When these goals are not met, either through the enactment of a law or lack
thereof, a sequester is triggered and certain federal spending is reduced.thereof, a sequester is triggered and certain federal spending is reduced.
Sequestration is currently used as a budget enforcement mechanism as part of the Statutory Pay- Sequestration is currently used as a budget enforcement mechanism as part of the Statutory Pay-
As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139)As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139) ~~and~~, the Budget Control Act of 2011 the Budget Control Act of 2011
(BCA; P.L. 112-25)(BCA; P.L. 112-25), and the Fiscal Responsibility Act of 2023 (FRA; P.L. 118-5). At this time, only the BCA mandatory spending sequester is in effect. At this time, only the BCA mandatory spending sequester is in effect ~~and~~; it is is
scheduled to continue each year scheduled to continue each year through FY2031 for non-Medicare benefit payment spending and through FY2032 for Medicare benefit payments. However, the Statutory PAYGO sequester and the FRA discretionary sequester are current law and can be triggered if the budget enforcement rules are broken (and Congress does not take action to change or waive these rules)~~through FY2031; however, the applicable Medicare spending~~
~~reductions have been suspended from May 2020 through March 2022.3 The BCA discretionary~~
~~spending limits, which were enforceable through a sequester, expired at the end of FY2021~~. .
Medicare, which is a federal program that pays for covered health care services of qualified Medicare, which is a federal program that pays for covered health care services of qualified
beneficiaries,beneficiaries,43 is subject to a reduction in federal spending associated with the implementation of is subject to a reduction in federal spending associated with the implementation of
these sequesters, although special rules limit the extent to which these sequesters, although special rules limit the extent to which ~~it is impacted~~sequestered expenditures can be reduced. .
This report begins with an overview of budget sequestration and Medicare before discussing how This report begins with an overview of budget sequestration and Medicare before discussing how
budget sequestration has been implemented across the different parts of the Medicare program. budget sequestration has been implemented across the different parts of the Medicare program.
Additionally, this report provides appendixes that include references to additional Congressional Additionally, this report provides appendixes that include references to additional Congressional
Research Service (CRS) resources related to this report and budget terminology definitions, as Research Service (CRS) resources related to this report and budget terminology definitions, as
defined by BBEDCA. defined by BBEDCA.
Budget Sequestration
Under current law, sequestration is a budget enforcement tool that occurs because certain Under current law, sequestration is a budget enforcement tool that occurs because certain
budgetary goals have not been met. When a sequester is triggered, all applicable budget accounts, budgetary goals have not been met. When a sequester is triggered, all applicable budget accounts,
unless exempted by law, are reduced by a certain percentage amount for a fiscal year.unless exempted by law, are reduced by a certain percentage amount for a fiscal year.~~5 The~~

4 The 1 Section 250(c)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177) 1 Section 250(c)(2) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177)
defines the terms defines the terms sequestration and and sequester as “the cancellation of budgetary resources provided by discretionary as “the cancellation of budgetary resources provided by discretionary
appropriations or direct spending law.” Budgetary resources are subject to sequestration unless exempted by law. For appropriations or direct spending law.” Budgetary resources are subject to sequestration unless exempted by law. For
further information on sequestration, see Office of Management and Budget (OMB), OMB Circular A-11 (further information on sequestration, see Office of Management and Budget (OMB), OMB Circular A-11 (~~2019~~2022), ),
Section 100, at https://www.whitehouse.gov/wp-content/uploads/2018/06/s100.pdf. Section 100, at https://www.whitehouse.gov/wp-content/uploads/2018/06/s100.pdf.
2 U.S. Congress, Senate Committee on Finance, 2 U.S. Congress, Senate Committee on Finance, Budget Enforcement Mechanisms, Oral and Written Testimony of the , Oral and Written Testimony of the
Honorable Phil Gramm, 112th Cong., 1st sess., May 4, 2011. Honorable Phil Gramm, 112th Cong., 1st sess., May 4, 2011.
3 3 ~~Section 3709 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) suspended the~~
~~application of the Budget Control Act of 2011 (BCA; P.L. 112-25) sequestration to Medicare from May 1, 2020,~~
~~through December 31, 2020; §102 of Division N, Title I of the Consolidated Appropriations Act, 2021 (P.L. 116-260),~~
~~extended the suspension through March 31, 2021; §1 of an Act to Prevent Across-the-Board Direct Spending Cuts, and~~
~~for Other Purposes (P.L. 117-7), extended the suspension through December 31, 2021; and §2 of the Protecting~~
~~Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71) extended the suspension through March 31,~~
~~2022. (The Protecting Medicare and American Farmers from Sequester Cuts Act also limited the Medicare reductions~~
~~to 1% from April 1, 2022, through June 30, 2022.)~~
~~4 For more information on Medicare, see CRS Report R40425, Medicare Primer.~~
~~5 Sequestration does not apply to every account, since many budget accounts are either exempted from sequestration or~~
~~governed by special rules under sequestration, the latter of which can vary depending on the sequestration trigger. See~~For more information on Medicare, see CRS Report R40425, Medicare Primer. 4 Sequestration does not apply to every account, since many budget accounts are either exempted from sequestration or governed by special rules under sequestration, the latter of which can vary depending on the sequestration trigger. See BBEDCA §255 and §256, as amended. Since OMB is responsible for the execution and legal interpretations of sequestration orders, some accounts not listed in these sections may also be exempt from sequestration. For a complete list of exempted accounts, see CRS Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules.
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Medicare and Budget Sequestration

percentage reduction varies between and within budget accounts depending on the categories of percentage reduction varies between and within budget accounts depending on the categories of
funding, as described below, contained within each budget account. funding, as described below, contained within each budget account.
After identifying each category of funding within a budget account, sequestration reductions are After identifying each category of funding within a budget account, sequestration reductions are
applied evenly across all budget account subcomponents referenced in committee reports, budget applied evenly across all budget account subcomponents referenced in committee reports, budget
justifications, and/or Presidential Detailed Budget Estimatesjustifications, and/or Presidential Detailed Budget Estimates – —also known as programs, projects also known as programs, projects
or activities.or activities.65 For budget accounts that contain only one category of funding, all sequestrable For budget accounts that contain only one category of funding, all sequestrable
funds are reduced by the same corresponding percentage. For accounts that contain multiple funds are reduced by the same corresponding percentage. For accounts that contain multiple
categories of funding, the total amount of each category of sequestrable funds is reduced by its categories of funding, the total amount of each category of sequestrable funds is reduced by its
corresponding percentage. The reduced budget resources usually are permanently cancelled.corresponding percentage. The reduced budget resources usually are permanently cancelled.76
A sequester can apply to either discretionary or mandatory spending. Discretionary spending is A sequester can apply to either discretionary or mandatory spending. Discretionary spending is
associated with most funds provided by annual appropriations acts. While all discretionary associated with most funds provided by annual appropriations acts. While all discretionary
spending is subject to the annual appropriations process, only a portion of mandatory spending is spending is subject to the annual appropriations process, only a portion of mandatory spending is
provided in appropriations acts.provided in appropriations acts.87 Mandatory spending is generally provided by permanent laws, Mandatory spending is generally provided by permanent laws,
such as the Social Security Act, which made indefinite budget authority permanently available for such as the Social Security Act, which made indefinite budget authority permanently available for
Medicare benefit payments.Medicare benefit payments.98 Some federal programs, including Medicare, can receive both Some federal programs, including Medicare, can receive both
discretionary and mandatory funding. discretionary and mandatory funding.
In the event that a sequester is triggered, the Office of Management and Budget (OMB) is In the event that a sequester is triggered, the Office of Management and Budget (OMB) is
responsible for calculating the across-the-board percentage reductionsresponsible for calculating the across-the-board percentage reductions, and calculates separate and calculates separate
percentages for Medicare, percentages for Medicare, certain other health programs, and other nondefenseother nondefense, and defense funding. and defense funding.109 Due to sequestration rules, Due to sequestration rules,
which are covered later in this report, mandatory Medicare benefit payments receive a specific which are covered later in this report, mandatory Medicare benefit payments receive a specific
percentage reduction different from other types of federal spending.percentage reduction different from other types of federal spending.10 The methodologies used to calculate these percentages and the sequestered amounts are published in a report produced by OMB. Once the President issues a sequestration order, the associated report is made available to the public and transmitted to Congress.11 5

~~BBEDCA §255 and §256, as amended. Since OMB is responsible for the execution and legal interpretations of~~
~~sequestration orders, some accounts not listed in these sections may also be exempt from sequestration. For a complete~~
~~list of exempted accounts, see CRS Report R42050,~~ ~~Budget “Sequestration” and Selected Program Exemptions and~~
~~Special Rules~~.
6 See CRS Report R42972, See CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions, and CRS , and CRS
Report 98-721, Report 98-721, Introduction to the Federal Budget Process. .
76 “In some circumstances current law allows for budget authority sequestered in one fiscal year to become available to “In some circumstances current law allows for budget authority sequestered in one fiscal year to become available to
the agencies again in a subsequent fiscal year. OMB refers to these amounts as ‘pop ups.’” See U.S. Government the agencies again in a subsequent fiscal year. OMB refers to these amounts as ‘pop ups.’” See U.S. Government
Accountability Office (GAO), Accountability Office (GAO), 2014 Sequestration Opportunities Exist to Improve Transparency of Progress Toward
Deficit Reduction Goals, GAO-16-263, April 2016, p. 20, at https://www.gao.gov/assets/680/676565.pdf. , GAO-16-263, April 2016, p. 20, at https://www.gao.gov/assets/680/676565.pdf.
87 Some mandatory entitlements are provided through the annual appropriations process and are considered Some mandatory entitlements are provided through the annual appropriations process and are considered
appropriated entitlements (e.g., Medicaid). Although these entitlements are appropriated, the federal government is (e.g., Medicaid). Although these entitlements are appropriated, the federal government is
legally obligated to make payments to those deemed eligible for the entitlement. (Medicaid is explicitly exempt from legally obligated to make payments to those deemed eligible for the entitlement. (Medicaid is explicitly exempt from
sequestration.) sequestration.)
98 Indefinite budget authority is federal spending that, at the time of enactment, is for an unspecified amount that will be Indefinite budget authority is federal spending that, at the time of enactment, is for an unspecified amount that will be
determined at a later date. See GAO, determined at a later date. See GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP, , GAO-05-734SP,
September 1, 2005, p. 23, at https://www.gao.gov/assets/80/76911.pdf. September 1, 2005, p. 23, at https://www.gao.gov/assets/80/76911.pdf.
109 All funds are first classified as discretionary or mandatory. Within each of these categories, funds are further All funds are first classified as discretionary or mandatory. Within each of these categories, funds are further
classified as Medicare, classified as Medicare, certain other health programs, defense, or nondefense. During a sequestration order, each subcomponent of discretionary defense, or nondefense. During a sequestration order, each subcomponent of discretionary
and/or mandatory funds receives a sequestration percentage based on the necessary amount of savings for that categoryand/or mandatory funds receives a sequestration percentage based on the necessary amount of savings for that category.
, and any applicable special rules. Each of these categories receives a different percentage reduction under a sequestration order. 10 For sequestration purposes, Medicare benefit payments are defined by BBEDCA as all payments for programs and For sequestration purposes, Medicare benefit payments are defined by BBEDCA as all payments for programs and
activities under Title XVIII of the Social Security Act. See BBEDCA §256(d). activities under Title XVIII of the Social Security Act. See BBEDCA §256(d). ~~Defense and nondefense are referred to~~
~~in BBEDCA as either “revised security” or “revised nonsecurity,” respectively. “Revised security” is any funding~~
~~coded with a budget function of 050, which is effectively the Department of Defense. “Revised nonsecurity” includes~~
~~all other government spending. Each of these categories receives a different percentage reduction under a sequestration~~
~~order~~ 11 For more information about the methodologies associated with calculating the sequester percentage in a given year, see OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2022, May 28, 2021, at https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf. .
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link to page link to page 89 Medicare and Budget Sequestration Budget Enforcement Rules At present, there are ~~Medicare and Budget Sequestration~~

~~The methodologies used to calculate these percentages and the sequestered amounts are published~~
~~in a report produced by OMB. Once the President issues a sequestration order, the associated~~
~~report is made available to the public and transmitted to Congress.11~~
~~Budget Enforcement Rules~~
~~In recent years, there have been~~ three budget enforcement rules that could trigger sequestration. three budget enforcement rules that could trigger sequestration.
~~Two were~~ One was established by the BCA, established by the BCA, ~~and~~ one was established by Statutory PAYGOone was established by Statutory PAYGO~~. Two of them~~
~~are currently in effect, while one of the BCA rules expired at the end of FY2021~~, and one was established by the FRA. The three rules . The three rules
and their corresponding sequesters can be summarized as follows (and are presented inand their corresponding sequesters can be summarized as follows (and are presented in Table 1): :
Budget Control Act
The BCA established a bipartisan Joint Select Committee on Deficit Reduction (Joint The BCA established a bipartisan Joint Select Committee on Deficit Reduction (Joint
Committee), which was responsible for developing legislation that would reduce the deficit by at Committee), which was responsible for developing legislation that would reduce the deficit by at
least $1.2 trillion from FY2012 to FY2021.12 However, the Joint Committee was unable to least $1.2 trillion from FY2012 to FY2021.12 However, the Joint Committee was unable to
achieve this goal; therefore, Congress and the President were unable to enact corresponding achieve this goal; therefore, Congress and the President were unable to enact corresponding
deficit reduction legislation by a date specified in the law. As a result, deficit reduction legislation by a date specified in the law. As a result, ~~two types of spending~~
~~reductions were triggered automatically.13~~
~~BCA Mandatory Sequester~~
~~One automatic spending reduction involved~~ the sequestration of certain the sequestration of certain mandatory spending spending
initially from FY2013 to FY2021initially from FY2013 to FY2021. was automatically triggered.13 (This report refers to these spending reductions as the (This report refers to these spending reductions as the BCA
mandatory sequester.).) Subsequent legislation extended this sequestration through FY2031Subsequent legislation extended this sequestration through FY2031.
for non-Medicare benefit payment spending and through FY2032 for Medicare benefit payments. Legislation that extended the BCA mandatory sequester includes the following: Legislation that extended the BCA mandatory sequester includes the following:
• The Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67) extended the BCA The Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67) extended the BCA
mandatory sequester through FY2023; mandatory sequester through FY2023;
• A law modifying the cost-of-living adjustment (COLA) for certain military A law modifying the cost-of-living adjustment (COLA) for certain military
retirees (P.L. 113-82) extended it through FY2024; retirees (P.L. 113-82) extended it through FY2024;
• The Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74) extended it through The Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74) extended it through
FY2025; FY2025;
• The Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123) extended it The Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123) extended it
through FY2027; through FY2027;
• The Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37) extended it through The Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37) extended it through
FY2029; FY2029;
• The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116- The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-
136) extended it through FY2030; 136) extended it through FY2030; ~~and~~
• The Infrastructure Investment and Jobs Act (P.L. 117-58) extended it through The Infrastructure Investment and Jobs Act (P.L. 117-58) extended it through
FY2031 FY2031.

~~11 For more information about the methodologies associated with calculating the sequester percentage in a given year,~~
~~see OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2022, May 28, 2021, at~~
~~https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf.~~
~~12 See Title IV of the BCA.~~
~~13 See CRS Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules.~~
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; and • The Consolidated Appropriations Act, 2023 (P.L. 117-328) extended it through FY2032, but only with respect to Medicare benefit payments.
Additional legislation suspended the application of the BCA mandatory sequester to Medicare Additional legislation suspended the application of the BCA mandatory sequester to Medicare
during the Coronavirus Disease 2019 (COVID-19) pandemic from May 2020 through March during the Coronavirus Disease 2019 (COVID-19) pandemic from May 2020 through March
2022 and limited the reductions to 1% from April 2022 through June 2022. (See “Temporary 2022 and limited the reductions to 1% from April 2022 through June 2022. (See “Temporary
Suspension of Medicare Sequestration.”) Suspension of Medicare Sequestration.”)
~~BCA Discretionary Sequester~~
12 See Title IV of the BCA. 13 Additionally, the BCA established statutory limits on Additionally, the BCA established statutory limits on discretionary spending for FY2012- spending for FY2012-
~~FY2021.14 These discretionary spending limits (discretionary caps) restricted the amount of~~
~~spending permitted through the annual appropriations process for defense and nondefense~~
~~programs. Any breach of these discretionary caps would have resulted in the sequestration of~~
~~nonexempt discretionary funding. (This reduction is referred to in this report as the~~ ~~BCA~~
~~discretionary sequester~~.)
~~No sequester was triggered as a result of a breach of the statutory discretionary caps over the~~
~~FY2012-FY2021 period.15 Notably, the statutory caps for each of FY2014-FY2021 were revised~~
~~upward to accommodate agreed-upon discretionary spending levels prior to the enactment of the~~
~~applicable appropriations acts for each of those fiscal years.16 The BCA discretionary spending~~
~~limits expired at the end of FY2021, so there are no BCA discretionary spending caps in effect for~~
~~FY2022 and beyond.~~
FY2021. For more information about the discretionary spending limits established under the BCA, see CRS Report R42506, The Budget Control Act of 2011 as Amended: Budgetary Effects. Congressional Research Service 3 Medicare and Budget Sequestration Statutory PAYGO
The Statutory PAYGO Act established a budget enforcement mechanism generally requiring that The Statutory PAYGO Act established a budget enforcement mechanism generally requiring that
legislation affecting direct (mandatory) spending and revenues does not have the effect of legislation affecting direct (mandatory) spending and revenues does not have the effect of
increasing the deficit over a 5- and/or 10-year period. If such legislation were to become law, a increasing the deficit over a 5- and/or 10-year period. If such legislation were to become law, a
sequester of certain sequester of certain mandatory spending would be required. This budget enforcement rule does spending would be required. This budget enforcement rule does
not have a sunset date and therefore remains in effect under current law. (This reduction is not have a sunset date and therefore remains in effect under current law. (This reduction is
referred to in this report as referred to in this report as Statutory PAYGO sequester.) .)
Although legislation estimated to increase the deficit has been enacted since 2010 (when the Although legislation estimated to increase the deficit has been enacted since 2010 (when the
Statutory PAYGO Act was enacted), a Statutory PAYGO sequester has never been triggered. To Statutory PAYGO Act was enacted), a Statutory PAYGO sequester has never been triggered. To
avoid any potential sequester, such legislation has often included a provision effectively avoid any potential sequester, such legislation has often included a provision effectively
exempting it from the PAYGO requirements.exempting it from the PAYGO requirements.1714
A recent exception to this practice, however, was the American Rescue Plan Act of 2021 (ARPA; A recent exception to this practice, however, was the American Rescue Plan Act of 2021 (ARPA;
P.L. 117-2), which did not include any provision that excluded its budgetary effects from the P.L. 117-2), which did not include any provision that excluded its budgetary effects from the
Statutory PAYGO requirements. Therefore, its estimated deficit increases of over $1.9 trillion and Statutory PAYGO requirements. Therefore, its estimated deficit increases of over $1.9 trillion and

~~14 For more information about the discretionary spending limits established under the BCA, see CRS Report R42506,~~
The Budget Control Act of 2011 as Amended: Budgetary Effects.
~~15 Apart from the statutory discretionary spending caps, the BCA required a sequester of discretionary spending in~~
~~FY2013 as a result of the Joint Committee not being able to report legislation reducing the deficit, as described above.~~
~~For further information, see CRS Report RL34424, The Budget Control Act and Trends in Discretionary Spending,~~
~~under the heading, “FY2013 Sequestration Triggered.”~~
~~16 The following legislation revised the statutory discretionary spending caps upward: (1) the BBA 2013 revised the~~
~~caps for FY2014 and FY2015; (2) the BBA 2015 revised the caps for FY2016 and FY2017; (3) the BBA 2018 revised~~
~~the caps for FY2018 and FY2019; and (4) the BBA 2019 revised the caps for FY2020 and FY2021. For additional~~
~~information on these revisions, see CRS Report R46752,~~ ~~Expiration of the Discretionary Spending Limits: Frequently~~
~~Asked Questions~~.
17over $2.0 trillion were placed on the 5-year and 10-year PAYGO scorecards, respectively.15 To avoid a sequester, however, the balances on the scorecards for FY2022 were transferred to FY2023 by the Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71). The Consolidated Appropriations Act, 2023 (P.L. 117-328), subsequently transferred the balances on the scorecards for FY2023-FY2025 and will transfer the balances on the scorecards for FY2024-FY2025 after the first session of the 118th Congress adjourns. A PAYGO sequester, including the 4% reduction to Medicare benefit payments, could be triggered in early 2026 unless similar legislative action is taken before then. If a PAYGO sequester were to be triggered in 2026 or another future fiscal year, neither the Statutory PAYGO Act nor the Budget Control Act include any explicit directions as to how the two sequesters would be implemented alongside each other. Fiscal Responsibility Act The FRA established statutory limits on discretionary spending for FY2024-FY2025.16 These discretionary spending limits (caps) restrict the amount of spending permitted through the annual appropriations process for defense and nondefense programs. Any breach of these discretionary caps would result in the sequestration of nonexempt discretionary funding within the applicable category (defense and/or nondefense). (This reduction is referred to in this report as the FRA sequester.) 14 For more information, see CRS Congressional Distribution Memorandum, “Budgetary Effects Excluded or For more information, see CRS Congressional Distribution Memorandum, “Budgetary Effects Excluded or
Eliminated from the Statutory Pay-As-You-Go (Stat-PAYGO) Scorecards,” Eliminated from the Statutory Pay-As-You-Go (Stat-PAYGO) Scorecards,” ~~February 16, 2022~~May 9, 2023, by Bill Heniff Jr. , by Bill Heniff Jr.
Available Available from the author upon request. 15 OMB, 2021 Statutory Pay-As-You-Go Act Annual Report, p. 10, at https://www.whitehouse.gov/wp-content/uploads/2022/01/annualpaygoreport2021.pdf. 16 For more information on these discretionary spending caps, see CRS Insight IN12168, Discretionary Spending Caps in the Fiscal Responsibility Act of 2023, and CRS Insight IN12183, The FRA’s Discretionary Spending Caps Under a CR: FAQs. Congressional Research Service 4 link to page 9 link to page 9 link to page 9 link to page 14 Medicare and Budget Sequestration Table 1. Medicare Budget Enforcement Rules Summary Sequester Medicare Percentage Funding Types Programs ~~from the author upon request.~~
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~~link to page 9 link to page 9 link to page 9~~ ~~Medicare and Budget Sequestration~~

~~over $2.0 trillion were placed on the 5-year and 10-year PAYGO scorecards, respectively.18 To~~
~~avoid a sequester in early 2022, however, the balances on the scorecards for FY2022 were~~
~~transferred to FY2023 by the Protecting Medicare and American Farmers from Sequester Cuts~~
~~Act (P.L. 117-71). A PAYGO sequester, including the 4% reduction to Medicare, could be~~
~~triggered in early 2023 unless similar legislative action is taken before then.~~
~~If a PAYGO sequester were to be triggered in 2023 or another future fiscal year, neither the~~
~~Statutory PAYGO Act nor the Budget Control Act include any explicit directions as to how the~~
~~two sequesters would be implemented alongside each other.~~
~~Table 1. Medicare Budget Enforcement Rules Summary~~
~~Sequester~~
~~Funding~~
~~Medicare~~
~~Percentage~~
~~Types~~
~~Programs~~
~~Sequester~~
~~Enforcement Rule~~
~~Cap~~
~~Current Status~~
Enforcement Rule Cap Current Status Statutory PAYGO Mandatory Mandatory
Parts A, B, C, Parts A, B, C,
~~Statutory~~
If revenue and/or If revenue and/or
mandatory 4% for 4% for ~~benefit~~Medicare
Current law but Current law but
not and D Benefits; and D Benefits; ~~PAYGO~~
~~mandatory spending~~
~~payments and~~
~~not~~ spending legislation that benefit payments triggered. triggered.
MIP HCFAC; MIP HCFAC;
~~legislation that projects to~~
projects to increase the and MIP HCFAC. MIP HCFAC.
Non-MIP Non-MIP
~~increase the~~ deficit over a deficit over a
5- and/or 10- None for other None for other
HCFAC; HCFAC;
~~5 and/or 10-year period is~~year period were enacted, a
spending. spending.
Administration Administration
~~enacted, a~~ sequester of sequester of
certain mandatory certain mandatory
spending would be spending would be
ordered. ordered.

~~BCA~~ BCA Mandatory Sequester Mandatory Parts A, B, C,
If the Joint Select If the Joint Select
~~2% for benefit~~Committee 2% for Medicare
Currently triggered Currently triggered
~~Mandatory~~
~~Committee was~~
~~payments and~~
~~and in effect~~
~~Sequester~~
~~unsuccessful at reducing~~
~~MIP HCFAC.~~
~~through FY2031~~
~~the federal deficit by $1.2~~
~~None for other~~
~~(temporarily~~
~~tril ion from FY2012-~~
~~spending.a~~
~~suspended during~~
~~FY2021, mandatory~~
~~the period of May~~
~~sequestration would be~~
~~2020-March 2022~~
~~implemented and~~
~~and limited to 1%~~
~~discretionary limits would~~
~~from April 2022 to~~
~~be established (with any~~
~~June 2022).b~~
~~breaches enforced through~~
~~Discretionary~~
~~Non-MIP~~
~~BCA~~
~~sequestration).~~
~~None.~~
~~Expired at the end~~
~~HCFAC;~~
~~Discretionary~~
~~of FY2021.c~~
~~Administration~~
~~Sequester~~and D Benefits; were to be unsuccessful at benefit payments and in effect through MIP HCFAC; reducing the federal deficit and MIP HCFAC. FY2031, or with Non-MIP by $1.2 tril ion from FY2012- None for other respect to Medicare HCFAC; FY2021, mandatory spending.a benefit payments and Administration sequestration would be MIP HCFAC, implemented.a through FY2032.b FRA Sequester Discretionary Non-MIP If discretionary None. Current law but not HCFAC; appropriations were enacted triggered. Administration that exceed specified limits, a sequester would be triggered.
Source: CRS.CRS.
Notes: Programs that appear in both categories are funded using mandatory and discretionary spending Programs that appear in both categories are funded using mandatory and discretionary spending
authority. In addition to the Medicare sequestration cap, other sequestration rules prohibit sequestration effects authority. In addition to the Medicare sequestration cap, other sequestration rules prohibit sequestration effects
from being included in the determination of adjustments to Medicare payment rates, and explicitly exempt Part from being included in the determination of adjustments to Medicare payment rates, and explicitly exempt Part
D low-income subsidies, Part D catastrophic subsidies (reinsurance) and Qualified Individual premiums from D low-income subsidies, Part D catastrophic subsidies (reinsurance) and Qualified Individual premiums from
sequestration. sequestration. BCA refers to Budget Control Act. refers to Budget Control Act. FRA refers to the Fiscal Responsibility Act. Discretionary Administration includes amounts for includes amounts for
payments to contractors to process providers’ claims, beneficiary outreach and education, and maintenance of payments to contractors to process providers’ claims, beneficiary outreach and education, and maintenance of
Medicare’s information technology infrastructure. Medicare’s information technology infrastructure. HCFAC refers to the Health Care Fraud and Abuse Control refers to the Health Care Fraud and Abuse Control
Program, which is responsible for activities that fight health care fraud and waste and is funded through Program, which is responsible for activities that fight health care fraud and waste and is funded through
discretionary and mandatory resources. discretionary and mandatory resources. Mandatory Administration includes, among other things, amounts includes, among other things, amounts
for quality improvement organizations. for quality improvement organizations. Medicare Benefit Payments are defined by BBEDCA as all payments are defined by BBEDCA as all payments
for programs and activities under Title XVIII of Social Security Act, including the Medicare Integrity Program. for programs and activities under Title XVIII of Social Security Act, including the Medicare Integrity Program.
MIP HCFAC refers to the Medicare Integrity Program, which focuses on combating fraud in Medicare. refers to the Medicare Integrity Program, which focuses on combating fraud in Medicare. Non-
~~MIP HCFAC~~ ~~refers to all HCFAC spending other than MIP.~~

~~18 OMB, 2021 Statutory Pay-As-You-Go Act Annual Report, p. 10, at https://www.whitehouse.gov/wp-content/uploads/~~
~~2022/01/annualpaygoreport2021.pdf.~~
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~~a. Per the Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71), the FY2030~~
~~Medicare sequester percentages wil be 2.25% during the first 6 months of the FY2030 sequestration order~~
~~and 3% for the next 6 months. Per the Infrastructure Investment and Jobs Act (P.L. 117-58), the~~ MIP HCFAC refers to all HCFAC spending other than MIP. a. Additionally, the BCA established statutory limits on discretionary spending for FY2012-FY2021. For more information about the discretionary spending limits established under the BCA, see CRS Report R42506, The Budget Control Act of 2011 as Amended: Budgetary Effects. Per the Consolidated Appropriations Act, 2023 (P.L. 117-328), the FY2032 Medicare Medicare
sequester percentagessequester percentages ~~in FY2031~~ wil be wil be 42% during the first % during the first 6six months of the months of the ~~FY2031~~FY2032 sequestration order sequestration order
and 0% for the next and 0% for the next 6six months. See 2 U.S.C. §901a(6). months. See 2 U.S.C. §901a(6).
For more information, see “Timing.” b. The Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67) extended the BCA mandatory sequester b. The Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67) extended the BCA mandatory sequester
through FY2023. A law modifying the cost-of-living adjustment (COLA) for certain military retirees (P.L. through FY2023. A law modifying the cost-of-living adjustment (COLA) for certain military retirees (P.L.
113-82) extended the sequester through FY2024. The Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-113-82) extended the sequester through FY2024. The Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-
74) extended the sequester through FY2025. The Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123) 74) extended the sequester through FY2025. The Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123)
extended the sequester through FY2027, the Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37) extended the sequester through FY2027, the Bipartisan Budget Act of 2019 (BBA 2019; P.L. 116-37)
extended the sequester through FY2029, the CARES Act (P.L. 116-136) extended it through FY2030, and extended the sequester through FY2029, the CARES Act (P.L. 116-136) extended it through FY2030, and
the Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71) extended it through the Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71) extended it through
~~FY2031~~ Congressional Research Service 5 Medicare and Budget Sequestration FY2031. The Consolidated Appropriations Act, 2023 (P.L. 117-328), extended it to FY2032 but only for Medicare benefit payments and MIP HCFAC. The CARES Act, as amended by the Consolidated Appropriations Act, 2021 (P.L. 116-260), an Act . The CARES Act, as amended by the Consolidated Appropriations Act, 2021 (P.L. 116-260), an Act
to Prevent Across-the-Board Direct Spending Cuts, and for to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes (P.L. 117-7), and the Protecting Other Purposes (P.L. 117-7), and the Protecting
Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71) also suspended the sequestration of Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71) also suspended the sequestration of
Medicare from May 2020 through March 2022. P.L. 117-7 also limited the Medicare reductions to 1% during Medicare from May 2020 through March 2022. P.L. 117-7 also limited the Medicare reductions to 1% during
~~April 2022 through June of 2022.~~
~~c. Several laws established new caps that were adhered to, thus not requiring any sequestration in the relevant~~
~~years. These include BBA 2013 for FY2014 and FY2015, BBA 2015 for FY2016 and FY2017, BBA 2018 for~~
~~FY2018 and FY2019, and BBA 2019 for FY2020 and FY2021. The discretionary spending limits under the~~
~~BCA expired at the end of FY2021. See CRS Report R46752,~~ ~~Expiration of the Discretionary Spending Limits:~~
~~Frequently Asked Questions~~.
April 2022 through June of 2022. For more information on budget sequestration, see CRS Report R42050, For more information on budget sequestration, see CRS Report R42050, Budget “Sequestration”
and Selected Program Exemptions and Special Rules,; CRS Report R42972, CRS Report R42972, Sequestration as a
Budget Enforcement Process: Frequently Asked Questions,; and CRS Report R45941, and CRS Report R45941, The Annual
Sequester of Mandatory Spending through FY2029. .
Medicare Overview
Medicare, which is a federal program that pays for Medicare, which is a federal program that pays for ~~certain~~covered health care services of qualified health care services of qualified
beneficiaries, is subject to sequestration, although special rules limit the extent to which it is beneficiaries, is subject to sequestration, although special rules limit the extent to which it is
~~impacted~~applied. Due to the varying payment structures of the four parts of the program, sequestration is . Due to the varying payment structures of the four parts of the program, sequestration is
applied differently across Medicare. applied differently across Medicare.
Medicare was established in 1965 under Title XVIII of the Social Security Act to provide hospital Medicare was established in 1965 under Title XVIII of the Social Security Act to provide hospital
and supplementary medical insurance to Americans aged 65 and older. Over time, the program and supplementary medical insurance to Americans aged 65 and older. Over time, the program
has been expanded to also include certain disabled persons, including those with end-stage renal has been expanded to also include certain disabled persons, including those with end-stage renal
disease. In disease. In ~~CY2021~~CY2022, the program covered an estimated , the program covered an estimated 6465.0 million persons ( million persons (5657.3 million aged and million aged and 8
7.7 million disabled).million disabled).1917
The Congressional Budget Office (CBO) estimated that total Medicare spending in The Congressional Budget Office (CBO) estimated that total Medicare spending in ~~FY2022~~FY2023 will will
be about $be about $~~912 billion~~1 trillion and will increase to about $1. and will increase to about $1.89 trillion in trillion in ~~FY2031.20~~FY2032.18 Almost all Medicare Almost all Medicare
spending is mandatory spending that is used primarily to cover benefit payments (i.e., payments spending is mandatory spending that is used primarily to cover benefit payments (i.e., payments
to health care providers for their services), administration, and the Medicare Integrity Program to health care providers for their services), administration, and the Medicare Integrity Program
(MIP). The remaining Medicare outlays are discretionary and used almost entirely for other (MIP). The remaining Medicare outlays are discretionary and used almost entirely for other
administrative activities that are described in more detail later in this report. administrative activities that are described in more detail later in this report.
Medicare consists of four distinct parts: Medicare consists of four distinct parts:

~~19 CMS, “Fast Facts,” March 2022, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-~~
~~and-Reports/CMS-Fast-Facts.~~
~~20 Congressional Budget Office (CBO), July 2021 Medicare Baseline, at https://www.cbo.gov/system/files/2021-07/~~
~~51302-2021-07-medicare.pdf.~~
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1. 1. Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled (Hospital Insurance, or HI) covers inpatient hospital services, skilled
nursing care, hospice care, and some home health services. nursing care, hospice care, and some home health services. ~~Most persons~~Persons aged 65 aged 65
and older are and older are ~~automatically~~ entitled to premium-free Part A entitled to premium-free Part A ~~because~~if they or their they or their
spouse paid Medicare payroll taxes for at least 40 quarters (about 10 years) on spouse paid Medicare payroll taxes for at least 40 quarters (about 10 years) on
earnings covered by either the Social Security or the Railroad Retirement earnings covered by either the Social Security or the Railroad Retirement
systems.systems.19 Part A services are paid for out of the Hospital Insurance Trust Fund, Part A services are paid for out of the Hospital Insurance Trust Fund,
which is mainly funded by a dedicated 2.9% payroll tax on earnings of current which is mainly funded by a dedicated 2.9% payroll tax on earnings of current
workers, shared equally between employers and workers. workers, shared equally between employers and workers.
2. 2. Part B (Supplementary Medical Insurance, or SMI) covers a broad range of (Supplementary Medical Insurance, or SMI) covers a broad range of
medical services, including physician services, laboratory services, durable medical services, including physician services, laboratory services, durable
medical equipment, and outpatient hospital services. Enrollment in Part B is medical equipment, and outpatient hospital services. Enrollment in Part B is
optional, but most beneficiaries with Part A also enroll in Part B. Part B benefits optional, but most beneficiaries with Part A also enroll in Part B. Part B benefits
are paid for out of the Supplementary Medical Insurance Trust Fund, which is are paid for out of the Supplementary Medical Insurance Trust Fund, which is
17 CMS, “Fast Facts,” March 2023, at https://data.cms.gov/sites/default/files/2023-03/CMSFastFactsMar2023.pdf. 18 Congressional Budget Office (CBO), May 2022 Medicare Baseline, at https://www.cbo.gov/system/files/2022-05/51302-2022-05-medicare.pdf. 19 Individuals who do not meet this requirement may obtain Medicare Part A coverage by paying a premium. Congressional Research Service 6 Medicare and Budget Sequestration primarily funded through Part B ~~primarily funded through~~ beneficiary premiums and federal general revenues. beneficiary premiums and federal general revenues.
3. 3. Part C (Medicare Advantage, or MA) is a private plan option that covers all (Medicare Advantage, or MA) is a private plan option that covers all
Parts A and B services, except hospice. Individuals choosing to enroll in Part C Parts A and B services, except hospice. Individuals choosing to enroll in Part C
must be enrolled in Parts A and B. About one-third of Medicare beneficiaries are must be enrolled in Parts A and B. About one-third of Medicare beneficiaries are
enrolled in MA. Part C is funded through both the HI and SMI trust funds. enrolled in MA. Part C is funded through both the HI and SMI trust funds.
4. 4. Part D is a is a voluntary private plan option that covers outpatient prescription drug private plan option that covers outpatient prescription drug ~~benefits.~~
~~This portion of the program is optional~~ benefits. About three-quarters of Medicare . About three-quarters of Medicare
beneficiaries are enrolled in Medicare Part D or have coverage through an beneficiaries are enrolled in Medicare Part D or have coverage through an
employer retiree plan subsidized by Medicare. Part D benefits are also paid for employer retiree plan subsidized by Medicare. Part D benefits are also paid for
out of the Supplementary Medical Insurance Trust Fund and are primarily funded out of the Supplementary Medical Insurance Trust Fund and are primarily funded
through through Part D beneficiary premiums, federal general revenues, and state transfer beneficiary premiums, federal general revenues, and state transfer
payments. payments.
For more information on the Medicare program, see CRS Report R40425, For more information on the Medicare program, see CRS Report R40425, Medicare Primer. .
Beneficiary Costs
Beneficiaries are responsible for paying Medicare Parts B and D premiums, as well as other out-Beneficiaries are responsible for paying Medicare Parts B and D premiums, as well as other out-
of-pocket costs, such as deductibles and coinsurance,of-pocket costs, such as deductibles and coinsurance,2120 for services provided under all parts of the for services provided under all parts of the
Medicare program.Medicare program.2221 Under Medicare Parts A, B and D, there is no limit on beneficiary out-of- Under Medicare Parts A, B and D, there is no limit on beneficiary out-of-
pocket spending, and most beneficiaries have some form of supplemental insurance through pocket spending, and most beneficiaries have some form of supplemental insurance through
private Medigap plans, employer-sponsored retiree plans, or Medicaid to help cover a portion of private Medigap plans, employer-sponsored retiree plans, or Medicaid to help cover a portion of
their Medicare premiums and/or deductibles and coinsurance.their Medicare premiums and/or deductibles and coinsurance.22 Medicare Advantage has limits on Medicare Advantage has limits on
beneficiary out-of-pocket spending. out-of-pocket spending.
Provider and Plan Payments
Under Medicare Parts A and B, the government generally pays providers directly for services on a Under Medicare Parts A and B, the government generally pays providers directly for services on a
fee-for-service basis using different prospective payment systems and fee schedules.23 Under basis using different prospective payment systems and fee schedules.23 Under

21Parts C and D, Medicare pays private insurers a monthly capitated per person amount to provide coverage to enrollees, regardless of the amount of services used. The capitated payments are adjusted to reflect differences in the relative cost of sicker beneficiaries with different risk factors including age, disability, or end-stage renal disease. Health Care Fraud and Abuse Control Program The Health Care Fraud and Abuse Control Program (HCFAC) was established by the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191) and is responsible for 20 A deductible is the amount an enrollee is required to pay for health care services or products before his or her A deductible is the amount an enrollee is required to pay for health care services or products before his or her
insurance plan begins to provide coverage. Coinsurance is the percentage share that an enrollee in a health insurance insurance plan begins to provide coverage. Coinsurance is the percentage share that an enrollee in a health insurance
plan pays for a product or service covered by the plan. plan pays for a product or service covered by the plan.
2221 Beneficiaries enrolled in a Medicare Advantage (MA, Part C) plan must pay Part B premiums as well as any Beneficiaries enrolled in a Medicare Advantage (MA, Part C) plan must pay Part B premiums as well as any
additional premium required by the MA plan. additional premium required by the MA plan.
22 For more information on Medigap, see CRS Report R47552, Medigap: Background and Statistics. 23 Under a 23 Under a prospective payment system (PPS), Medicare payments are made using a predetermined, fixed amount based (PPS), Medicare payments are made using a predetermined, fixed amount based
on the classification system for a particular service. The Centers for Medicare & Medicaid Services (CMS) uses on the classification system for a particular service. The Centers for Medicare & Medicaid Services (CMS) uses
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~~Medicare and Budget Sequestration~~

~~Parts C and D, Medicare pays private insurers a monthly capitated per person amount to provide~~
~~coverage to enrollees, regardless of the amount of services used. The capitated payments are~~
~~adjusted to reflect differences in the relative cost of sicker beneficiaries with different risk factors~~
~~including age, disability, or end-stage renal disease.~~
~~Health Care Fraud and Abuse Control Program~~
~~The Health Care Fraud and Abuse Control Program (HCFAC) was established by the Health~~
~~Insurance Portability and Accountability Act (HIPAA; P.L. 104-191) and is responsible for~~
separate PPSs to pay acute inpatient hospitals, home health agencies, hospice, hospital outpatient departments, inpatient psychiatric facilities, inpatient rehabilitation facilities, long-term care hospitals, and skilled nursing facilities. A fee schedule is a listing of fees used by Medicare to pay doctors or other providers/suppliers. Fee schedules are used to pay for physician services; ambulance services; clinical laboratory services; and durable medical equipment, prosthetics, orthotics, and supplies in certain locations. Congressional Research Service 7 link to page 9 link to page 14 Medicare and Budget Sequestration activities that fight health care fraud and waste.24 HCFAC is funded using both mandatory and activities that fight health care fraud and waste.24 HCFAC is funded using both mandatory and
discretionary funds and consists of three programs: (1) the HCFAC program, which finances the discretionary funds and consists of three programs: (1) the HCFAC program, which finances the
investigative and enforcement activities undertaken by the Department of Health and Human investigative and enforcement activities undertaken by the Department of Health and Human
Services (HHS), the HHS Office of Office of Inspector General, the Department of Justice, and Services (HHS), the HHS Office of Office of Inspector General, the Department of Justice, and
the Federal Bureau of Investigation, (2) Medicaid Oversight, and (3) Medicare Integrity Program the Federal Bureau of Investigation, (2) Medicaid Oversight, and (3) Medicare Integrity Program
(MIP). (MIP).
Historically, MIP has focused on combating fee-for-service fraud in Medicare Parts A and B. Historically, MIP has focused on combating fee-for-service fraud in Medicare Parts A and B.
However, increases in private Medicare enrollment—Parts C and D—have expanded program However, increases in private Medicare enrollment—Parts C and D—have expanded program
integrity efforts into capitated payment systems as well. integrity efforts into capitated payment systems as well.
While HCFAC is not a part of the Medicare program, MIP is authorized by the same title of the While HCFAC is not a part of the Medicare program, MIP is authorized by the same title of the
Social Security Act as Medicare and focuses entirely on the program. As a result, this portion of Social Security Act as Medicare and focuses entirely on the program. As a result, this portion of
HCFAC is treated as a part of Medicare benefit payments under a sequestration order and is HCFAC is treated as a part of Medicare benefit payments under a sequestration order and is
subject to the Medicare mandatory sequestration percentage limits.25 subject to the Medicare mandatory sequestration percentage limits.25
Administrative Spending
The administration of Medicare is funded through a combination of discretionary and mandatory The administration of Medicare is funded through a combination of discretionary and mandatory
resources that are subject to reductions under a discretionary or mandatory sequestration order, resources that are subject to reductions under a discretionary or mandatory sequestration order,
respectively. Discretionary administration funding includes amounts for payments to contractors respectively. Discretionary administration funding includes amounts for payments to contractors
to process providers’ claims, beneficiary outreach and education, and maintenance of Medicare’s to process providers’ claims, beneficiary outreach and education, and maintenance of Medicare’s
information technology infrastructure. Mandatory administration funding includes amounts for information technology infrastructure. Mandatory administration funding includes amounts for
quality improvement organizations and Part B premium payments for Qualifying Individuals quality improvement organizations and Part B premium payments for Qualifying Individuals
(QI).26 (QI).26

~~separate PPSs to reimburse acute inpatient hospitals, home health agencies, hospice, hospital outpatient departments,~~
~~inpatient psychiatric facilities, inpatient rehabilitation facilities, long-term care hospitals, and skilled nursing facilities.~~
~~A fee schedule is a listing of fees used by Medicare to pay doctors or other providers/suppliers. Fee schedules are used~~
~~to pay for physician services; ambulance services; clinical laboratory services; and durable medical equipment,~~
~~prosthetics, orthotics, and supplies in certain locations.~~
Medicare Sequestration Rules Special rules limit the total effect of budget sequestration on Medicare (see Table 1). Most notably, BBEDCA, as amended by the BCA, prohibits Medicare benefit payments from being reduced by more than 2% under a BCA mandatory sequestration order. Similarly, Statutory PAYGO prohibits Medicare benefit payments from being reduced by more than 4% under a Statutory PAYGO sequestration order.27 The caps do not apply to Medicare mandatory and discretionary administrative spending, which is subject to the unrestricted percentage reduction under both BCA and Statutory PAYGO sequestration orders. Under the current mandatory sequestration process triggered by the BCA, the Medicare sequestration percentage is capped at 2%.28 Therefore, regardless of the percentage reduction 24 For additional information, see U.S. Department of Health and Human Services, Office of Inspector General, 24 For additional information, see U.S. Department of Health and Human Services, Office of Inspector General, Health
Care Fraud and Abuse Control Program Report,, at https://oig.hhs.gov/reports-and-publications/hcfac/index.asp. at https://oig.hhs.gov/reports-and-publications/hcfac/index.asp.
25 For sequestration purposes, BBEDCA defines Medicare benefit payments as all payments for programs and activities 25 For sequestration purposes, BBEDCA defines Medicare benefit payments as all payments for programs and activities
under Title XVIII of Social Security Act. This includes the Medicare Integrity Program (MIP). See BBEDCA §256(d). under Title XVIII of Social Security Act. This includes the Medicare Integrity Program (MIP). See BBEDCA §256(d).
26 The Qualifying Individuals (QI) program is a state program that helps pay Part B premiums for people who have Part 26 The Qualifying Individuals (QI) program is a state program that helps pay Part B premiums for people who have Part
A and limited income and resources. See CMS, “Medicare Savings Programs,”A and limited income and resources. See CMS, “Medicare Savings Programs,” at https://www.medicare.gov/at https://www.medicare.gov/~~your-~~
~~medicare-costs/help-paying-costs/medicare-savings-program/~~medicare-savings-programsmedicare-savings-programs~~.html.~~
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~~link to page 8 link to page 6 link to page 20~~ ~~Medicare and Budget Sequestration~~

~~Medicare Sequestration Rules~~
~~Special rules limit the total effect of budget sequestration on Medicare (see Table 1). Most~~
~~notably, BBEDCA, as amended by the BCA, prohibits Medicare benefit payments from being~~
~~reduced by more than 2% under a BCA mandatory sequestration order. Similarly, Statutory~~
~~PAYGO prohibits Medicare benefit payments from being reduced by more than 4% under a~~
~~Statutory PAYGO sequestration order.27 The caps do not apply to Medicare mandatory and~~
~~discretionary administrative spending, which is subject to the unrestricted percentage reduction~~
~~under both BCA and Statutory PAYGO sequestration orders.~~
~~Under the current mandatory sequestration process triggered by the BCA, the Medicare~~
~~sequestration percentage is capped at 2%.28 Therefore, regardless of the percentage reduction~~
~~applied to other mandatory spending through FY2031~~. 27 Medicare benefit payments are considered mandatory budgetary resources and would not be subject to a FRA sequestration order. 28 See 2 U.S.C. §901a(6). P.L. 117-71. Per the P.L. 117-58 Consolidated Appropriations Act, 2023 [P.L. 117-328], the Medicare sequester percentage in FY2032 will be 2% during the first six months of the FY2032 sequestration order (April 2032 through September 2032) and 0% for the next six months (October 2032 through March 2033). See 2 U.S.C. §901a(6). For more information, see “Timing.” Congressional Research Service 8 link to page 7 link to page 20 link to page 15 link to page 15 Medicare and Budget Sequestration applied to other mandatory spending, Medicare benefit payments cannot be , Medicare benefit payments cannot be
reduced by more than 2%. reduced by more than 2%.
For the FY2013-FY2021 sequestration orders, the reduction percentages were determined under For the FY2013-FY2021 sequestration orders, the reduction percentages were determined under
the following method. If OMB were to determine that total nonexempt, nondefense mandatory the following method. If OMB were to determine that total nonexempt, nondefense mandatory
funds needed to be reduced by a percentage larger than 2% in order to achieve necessary savings funds needed to be reduced by a percentage larger than 2% in order to achieve necessary savings
under a BCA sequestration order for a given year, then a 2% reduction would be made to under a BCA sequestration order for a given year, then a 2% reduction would be made to
Medicare benefit spending, and a uniform reduction percentage for the remaining non-Medicare Medicare benefit spending, and a uniform reduction percentage for the remaining non-Medicare
benefit, nonexempt, nondefense mandatory programs would be recalculated and increased by an benefit, nonexempt, nondefense mandatory programs would be recalculated and increased by an
amount to achieve the necessary level of reductions.29 If the uniform percentage reduction needed amount to achieve the necessary level of reductions.29 If the uniform percentage reduction needed
to achieve the total amount of savings were less than 2%, then the determined percentage would to achieve the total amount of savings were less than 2%, then the determined percentage would
be applied to Medicare as well as to all other nonexempt non-Medicare nondefense mandatory be applied to Medicare as well as to all other nonexempt non-Medicare nondefense mandatory
spending. spending.
If a mandatory sequestration order were If a mandatory sequestration order were to be triggered by Statutory PAYGO, the process would be the triggered by Statutory PAYGO, the process would be the
same as above, but the reduction of payments for Medicare benefits would be capped at 4%.30 same as above, but the reduction of payments for Medicare benefits would be capped at 4%.30
Beyond FY2021, there is no statutory requirement that the BCA mandatory sequester achieve a Beyond FY2021, there is no statutory requirement that the BCA mandatory sequester achieve a
certain level of budgetary savings in defense and nondefense spending and, consequently, no certain level of budgetary savings in defense and nondefense spending and, consequently, no
specific amounts to apportion to the different spending categories. The statutes extending the specific amounts to apportion to the different spending categories. The statutes extending the
BCA mandatory sequester (see BCA mandatory sequester (see “~~BCA Mandatory Sequester~~Budget Control Act”) therefore required that the ) therefore required that the
applicable percentage reductions for FY2022 through FY2031 be the same as those under the applicable percentage reductions for FY2022 through FY2031 be the same as those under the
FY2021 FY2021 sequestration order. (See Table 2.) The statute extending sequestration only for Medicare benefit payments for FY2032 required a 2% reduction for the first six months of the FY2032 sequestration order and 0% for the next six months. In addition to the Medicare percentage caps, BBEDCA also prohibits Statutory PAYGO and BCA mandatory sequestration effects from being included in the determination of annual adjustments to Medicare payment rates established under Title XVIII of the Social Security Act, including the Part C growth percentage and the Part D annual growth rate.31 (See “Reductions in Benefit Spending.”) Certain Medicare programs and activities are explicitly exempted from Statutory PAYGO and BCA sequestration orders. Specifically, Part D low-income subsidies,32 Part D catastrophic subsidies (reinsurance),33 and QI premiums cannot be reduced under a mandatory sequestration order.34 ~~sequestration order. (See Table 2.)~~
~~In addition to the Medicare percentage caps, BBEDCA also prohibits Statutory PAYGO and BCA~~
~~mandatory sequestration effects from being included in the determination of annual adjustments~~

~~27 Medicare benefit payments are considered mandatory budgetary resources and would not be subject to a BCA~~
~~discretionary sequestration order.~~
~~28 See 2 U.S.C. §901a(6). Per the Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71),~~
~~the Medicare sequester percentage in FY2030 will be 2.25% during the first 6 months of the FY2030 sequestration~~
~~order (April 2030 through September 2030) and 3% for the next 6 months (October 2030 through March 2031). Per the~~
~~Infrastructure Investment and Jobs Act (P.L. 117-58), the Medicare sequester percentage in FY2031 will be 4% during~~
~~the first 6 months of the FY2031 sequestration order (April 2031 through September 2031) and 0% for the next 6~~
~~months (October 2031 through March 2032). See 2 U.S.C. §901a(6).~~
29 In making the sequestration amount determinations during the CARES Act, as amended, suspension of Medicare 29 In making the sequestration amount determinations during the CARES Act, as amended, suspension of Medicare
sequestration, OMB’s estimates sequestration, OMB’s estimates ~~reflect~~reflected the full amount of sequestrable Medicare resources even though resources the full amount of sequestrable Medicare resources even though resources
expended during that period expended during that period ~~would~~were not not be reduced. For additional information, see reduced. For additional information, see OMB Report to the Congress on the
BBEDCA 251A Sequestration for Fiscal Year 2022,, May 28, 2021, at https://www.whitehouse.gov/wp-content/uploads/May 28, 2021, at https://www.whitehouse.gov/wp-content/uploads/
2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf. 2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf.
30 See BBEDCA, §256(d)(2). 30 See BBEDCA, §256(d)(2).
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9

~~link to page 14~~ ~~Medicare and Budget Sequestration~~

~~to Medicare payment rates established under Title XVIII of the Social Security Act.31 (See~~
~~“Reductions in Benefit Spending.”)~~
~~Finally, certain Medicare programs and activities are explicitly exempted from Statutory PAYGO~~
~~and BCA sequestration orders. Specifically, Part D low-income subsidies,32 Part D catastrophic~~
~~subsidies (reinsurance),33 and QI premiums cannot be reduced under a mandatory sequestration~~
~~order.34~~
31 See BBEDCA §256(d)(6). 32 Medicare Part D provides subsidies to assist low-income beneficiaries with premiums and cost sharing. For more information on Medicare Part D, see CRS Report R40611, Medicare Part D Prescription Drug Benefit. 33 Part D pays nearly all drug costs above a catastrophic threshold, except for nominal beneficiary cost sharing. Medicare subsidizes 80% of each plan’s costs for this catastrophic coverage. For more information on Medicare Part D, see CRS Report R40611, Medicare Part D Prescription Drug Benefit. 34 See BBEDCA §256(d)(7). Congressional Research Service 9 Medicare and Budget Sequestration Medicare Sequester Execution
Timing
Once a sequester is triggered, OMB issues a sequestration order for, at most, one fiscal year, and Once a sequester is triggered, OMB issues a sequestration order for, at most, one fiscal year, and
~~subsequent~~additional orders are orders are ~~reissued~~issued for each for each subsequent fiscal year, as necessary. These orders can be issued either fiscal year, as necessary. These orders can be issued either
before or during the fiscal year in which they apply, depending on the trigger. before or during the fiscal year in which they apply, depending on the trigger.
Reductions in budget resources are to be made during the effective period of a sequestration Reductions in budget resources are to be made during the effective period of a sequestration
order; however, special rules differentiate when a sequestration order is implemented for benefit order; however, special rules differentiate when a sequestration order is implemented for benefit
payments. As a result, sequestration orders are applied to Medicare benefit payments on a payments. As a result, sequestration orders are applied to Medicare benefit payments on a
different timeline than other mandatory and discretionary Medicare funds (i.e., Medicare different timeline than other mandatory and discretionary Medicare funds (i.e., Medicare
administration and HCFAC). administration and HCFAC).
Once OMB issues a sequestration order, Medicare benefit payments are sequestered beginning on Once OMB issues a sequestration order, Medicare benefit payments are sequestered beginning on
the first date of the following month and remain in effect for all services furnished during the the first date of the following month and remain in effect for all services furnished during the
following one-year period.35 In the event that a subsequent sequester order is issued prior to the following one-year period.35 In the event that a subsequent sequester order is issued prior to the
completion of the first order, the subsequent order begins on the first completion of the first order, the subsequent order begins on the first ~~day~~month after the initial order has after the initial order has
been completed.been completed.36 As an example, the first BCA mandatory sequester order (FY2013) was issued As an example, the first BCA mandatory sequester order (FY2013) was issued
on March 1, 2013, and took effect April 1, 2013. It remained in effect through March 31, 2014. on March 1, 2013, and took effect April 1, 2013. It remained in effect through March 31, 2014.
The FY2014 order was issued on April 10, 2013 (corrected on May 20, 2013), and was in effect The FY2014 order was issued on April 10, 2013 (corrected on May 20, 2013), and was in effect
~~from April 1, 2014, to March 31, 2015.~~
from April 1, 2014, to March 31, 2015. Subsequent sequestration orders have followed this timeline (i.e., have been in effect from April of the designated fiscal year through March of the subsequent fiscal year). With future sequestration orders required to be issued prior to the completion of preceding orders, the first six months of the FY2032 sequester order, which has a required 2% reduction, would be in effect from April 1, 2032, through September 30, 2032, and the second six months of the FY2032 sequestration order, which has a 0% reduction, would be in effect from October 1, 2032, through March 31, 2032. All other sequestrable funding is reduced only during the fiscal year associated with the sequester All other sequestrable funding is reduced only during the fiscal year associated with the sequester
report. report. ~~Using the same~~For example, the first BCA mandatory sequester order (FY2013) reduced example, the first BCA mandatory sequester order (FY2013) reduced
appropriate administrative spending from March 1, 2013, to September 30, 2013. The second appropriate administrative spending from March 1, 2013, to September 30, 2013. The second
order for FY2014 sequestered funds from October 1, 2013, to September 30, 2014. order for FY2014 sequestered funds from October 1, 2013, to September 30, 2014.
While OMB uses current law to determine the amount of funds available to be sequestered and While OMB uses current law to determine the amount of funds available to be sequestered and
corresponding percentage reductions, actual Medicare outlays will not be known until after the corresponding percentage reductions, actual Medicare outlays will not be known until after the
end of the fiscal year. Since sequestration orders are issued either before or during the fiscal year end of the fiscal year. Since sequestration orders are issued either before or during the fiscal year
in which they are applicable, OMB in which they are applicable, OMB estimates the total sequestrable budget authority for Medicare, the total sequestrable budget authority for Medicare,

~~31 See BBEDCA §256(d)(6).~~
~~32 Medicare Part D provides subsidies to assist low-income beneficiaries with premiums and cost sharing. For more~~
~~information on Medicare Part D, see CRS Report R40611, Medicare Part D Prescription Drug Benefit.~~
~~33 Part D pays nearly all drug costs above a catastrophic threshold, except for nominal beneficiary cost sharing.~~
~~Medicare subsidizes 80% of each plan’s costs for this catastrophic coverage. For more information on Medicare Part D,~~
~~see CRS Report R40611, Medicare Part D Prescription Drug Benefit.~~
~~34 See BBEDCA §256(d)(7).~~
~~35 See BBEDCA §256(d)(1).~~
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and other accounts with indefinite budget authority, in order to determine necessary sequestration and other accounts with indefinite budget authority, in order to determine necessary sequestration
percentages.percentages.3637
If Medicare outlays exceed the estimated amount included in a sequestration order for that fiscal If Medicare outlays exceed the estimated amount included in a sequestration order for that fiscal
year, the additional outlays are sequestered at the established percentage for that fiscal year. If year, the additional outlays are sequestered at the established percentage for that fiscal year. If
Medicare outlays are determined to be less than the estimated amount, no adjustments are made Medicare outlays are determined to be less than the estimated amount, no adjustments are made
to the sequestration order. In other words, OMB does not adjust sequestration percentages for any to the sequestration order. In other words, OMB does not adjust sequestration percentages for any
category of budget authority once actuals are realized for accounts with indefinite budget category of budget authority once actuals are realized for accounts with indefinite budget
35 See BBEDCA §256(d)(1). 36 See BBEDCA §256(d)(4). 37 GAO, 2014 Sequestration Opportunities Exist to Improve Transparency of Progress Toward Deficit Reduction Goals, GAO-16-263, April 2016, p. 27, at https://www.gao.gov/assets/680/676565.pdf. Congressional Research Service 10 Medicare and Budget Sequestration authority. Similarly, OMB does not adjust future orders to account for any previous discrepancies authority. Similarly, OMB does not adjust future orders to account for any previous discrepancies
between estimates and actuals. between estimates and actuals.
Temporary Suspension of Medicare Sequestration
During the COVID-19 pandemic, Congress During the COVID-19 pandemic, Congress ~~has taken~~took a number of actions to address financial a number of actions to address financial
challenges faced by health care providers. This challenges faced by health care providers. This ~~has~~ included suspending the application of the included suspending the application of the
BCA mandatory spending sequestration to the Medicare program. Specific legislation included BCA mandatory spending sequestration to the Medicare program. Specific legislation included
the following: •  The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116- The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-
136) initially suspended Medicare sequestration from May 2021 through 136) initially suspended Medicare sequestration from May 2021 through
December 2021December 2021;
• The Consolidated Appropriations Act, 2021 (P.L. 116-260), extended the The Consolidated Appropriations Act, 2021 (P.L. 116-260), extended the
suspension through March 2021 suspension through March 2021;
• An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other
Purposes (P.L. 117-7), extended the suspension through December 2021 Purposes (P.L. 117-7), extended the suspension through December 2021~~; and~~
 • The Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. The Protecting Medicare and American Farmers from Sequester Cuts Act (P.L.
117-71) extended the suspension through March 2022 117-71) extended the suspension through March 2022~~. This law also~~ and limited the limited the
Medicare reductions under sequestration to 1% from April 2022 through June Medicare reductions under sequestration to 1% from April 2022 through June
~~2022.~~
~~Without further congressional action, the BCA mandatory spending sequester on Medicare will~~
~~resume April 1, 2022. However, from April 1 to June 30, 2022, Medicare benefit payments will~~
~~be reduced by only 1%. Then, beginning on July 1, 2022, Medicare benefit payments will be~~
~~reduced by 2%, as they were before the temporary suspension. These reductions are scheduled to~~
~~continue through FY2031.~~
2022 Beginning July 1, 2022, the full 2% sequester was re-implemented. Reductions in Benefit Spending
Parts A and B
Under Medicare Parts A and B, participating providers, such as hospitals and physicians, are paid Under Medicare Parts A and B, participating providers, such as hospitals and physicians, are paid
by the federal government on a fee-for-service basis for services provided to a beneficiary. by the federal government on a fee-for-service basis for services provided to a beneficiary.
According to guidance issued by the Centers for Medicare & Medicaid Services (CMS), any According to guidance issued by the Centers for Medicare & Medicaid Services (CMS), any
sequestration reductions are to be made to claims after determining coinsurance, deductibles, and sequestration reductions are to be made to claims after determining coinsurance, deductibles, and
any applicable Medicare Secondary Payment adjustments.any applicable Medicare Secondary Payment adjustments.3738 Therefore, sequestration applies only to the portion of the payment paid to providers by Medicare; the beneficiary cost-sharing amounts and amounts paid by other insurance are not reduced. As an example, if the total allowed payment for a particular service is $100 and the beneficiary has a 20% co-insurance, the beneficiary would be responsible for paying the provider the full $20 in co-insurance. The remaining 80% that is paid by Medicare would be reduced by 2% under the 38 During the suspension of sequestration of Medicare under the CARES Act, as amended, fee-for-service provider payments were not subject to the 2% reduction in Medicare payments. ~~Therefore, sequestration applies only~~

~~36 GAO,~~ ~~2014 Sequestration Opportunities Exist to Improve Transparency of Progress Toward Deficit Reduction~~
~~Goals, GAO-16-263, April 2016, p. 27, at https://www.gao.gov/assets/680/676565.pdf.~~
37 CMS, Medicare FFS Provider e-News, March 8, 2013, CMS, Medicare FFS Provider e-News, March 8, 2013, Monthly Payment Reductions in the Medicare Fee-for-Service
(FFS) Program – “Sequestration,” at https://www.cms.gov/Outreach-and-Education/Outreach/FFSProvPartProg/at https://www.cms.gov/Outreach-and-Education/Outreach/FFSProvPartProg/
~~Downloads/2013-03-08-standalone.pdf.~~
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~~Medicare and Budget Sequestration~~

~~to the portion of the payment paid to providers by Medicare; the beneficiary cost-sharing amounts~~
~~and amounts paid by other insurance are not reduced.~~
~~As an example, if the total allowed payment for a particular service is $100 and the beneficiary~~
~~has a 20% co-insurance, the beneficiary would be responsible for paying the provider the full $20~~
~~in co-insurance. The remaining 80% that is paid by Medicare would be reduced by 2% under the~~
~~FY2018~~Downloads/2013-03-08-standalone.pdf. See April 10, 2020, CMS MLNConnects Newsletter, “COVID-19: Infection Control, Maximizing Workforce, Updated Q&A, CS Modifier for Cost-Sharing, Payment Adjustment Suspended,” at https://www.cms.gov/outreach-and-educationoutreachffsprovpartprogprovider-partnership-email-archive/2020-04-10-mlnc-se; January 7, 2021, CMS MLNConnects Newsletter, “Physician Fee Schedule Update,” at https://www.cms.gov/outreach-and-educationoutreachffsprovpartprogprovider-partnership-email-archive/2021-01-07-mlnc-se; April 16, 2021, CMS MLNConnects Newsletter, “Medicare FFS Claims: 2% Payment Adjustment (Sequestration) Suspended Through December,” at https://www.cms.gov/outreach-and-educationoutreachffsprovpartprogprovider-partnership-email-archive/2021-04-16-mlnc; and December 16, 2021, CMS MLNConnects Newsletter, “Medicare FFS Claims: 2% Payment Adjustment (Sequestration) Changes,” at https://www.cms.gov/outreach-and-educationoutreachffsprovpartprogprovider-partnership-email-archive/2021-12-16-mlnc. Congressional Research Service 11 Medicare and Budget Sequestration FY2023 sequestration order, or $1.60 in this example, resulting in a total Medicare payment of sequestration order, or $1.60 in this example, resulting in a total Medicare payment of
$78.40. In total, the provider would receive a payment of $98.40. This reduced payment is $78.40. In total, the provider would receive a payment of $98.40. This reduced payment is
considered payment in full and the Medicare beneficiary is not expected to pay higher considered payment in full and the Medicare beneficiary is not expected to pay higher
copayments to make up for the reduced Medicare payment.copayments to make up for the reduced Medicare payment.3839
Part A inpatient services are considered to be furnished on the date of the individual’s discharge Part A inpatient services are considered to be furnished on the date of the individual’s discharge
from the inpatient facility. For services paid on a reasonable cost basis,from the inpatient facility. For services paid on a reasonable cost basis,3940 the reduction is to be the reduction is to be
applied to payments for such services incurred at any time during the sequestration period for the applied to payments for such services incurred at any time during the sequestration period for the
portion of the cost reporting period that occurs during the effective period of the order. For Part B portion of the cost reporting period that occurs during the effective period of the order. For Part B
services provided under assignment,services provided under assignment,4041 the reduced payment is to be considered the reduced payment is to be considered payment in full
and the Medicare beneficiary will not pay higher copayments to make up for the reduced and the Medicare beneficiary will not pay higher copayments to make up for the reduced
amount.amount.4142
Medicare Medicare nonparticipating providers, which are providers that do not elect to accept Medicare’s providers, which are providers that do not elect to accept Medicare’s
allowed payments as payment in full on allowed payments as payment in full on all claims for services furnished to program beneficiaries claims for services furnished to program beneficiaries
in a given year, are not subject to the same rules. Medicare nonparticipating providers receive a in a given year, are not subject to the same rules. Medicare nonparticipating providers receive a
~~lower reimbursement rate from Medicare~~Medicare payment based on a lower maximum allowable charge under the fee schedule on all services provided and may charge beneficiaries a on all services provided and may charge beneficiaries a
limited amount limited amount ~~more (balance bill charge) than~~in addition to the fee schedule the fee schedule amount (balance bill charge) ~~amount~~ on nonassigned claims.on nonassigned claims.42
43 In these instances, instead of the Medicare check being sent to the provider, a check that In these instances, instead of the Medicare check being sent to the provider, a check that
incorporates the 2% reduction is mailed to the patient. The patient must then pay the provider an incorporates the 2% reduction is mailed to the patient. The patient must then pay the provider an
amount that incorporates the sequestered amount. More specifically, as payment, the beneficiary amount that incorporates the sequestered amount. More specifically, as payment, the beneficiary
is responsible for paying the provider the amount listed on the check, any cost sharing, balance is responsible for paying the provider the amount listed on the check, any cost sharing, balance
bill charges, bill charges, and the sequestered amounts taken out of the provider check.the sequestered amounts taken out of the provider check.4344 This contrasts with payment for Part B services provided under assignment, where the Medicare participating provider cannot charge the beneficiary for revenue lost due to sequestration.
Annual adjustments to Medicare payment rates are determined without incorporating Annual adjustments to Medicare payment rates are determined without incorporating
sequestration.sequestration.4445 However, the Medicare Payment Advisory Commission does incorporate the However, the Medicare Payment Advisory Commission does incorporate the
effects of sequestration when assessing the adequacy of provider payments.effects of sequestration when assessing the adequacy of provider payments.4546 The commission The commission

38 39 Ibid. Ibid.
3940 Most providers are paid under a prospective payment system or fee schedule. Some types of providers, such as Most providers are paid under a prospective payment system or fee schedule. Some types of providers, such as
Critical Access Hospitals, are paid on a reasonable cost basis under which payments are based on actual costs incurred. Critical Access Hospitals, are paid on a reasonable cost basis under which payments are based on actual costs incurred.
Reasonable cost is defined at Social Security Act §1861(v). Reasonable cost is defined at Social Security Act §1861(v).
4041 Assignment is an agreement by a doctor, provider, or supplier to be paid directly by Medicare, to accept the payment Assignment is an agreement by a doctor, provider, or supplier to be paid directly by Medicare, to accept the payment
amount Medicare approves for the service, and not to bill the beneficiary for any more than the Medicare deductible amount Medicare approves for the service, and not to bill the beneficiary for any more than the Medicare deductible
and coinsurance (if applicable). Providers that don't accept assignment may charge more than the Medicare-approved and coinsurance (if applicable). Providers that don't accept assignment may charge more than the Medicare-approved
amount. amount.
~~41 See~~42 CMS, Medicare FFS Provider e-News, March 8, 2013, CMS, Medicare FFS Provider e-News, March 8, 2013, Monthly Payment Reductions in the Medicare Fee-for-
Service (FFS) Program – “Sequestration,” at https://www.cms.gov/Outreach-and-Education/Outreach/ at https://www.cms.gov/Outreach-and-Education/Outreach/
FFSProvPartProg/Downloads/2013-03-08-standalone.pdf. FFSProvPartProg/Downloads/2013-03-08-standalone.pdf.
4243 CMS, CMS, Medicare Provider Utilization and Payment Data: Physician and Other Supplier PUF: Frequently Asked
Questions, updated May 23, 2019, p. 4, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-, updated May 23, 2019, p. 4, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/Medicare-Provider-Charge-Data/Downloads/Physician_FAQ.pdf. Trends-and-Reports/Medicare-Provider-Charge-Data/Downloads/Physician_FAQ.pdf.
4344 CMS, Medicare FFS Provider e-News, March 8, 2013, CMS, Medicare FFS Provider e-News, March 8, 2013, Monthly Payment Reductions in the Medicare Fee-for-Service
(FFS) Program – “Sequestration,,” at https://www.cms.gov/Outreach-and-Education/Outreach/FFSProvPartProg/at https://www.cms.gov/Outreach-and-Education/Outreach/FFSProvPartProg/
Downloads/2013-03-08-standalone.pdf. Downloads/2013-03-08-standalone.pdf.
4445 BBEDCA §256(d)(6). BBEDCA §256(d)(6).
4546 Medicare Payment Advisory Commission (MedPAC), Medicare Payment Advisory Commission (MedPAC), Medicare Payment Policy Report to Congress, March 2018, p, March 2018, p. 60, at https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar18_medpac_entirereport_sec_rev_0518.pdf. .
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uses these annual assessments to develop payment adjustment recommendations to the HHS uses these annual assessments to develop payment adjustment recommendations to the HHS
Secretary and/or Congress. Secretary and/or Congress.
~~During the suspension of sequestration of Medicare under the CARES Act, as amended, fee-for-~~
~~service provider payments are not subject to the 2% reduction in Medicare payments.46 The~~
~~suspension is effective for claims with dates of service from May 1, 2020, through March 31,~~
~~2022.47 Additionally, reductions will be limited to 1% from April 1, 2022, through June 30, 2022.~~
Part C (Medicare Advantage)
Under Medicare Advantage, private health plans are paid a per Under Medicare Advantage, private health plans are paid a per -person monthly amount to provide person monthly amount to provide
all Medicare-covered benefits, except hospice, to beneficiaries who enroll in their plans. These all Medicare-covered benefits, except hospice, to beneficiaries who enroll in their plans. These
capitated monthly payments are made to MA plans regardless of how many or how few services capitated monthly payments are made to MA plans regardless of how many or how few services
~~beneficiaries actually use~~are furnished to enrolled beneficiaries. The plan is at risk if costs for all of its enrollees exceed program . The plan is at risk if costs for all of its enrollees exceed program
payments and beneficiary cost sharing; conversely, the plan can generally retain savings if payments and beneficiary cost sharing; conversely, the plan can generally retain savings if
aggregate enrollee costs are less than program payments and cost sharing. aggregate enrollee costs are less than program payments and cost sharing.
~~With respect to sequestration, reductions are made uniformly to the monthly capitated~~In general, CMS payments payments
to the private plans administering Medicare Advantage (Medicare Advantage Organizationsto the private plans administering Medicare Advantage (Medicare Advantage Organizations, or or
~~MAOs). These fixed payments are determined every year with CMS approval through an annual~~
~~“bid process” and the amounts can vary depending on the private plan.48~~
~~In general, CMS payments to MAOs are generally comprised of~~MAOs) comprise amounts to cover medical costs, amounts to cover medical costs,
administrative administrative expenses, private plan profits, risk adjustments, and plan rebates to beneficiaries.47 These fixed payments are determined every year with CMS approval through an annual “bid process,” and the amounts can vary depending on the private plan.48 With respect to sequestration, reductions are made uniformly to the monthly capitated payments to MAOs.49 MAOs have discretion on how to distribute any sequestration cut but must adhere to their legal obligations.50 Some MAOs have attempted to pass the reduction in their capitation rates onto providers through lower payment rates; however, MAOs may be limited in their ability to do so.51 CMS has ~~expenses, private plan profits, risk adjustments, and plan rebates to beneficiaries.49~~
~~MAOs have discretion to distribute any sequestration cut across these different components but~~
~~must still adhere to their legal obligations.50 Due to the temporary suspension of sequestration~~
~~from May 2020 through March 2022, the 2% payment reduction that would have otherwise~~
~~applied to MAOs will not be applied during the suspension period. CMS has indicated that the~~
~~2% will also not apply to any future retroactive adjustments made to payments for beneficiaries~~

~~60, at http://www.medpac.gov/docs/default-source/reports/mar18_medpac_entirereport_sec_rev_0518.pdf?sfvrsn=0.~~
~~46 See April 10, 2020, CMS MLNConnects Newsletter, “COVID-19: Infection Control, Maximizing Workforce,~~
~~Updated Q&A, CS Modifier for Cost-Sharing, Payment Adjustment Suspended,” at https://www.cms.gov/outreach-~~
~~and-educationoutreachffsprovpartprogprovider-partnership-email-archive/2020-04-10-mlnc-se; January 7, 2021, CMS~~
~~MLNConnects Newsletter, “Physician Fee Schedule Update,” at https://www.cms.gov/outreach-and-~~
~~educationoutreachffsprovpartprogprovider-partnership-email-archive/2021-01-07-mlnc-se; April 16, 2021, CMS~~
~~MLNConnects Newsletter, “Medicare FFS Claims: 2% Payment Adjustment (Sequestration) Suspended Through~~
~~December,” at https://www.cms.gov/outreach-and-educationoutreachffsprovpartprogprovider-partnership-email-~~
~~archive/2021-04-16-mlnc; and December 16, 2021, CMS MLNConnects Newsletter, “Medicare FFS Claims: 2%~~
~~Payment Adjustment (Sequestration) Changes,” at https://www.cms.gov/outreach-and-~~
~~educationoutreachffsprovpartprogprovider-partnership-email-archive/2021-12-16-mlnc.~~
~~47 Information on the impact of the sequestration suspension on Medicare provider payments may be found in the~~
~~March 2022 MedPAC report, Medicare Payment Policy, at https://www.medpac.gov/wp-content/uploads/2022/03/~~
~~Mar22_MedPAC_ReportToCongress_SEC.pdf.~~
~~48 For more information on the annual bid process, see CRS Report R45494,~~ ~~Medicare Advantage (MA)–Proposed~~
~~Benchmark Update and Other Adjustments for CY2020: In Brief~~.
~~49 A plan rebate is the difference between a plan’s bid and a statutorily specified benchmark amount. It is included in~~
~~the plan payment and must be returned to enrollees in the form of additional benefits, reduced cost sharing, reduced~~
~~Medicare Part B or Part D premiums, or some combination of these options.~~
~~50 See May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS,~~ ~~Additional Information Regarding the~~
~~Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs, at https://www.cms.gov/~~
~~Medicare/Medicare-Advantage/Plan-Payment/Downloads/PaymentReductions.pdf.~~
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~~enrolled within the sequestration suspension period.51 (CMS will continue to apply sequestration~~
~~to payments for, and any retroactive adjustments made to payments for, beneficiaries enrolled~~
~~outside of the sequestration suspension period.) Beginning in April 2022, the reductions will~~
~~resume but will be limited to 1%, and beginning in July 2022, the full 2% reductions will again be~~
~~applied.~~
~~Some MAOs have attempted to pass the reduction in their capitation rates onto providers through~~
~~lower reimbursement rates; however, MAOs may be limited in their ability to do so.52 CMS~~
provided instructions regarding the treatment of contract and noncontract providers that provide provided instructions regarding the treatment of contract and noncontract providers that provide
services under Part C. Specifically, “whether and how sequestration might affect an MAO’s services under Part C. Specifically, “whether and how sequestration might affect an MAO’s
payments to its contracted providers are governed by the terms of the contract between the MAO payments to its contracted providers are governed by the terms of the contract between the MAO
and the provider.”and the provider.”5352 Therefore, in order for MAOs to reduce provider payments by the 47 A plan rebate is the difference between a plan’s bid and a statutorily specified benchmark amount. It is included in the plan payment and must be returned to enrollees in the form of additional benefits, reduced cost sharing, reduced Medicare Part B or Part D premiums, or some combination of these options. 48 For more information on the annual bid process, see CRS Report R45494, Medicare Advantage (MA)–Proposed Benchmark Update and Other Adjustments for CY2020: In Brief. 49 During the temporary suspension of sequestration from May 2020 through March 2022, the 2% payment reduction did not apply. CMS also indicated that the 2% reduction did not apply to retroactive adjustments made to payments for beneficiaries enrolled within the sequestration suspension period. ~~Therefore, in order for MAOs to reduce provider payments by the~~
~~sequestered amount, specific language within a contract must allow the reduction or the contract~~
~~would need to be renegotiated. Similarly, during the May 2020 through March 2022 CARES Act,~~
~~as amended, suspension of sequestration, the decision to suspend the application of the 2%~~
~~reduction to provider payments may depend on the reimbursement language in MAO-provider~~
~~contracts.54~~
~~In certain instances, such as when beneficiaries receive emergency out-of-network care, MAOs~~
~~need to reimburse the noncontracted providers; in such cases, the MAOs are required to pay at~~
~~least the rate providers would have received if the beneficiaries had been enrolled in original~~
~~Medicare. However, MAOs have the discretion of whether or not to incorporate sequestration~~
~~cuts into payments to noncontracted providers for those services.55 Noncontracted providers must~~
~~accept any payments reduced by the sequestration percentage as payment in full.~~
~~In addition, regulations in the annual bid process restrict MAO’s potential responses to~~
~~sequestration. Specifically, MAOs are limited to “reasonable” revenue margins and a set~~

51 See April 22, 2020, memorandum from Jennifer R. Shapiro, CMS, See April 22, 2020, memorandum from Jennifer R. Shapiro, CMS, Medicare Advantage/Prescription Drug System
(MARx) May 2020 Payment Information, at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/, at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/
marx%20plan%20payment%20letter_may%204.22.2020_7.pdf; March 30, 2021, memorandum from Jennifer R. marx%20plan%20payment%20letter_may%204.22.2020_7.pdf; March 30, 2021, memorandum from Jennifer R.
Shapiro, CMS, Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) April 2021 Payment Information, at , at
https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-
memos-archive/hpms-memos-week-5-march-29-31-2021; and January 28, 2022, memorandum from Jennifer R. memos-archive/hpms-memos-week-5-march-29-31-2021; and January 28, 2022, memorandum from Jennifer R.
Shapiro, CMS, Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) February 2022 Payment Information, at , at
https://www.cms.gov/files/document/marxplanpaymentletterfeb2022508.pdf.https://www.cms.gov/files/document/marxplanpaymentletterfeb2022508.pdf.
52 50 May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS, Additional Information Regarding the Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs, at https://www.cms.gov/Medicare/Medicare-Advantage/Plan-Payment/Downloads/PaymentReductions.pdf. 51 As a result of the initial BCA sequester, some Medicare Advantage Organizations (MAOs) attempted to reduce As a result of the initial BCA sequester, some Medicare Advantage Organizations (MAOs) attempted to reduce
provider payments by 2%. The courts ultimately determined that MAOs were subject to the terms in the contracts with provider payments by 2%. The courts ultimately determined that MAOs were subject to the terms in the contracts with
providers. See Baptist Hosp. of Miami, Inc. v. Humana Health Ins. Co. of Florida, Inc. and Butler Healthcare Providers providers. See Baptist Hosp. of Miami, Inc. v. Humana Health Ins. Co. of Florida, Inc. and Butler Healthcare Providers
et al. v. Highmark Inc. et al. et al. v. Highmark Inc. et al.
5352 May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS, May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS, Additional Information Regarding the
Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs, at https://www.cms.gov/, at https://www.cms.gov/
Medicare/Medicare-Advantage/Plan-Payment/Downloads/PaymentReductions.pdf. Medicare/Medicare-Advantage/Plan-Payment/Downloads/PaymentReductions.pdf.
~~54 Two of the nation’s largest commercial insurers, Aetna and UnitedHealthcare, have indicated that they have~~
~~temporarily eliminated the 2% sequestration cuts in payments to providers in their Medicare Advantage plans during~~
~~the suspension period. Additional detail may be found at https://www.uhcprovider.com/en/resource-library/news/~~
~~Novel-Coronavirus-COVID-19/covid19-practice-administration/covid19-practice-administration-cares-act.html (as of~~
~~the date of this report, this site had not yet been updated to reflect the suspension extensions), and~~
~~https://www.aetna.com/health-care-professionals/covid-faq/billing-and-coding.html.~~
~~55 May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS,~~ ~~Additional Information Regarding the~~
~~Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs~~.
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~~Medicare and Budget Sequestration~~

~~Medicare/non-Medicare profit margin discrepancy, among other requirements.56~~Congressional Research Service 13 Medicare and Budget Sequestration sequestered amount, specific language within a contract must allow the reduction or the contract would need to be renegotiated.53 In certain instances, such as when beneficiaries receive emergency out-of-network care, MAOs need to reimburse the noncontracted providers; in such cases, the MAOs are required to pay at least the rate providers would have received if the beneficiaries had been enrolled in original Medicare. However, MAOs have the discretion of whether or not to incorporate sequestration cuts into payments to noncontracted providers for those services.54 Noncontracted providers must accept any payments reduced by the sequestration percentage as payment in full. In addition, regulations in the annual bid process restrict MAO’s potential responses to sequestration. Specifically, MAOs are limited to “reasonable” revenue margins and a set Medicare/non-Medicare profit margin discrepancy, among other requirements.55 MAOs are also MAOs are also
restricted from allowing sequestration to impact a beneficiary’s plan benefits or liabilities.restricted from allowing sequestration to impact a beneficiary’s plan benefits or liabilities.5756
As HHS computes annual adjustments to Medicare payment rates, the Secretary cannot take into As HHS computes annual adjustments to Medicare payment rates, the Secretary cannot take into
account any reductions in payment amounts under sequestration for the Part C growth account any reductions in payment amounts under sequestration for the Part C growth
percentage.percentage.5857 In other words, plan payment updates are to be determined as if the reductions In other words, plan payment updates are to be determined as if the reductions
under sequestration have not taken place. This results in larger annual adjustments compared to under sequestration have not taken place. This results in larger annual adjustments compared to
baselines that incorporate sequestration cuts. baselines that incorporate sequestration cuts.
Part D
Under Medicare Part D, each plan receives a base capitated monthly payment, called a direct Under Medicare Part D, each plan receives a base capitated monthly payment, called a direct
subsidy, which is adjusted to incorporate three risk-sharing mechanisms (low-income subsidies, subsidy, which is adjusted to incorporate three risk-sharing mechanisms (low-income subsidies,
individual reinsurance, and risk corridor payments). While each plan receives the same direct individual reinsurance, and risk corridor payments). While each plan receives the same direct
subsidy amount for each enrollee regardless of how many benefits an enrollee actually subsidy amount for each enrollee regardless of how many benefits an enrollee actually ~~uses,~~ receives, plans plans
receive different risk-sharing adjustments in their monthly payments. With respect to receive different risk-sharing adjustments in their monthly payments. With respect to
~~sequestration, the 2% reductions are made only to the direct subsidy amounts. Part D risk-sharing~~
~~adjustments are exempt from sequestration and are therefore not reduced.59~~
~~During the May 2020 through March 2022 CARES Act, as amended, sequestration suspension~~
~~period, the 2% payment reductions to Part D plans will not occur. Payment adjustments during~~
~~the suspension period for Part D plans will be applied similarly to payments to MAOs under~~
~~Medicare Advantage.60 In addition, similar to provider payments made by MAOs, whether and~~
~~how sequestration, and its temporary suspension, affects a Part D plan sponsor’s payment to its~~
~~contracted providers is “governed by the payment terms of the contract between the plan sponsor~~
~~and its network pharmacy providers.”61 Beginning in April 2022, the reductions will resume but~~
~~will be limited to 1%, and beginning in July 2022, the full 2% reductions will again be applied.~~
~~Part D also contains a Retiree Drug Subsidy Program, which pays subsidies to qualified~~
~~employers and union groups that provide prescription drug insurance to Medicare-eligible, retired~~
~~workers. Instead of a capitated monthly payment, each sponsor receives a federal subsidy at the~~

56 See CMS, Actuarial Bid Training – 2021 53 Similarly, during the May 2020 through March 2022 CARES Act, as amended, suspension of sequestration, the decision to suspend the application of the 2% reduction to provider payments may have depended on the reimbursement language in MAO-provider contracts. Two of the nation’s largest commercial insurers, Aetna and UnitedHealthcare, indicated that they temporarily eliminated the 2% sequestration cuts in payments to providers in their Medicare Advantage plans during the suspension period. Additional detail may be found at https://www.uhcprovider.com/en/resource-library/news/Novel-Coronavirus-COVID-19/covid19-practice-administration/covid19-practice-administration-cares-act.html (as of the date of this report, this site had not yet been updated to reflect the suspension extensions), and https://www.aetna.com/health-care-professionals/covid-faq/billing-and-coding.html. 54 May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS, Additional Information Regarding the Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs. 55 CMS, Actuarial Bid Training, at https://www.cms.gov/medicare/medicare-advantage-rates-statistics/, at https://www.cms.gov/medicare/medicare-advantage-rates-statistics/
actuarial-bid-training; and 42 C.F.R. Part 422, Subpart X. actuarial-bid-training; and 42 C.F.R. Part 422, Subpart X.
~~57 See~~56 CMS, CMS, User Group Call 05/07/2015, May 7, 2015, at https://www.cms.gov/Medicare/Health-Plans/, May 7, 2015, at https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Downloads/ActuarialBidQuestions2016.pdf. MedicareAdvtgSpecRateStats/Downloads/ActuarialBidQuestions2016.pdf.
5857 BBEDCA §256(d)(6)(A). The Secretary uses an estimate of the growth in overall spending in Medicare when BBEDCA §256(d)(6)(A). The Secretary uses an estimate of the growth in overall spending in Medicare when
calculating updated payments to MA plans. See CRS Report R45494, calculating updated payments to MA plans. See CRS Report R45494, Medicare Advantage (MA)–Proposed Benchmark
Update and Other Adjustments for CY2020: In Brief. .
~~59 This is different from Medicare Part C risk-sharing adjustments, which are included in the capitated payments and~~
~~are subject to sequestration.~~
~~60 See April 22, 2020, memorandum from Jennifer R. Shapiro, CMS,~~ ~~Medicare Advantage/Prescription Drug System~~
~~(MARx) May 2020 Payment Information, at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/~~
~~marx%20plan%20payment%20letter_may%204.22.2020_7.pdf; March 30, 2021, memorandum from Jennifer R.~~
~~Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) April 2021 Payment Information, at~~
~~https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-~~
~~memos-archive/hpms-memos-week-5-march-29-31-2021; and January 28, 2022, memorandum from Jennifer R.~~
~~Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) February 2022 Payment Information, at~~
~~https://www.cms.gov/files/document/marxplanpaymentletterfeb2022508.pdf.~~
~~61 May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS,~~ ~~Additional Information Regarding the~~
~~Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs~~.
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15

~~link to page 20~~ ~~Medicare and Budget Sequestration~~

Congressional Research Service 14 Medicare and Budget Sequestration sequestration, the 2% reductions are made only to the direct subsidy amounts.58 Part D risk-sharing adjustments are exempt from sequestration and are therefore not reduced.59 In addition, similar to provider payments made by MAOs, whether and how sequestration affects a Part D plan sponsor’s payment to its contracted providers is “governed by the payment terms of the contract between the plan sponsor and its network pharmacy providers.”60 Part D also contains a Retiree Drug Subsidy Program, which pays subsidies to qualified employers and union groups that provide prescription drug insurance to Medicare-eligible, retired workers. Instead of a capitated monthly payment, each sponsor receives a federal subsidy at the end of the year to cover a portion of gross prescription drug costs for each retiree during that year. end of the year to cover a portion of gross prescription drug costs for each retiree during that year.
Under this program, sequestration reductions are applied to the annual subsidy amount.Under this program, sequestration reductions are applied to the annual subsidy amount.6261
Similar to Part C, the HHS Secretary is prohibited from taking into account any reductions in Similar to Part C, the HHS Secretary is prohibited from taking into account any reductions in
payment amounts under sequestration for purposes of computing the Part D annual growth rate.payment amounts under sequestration for purposes of computing the Part D annual growth rate.6362
Health Care Fraud and Abuse Control Program
As noted, the HCFAC program is not part of Medicare but does receive mandatory and As noted, the HCFAC program is not part of Medicare but does receive mandatory and
discretionary funds to ensure the programmatic integrity of the Medicare program. Under a BCA discretionary funds to ensure the programmatic integrity of the Medicare program. Under a BCA
sequestration order of mandatory funds, MIP funds are treated as a part of Medicare benefit sequestration order of mandatory funds, MIP funds are treated as a part of Medicare benefit
payments and are therefore subject to the Medicare 2% sequester limit.payments and are therefore subject to the Medicare 2% sequester limit. ~~(The sequestration of this~~
~~portion of HCFAC funding has been suspended by the CARES Act, as amended, from May 2020~~
~~through March 2022.)~~63 HCFAC mandatory funding that does not exclusively address Medicare is HCFAC mandatory funding that does not exclusively address Medicare is
reduced by the nondefense mandatory sequester rate (5.7% in reduced by the nondefense mandatory sequester rate (5.7% in ~~FY2022~~FY2023), when applicable. 58 During the May 2020 through March 2022 CARES Act, as amended, sequestration suspension period, the 2% payment reductions to Part D plans did not occur. Payment adjustments during the suspension period for Part D plans were applied similarly to payments to MAOs under Medicare Advantage. See April 22, 2020, memorandum from Jennifer R. Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) May 2020 Payment Information, at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/marx%20plan%20payment%20letter_may%204.22.2020_7.pdf; March 30, 2021, memorandum from Jennifer R. Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) April 2021 Payment Information, at https://www.cms.gov/httpseditcmsgovresearch-statistics-data-and-systemscomputer-data-and-systemshpmshpms-memos-archive/hpms-memos-week-5-march-29-31-2021; and January 28, 2022, memorandum from Jennifer R. Shapiro, CMS, Medicare Advantage/Prescription Drug System (MARx) February 2022 Payment Information, at https://www.cms.gov/files/document/marxplanpaymentletterfeb2022508.pdf. 59 This is different from Medicare Part C risk-sharing adjustments, which are included in the capitated payments and are subject to sequestration. 60 May 1, 2013, memorandum from Cheri Rice and Danielle Moon, CMS, Additional Information Regarding the Mandatory Payment Reductions in the Medicare Advantage, Part D, and Other Programs. 61~~), when applicable.~~
~~Administrative Expenses~~
~~Under either a mandatory or discretionary sequestration order, administrative spending within~~
~~nonexempt Medicare and HCFAC programs is reduced by the nondefense rate determined by~~
~~OMB. (Mandatory Medicare administrative spending authorized under Title XVIII of the Social~~
~~Security Act is exempt from the sequester during the CARES Act, as amended, suspension~~
~~period.)64~~
~~Medicare and the BCA Mandatory Sequester~~
~~With the exception of the CARES Act, as amended, May 2020 through March 2022 suspension~~
~~(and the 1% limit from April through June 2022), Medicare benefit payments have been subject to~~
~~the 2% annual reduction limit established by the BCA since the first BCA mandatory sequester~~
~~order was issued in FY2013. Nondefense mandatory budget authority reductions, which have~~
~~applied to mandatory Medicare administrative spending, have fluctuated between 5.1% and 7.3%~~
~~from FY2013 through FY2022. (See Table 2.) Under the FY2022 sequestration order, with the~~
~~exception of the suspension time frames mentioned above, mandatory Medicare administrative~~
~~expenses are to be sequestered by the nondefense mandatory percentage, 5.7% in FY2022.65~~

62 CMS, “Mandatory Payment Reduction in CMS’ Retiree Drug Subsidy Reconciliation Payments,” April 19, 2014, at CMS, “Mandatory Payment Reduction in CMS’ Retiree Drug Subsidy Reconciliation Payments,” April 19, 2014, at
https://www.rds.cms.hhs.gov/sites/default/files/webfiles/documents/mandatorypaymentreduction.pdf; and CMS, https://www.rds.cms.hhs.gov/sites/default/files/webfiles/documents/mandatorypaymentreduction.pdf; and CMS,
“Extension to Suspension of Sequestration for Retiree Drug Subsidy (RDS) Program,” December 30, 2020, at “Extension to Suspension of Sequestration for Retiree Drug Subsidy (RDS) Program,” December 30, 2020, at
https://www.hhs.gov/guidance/document/extension-suspension-sequestration-retiree-drug-subsidy-rds-program. https://www.hhs.gov/guidance/document/extension-suspension-sequestration-retiree-drug-subsidy-rds-program.
6362 BBEDCA §256(d)(6)(B). 63 The sequestration of this portion of HCFAC funding was suspended by the CARES Act, as amended, from May 2020 through March 2022. Congressional Research Service 15 link to page 20 Medicare and Budget Sequestration Administrative Expenses Under either a mandatory or discretionary sequestration order, administrative spending within nonexempt Medicare and HCFAC programs is reduced by the applicable nondefense rate determined by OMB.64 Medicare and the BCA Mandatory Sequester With the exception of the CARES Act, as amended, May 2020 through March 2022 suspension (and the 1% limit from April through June 2022), Medicare benefit payments have been subject to the 2% annual reduction limit established by the BCA since the first BCA mandatory sequester order was issued in FY2013.65 Nondefense mandatory budget authority reductions, which have applied to mandatory Medicare administrative spending, fluctuated between 5.1% and 7.3% from FY2013 through FY2021. (See Table 2.) Under the sequestration orders that have been issued since (FY2022-FY2024), mandatory Medicare administrative expenses have been and are to be sequestered by the FY2021 nondefense mandatory percentage, 5.7%.66 ~~BBEDCA §256(d)(6)(B).~~
~~64 Department of Health and Human Services, Agency Financial Report: Fiscal Year 2021, p. 154, at~~
~~https://www.hhs.gov/sites/default/files/fy-2021-hhs-agency-financial-report.pdf.~~
~~65 CMS receives administrative funding for the Medicare program through the Medicare trust funds and the CMS~~
~~program management account. Since the~~ ~~OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal~~
~~Year 2022~~ ~~shows the amount of mandatory administrative funding sequestered at the account level and CMS funds~~
~~other programs through the program management account, the total amount of mandatory administrative funding for~~
~~the Medicare program cannot be determined from the source.~~
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~~link to page 21~~ ~~Medicare and Budget Sequestration~~

Table 2. Mandatory Percentage Reductions Under Budget Control Act
Sequestration Orders
(FY2013-FY2013-~~FY2022)~~FY2024 FY2021 –

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
~~FY2021~~
~~FY2022~~ FY2024
Medicare Medicare
(Benefit Payments ~~and MIP~~
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
2.0% 2.0%
~~2.0%~~
and MIP HCFAC)
Nondefense Mandatory Nondefense Mandatory
(Medicare administrative ~~spending~~
5.1% 5.1%
7.2% 7.2%
7.3% 7.3%
6.8% 6.8%
6.9% 6.9%
6.6% 6.6%
6.2% 6.2%
5.9% 5.9%
5.7% 5.7%
~~5.7%~~
spending and non-MIP HCFAC)
Defense Mandatory Defense Mandatory
7.9% 7.9%
9.8% 9.8%
9.5% 9.5%
9.3% 9.3%
9.1% 9.1%
8.9% 8.9%
8.7% 8.7%
8.6% 8.6%
8.3% 8.3%
~~8.3%~~
Source: OMB Reports to Congress on the Joint Committee Sequestration for FY2013 to OMB Reports to Congress on the Joint Committee Sequestration for FY2013 to ~~FY2022~~FY2024. .
Notes: Reductions to Medicare benefit and mandatory administrative spending did not occur during the CARES Reductions to Medicare benefit and mandatory administrative spending did not occur during the CARES
Act, as amended, temporary suspension of Medicare sequestration from May 2020 through March 2022, in effect Act, as amended, temporary suspension of Medicare sequestration from May 2020 through March 2022, in effect
during the period of the FY2020 through during the period of the FY2020 through ~~FY2022~~FY2021 sequestration orders. Reductions to Medicare benefit sequestration orders. Reductions to Medicare benefit
payments payments ~~are also~~also were limited to 1% from April 2022 through June 2022. Defense Mandatory is any funding 64 Mandatory Medicare administrative spending authorized under Title XVIII of the Social Security Act was exempt from the sequester during the CARES Act, as amended, suspension period. Department of Health and Human Services, Agency Financial Report: Fiscal Year 2021, p. 154, at https://www.hhs.gov/sites/default/files/fy-2021-hhs-agency-financial-report.pdf. 65 Certain other health programs were also subject to a 2% reduction in FY2013, FY2014, FY2015, FY2017, FY2022, and FY2023. 66 CMS receives administrative funding for the Medicare program through the Medicare trust funds and the CMS program management account. Since the OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2023 shows the amount of mandatory administrative funding sequestered at the account level and CMS funds other programs through the program management account, the total amount of mandatory administrative funding for the Medicare program cannot be determined from the source. Congressional Research Service 16 link to page 21 link to page 22 Medicare and Budget Sequestration limited to 1% from April 2022 through June 2022. Defense Mandatory ~~is any funding~~ coded coded
with a budget function of 050. with a budget function of 050. Medicare Benefit Payments are defined by BBEDCA as all payments for are defined by BBEDCA as all payments for
programs and activities under Title XVIII of Social Security Act. Theprograms and activities under Title XVIII of Social Security Act. The Health Care Fraud and Abuse Control
Program (HCFAC) is responsible for activities that fight health care fraud and waste. ) is responsible for activities that fight health care fraud and waste. Nondefense
Mandatory includes all other government spending not defined as Medicare or Defense Mandatory. includes all other government spending not defined as Medicare or Defense Mandatory. MIP refers refers
to the Medicare Integrity Program, which is under HCFAC and focuses on combating fraud in Medicare. to the Medicare Integrity Program, which is under HCFAC and focuses on combating fraud in Medicare.
~~Traditionally, Medicare benefit payments comprise the largest single source of sequestered funds~~
Certain other heath programs were also subject to a 2% reduction in FY2013, FY2014, FY2015, FY2017, FY2022, and FY2023. Traditionally, Medicare benefit payments comprise the largest single source of funds available to be sequestered and the largest single source of funds that are sequestered in a given mandatory sequestration order, as shown inin a given mandatory sequestration order, as shown in Figure 1 a nd Figure 2, respectively.. Under the Under the ~~FY2022~~FY2024 BCA BCA
mandatory sequester ordermandatory sequester order ~~(excluding the impact of the CARES Act, as amended, sequestration~~
~~suspension and reduction limits), the estimated $835.4~~, the estimated $952.2 billion in Medicare benefit payments billion in Medicare benefit payments
subject to sequestration (not including administration) were expected to represent about 87subject to sequestration (not including administration) were expected to represent about 87.3% of % of
all Medicare and non-Medicare resources all Medicare and non-Medicare resources available to be sequestered. to be sequestered.6667 Of the funds expected to Of the funds expected to
be sequestered, the estimated Medicare benefit sequestration amounts of $be sequestered, the estimated Medicare benefit sequestration amounts of $~~16.7~~19.0 billion were billion were
expected to account for about 69expected to account for about 69.2% of all sequestered funds.68 The smaller percentage of Medicare sequestered amounts relative to the percentage of Medicare amounts available to be sequestered is a reflection of Medicare being subject to a 2% reduction limit, while nondefense mandatory and defense mandatory amounts are not. Figure 1. Sequestrable Budget Authority Under Mandatory Budget Control Act Sequestration Orders: Amounts by Category and Medicare Percentage Share FY2013-FY2024 Source: CRS analysis of OMB Reports to the Congress on the Joint Committee Sequestration for FY2013 to FY2024. Notes: Each fiscal year refers to amounts sequestered in accordance with that fiscal year’s sequestration order. Sequestrable budget authority refers to all resources estimated to be available to be sequestered. 67 For a list of sequestrable budget authority by budget account, see OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2024, March 13, 2023, at https://www.whitehouse.gov/wp-content/uploads/2023/03/BBEDCA_Sequestration_Report_and_Letter_3-13-2024.pdf. 68 Ibid. Congressional Research Service 17 Medicare and Budget Sequestration Administrative funding is not included in Medicare benefit payment totals. All percentages are estimates. The fiscal years with asterisks in the Medicare percentage of total do not reflect the CARES Act, as amended, temporary suspension of Medicare sequestration from May 2020 through March 2022, or the 1% limit in effect from April 2022 through June 2022. Figure 2. Sequestered Amounts Under Mandatory Budget Control Act Sequestration Orders: Amounts by Category and Medicare Percentage Share FY2013-FY2024 Source: CRS analysis of OMB Reports to the Congress on the Joint Committee Sequestration for FY2013 to FY2024. Notes: Each fiscal year refers to amounts sequestered in accordance with that fiscal year’s sequestration order. Sequestered Amounts ~~% of the combined mandatory defense and nondefense~~
~~sequestered funds.67~~
~~The Congressional Budget Office (CBO) estimated that the original CARES Act May 2020~~
~~through December 2020 suspension would increase Medicare outlays by $4 billion in each of~~
~~FY2020 and FY2021—for a total increase of $8 billion—but did not provide a separate estimate~~
~~for the Consolidated Appropriations Act, 2021, extension through March 2021.68 CBO projected~~

~~66 For a list of sequestrable budget authority by budget account, see~~ ~~OMB Report to the Congress on the BBEDCA~~
~~251A Sequestration for Fiscal Year 2022, May 28, 2021, at https://www.whitehouse.gov/wp-content/uploads/2021/05/~~
~~BBEDCA_251A_Sequestration_Report_FY2022.pdf.~~
~~67 Ibid.~~
~~68 CBO, Preliminary Estimate of the Effects of H.R. 748, the CARES Act, P.L. 116-136, Revised, April 27, 2020, at~~
~~https://www.cbo.gov/system/files/2020-04/hr748.pdf. In its projection of the CARES Act provision, CBO projected~~
~~that the Medicare sequestration suspension would increase direct spending in both FY2020 and FY2021. In addition to~~
~~the temporary suspension, §3709 of the CARES Act also amended the BCA (P.L. 112-25) to extend by one year~~
~~(through FY2030) the sequestration of all nonexempt mandatory spending. CBO scored the net impact of §3709 as~~
~~decreasing direct spending (outlays) by $19 billion over the FY2020-FY2030 projection period. (In its score of~~
~~Division N of the Consolidated Appropriations Act, 2021 (P.L. 116-260), CBO provided an aggregate estimate for all~~
~~provisions in Title I and did not include a separate estimate for the three-month Medicare sequestration suspension~~
~~extension; see CBO,~~ ~~H.R. 133, Estimate for Division N—Additional Coronavirus Response and Relief Consolidated~~
~~Appropriations Act, 2021~~ ~~P.L. 116-260, January 14, 2021, at https://www.cbo.gov/system/files/2021-01/PL_116-~~
~~260_div_N.pdf.)~~
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~~Medicare and Budget Sequestration~~

~~that (1) the additional March 2021 through December 2021 suspension extension in An Act to~~
~~Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes, would cost a total of~~
~~$12.3 billion over FY2021 and FY2022,69 and (2) the Protecting Medicare and American Farmers~~
~~from Sequester Cuts Act (P.L. 117-71) suspension extension from January 2022 through March~~
~~2022 and the April 2022 to June 2022 1% Medicare sequestration limit would cost $5.9 billion~~
~~over FY2022 and FY2023.70~~
~~Figure 1. Medicare Benefit Payment Amounts as a Percentage of Budget Control Act~~
~~Mandatory Sequester Amounts~~
~~(FY2013-FY2022)~~

Source: CRS analysis of OMB Reports to the Congress on the Joint Committee Sequestration for FY2013 to
~~FY2022.~~
Notes: Each FY refers to amounts sequestered in accordance with that fiscal year’s sequestration order.
Mandatory sequester amounts include amounts for Medicare, other nondefense, and defense. Sequestrable
~~budget authority refers to all resources estimated to be available to be sequestered. Sequestered Funds~~

~~69 This cost estimate reflects only the cost of the April 2021 through December 2021 extension and is in addition to the~~
~~costs of the original CARES Act suspension and Consolidated Appropriations Act, 2021, extension. CBO,~~ ~~CBO’s~~
~~Estimate of the Statutory Pay-As-You-Go Effects of H.R. 1868, an Act to Prevent Across-the-Board Direct Spending~~
~~Cuts, and for Other Purposes, April 12, 2021, at https://www.cbo.gov/publication/57139.~~
~~70 CBO,~~ ~~Estimated Budgetary Effects of the House Amendment to S.610, the Protecting Medicare and American~~
~~Farmers from Sequester Cuts Act, December 7, 2021, at https://www.cbo.gov/publication/57675.~~
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refers to all resources estimated to be sequestered. Administrative funding is not included in Medicare benefit refers to all resources estimated to be sequestered. Administrative funding is not included in Medicare benefit
payment totals. All percentages are estimates. payment totals. All percentages are estimates. ~~This figure does~~The fiscal years with asterisks in the Medicare percentage of total do not reflect the CARES Act, as amended, not reflect the CARES Act, as amended,
temporary suspension of Medicare sequestration from May 2020 through March 2022,temporary suspension of Medicare sequestration from May 2020 through March 2022, ~~in effect during the period~~
~~of the FY2020 through FY2022 sequestration orders~~ or the 1% limit in effect from April 2022 through June 2022. or the 1% limit in effect from April 2022 through June 2022.
CBO estimates that Medicare benefit payment outlays will CBO estimates that Medicare benefit payment outlays will ~~more than~~almost double from double from ~~FY2021 to~~
~~FY2031 (from $839~~FY2022 to FY2032 (from $983 billion to billion to ~~almost $1.8~~$1.9 trillion), the last year of BCA mandatory trillion), the last year of BCA mandatory
~~sequestration.71~~sequestration for Medicare benefit payments.69 Most of this expected increase is due to an aging population and rising health care Most of this expected increase is due to an aging population and rising health care
costs per person.costs per person.7270 Most of this Most of this ~~increase~~increased amount would be subject to sequestration. would be subject to sequestration.

~~71 CBO,~~ ~~July 2021~~ 69 CBO, May 2022 Medicare Baseline, at https://www.cbo.gov/system/files/, at https://www.cbo.gov/system/files/~~2021-07/51302-2021-07~~2022-05/51302-2022-05-medicare.pdf. -medicare.pdf.
7270 CBO, CBO, The ~~2021~~2022 Long-Term Budget Outlook, , ~~March 2021, p. 17~~July 2022, p. 19, at https://www.cbo.gov/publication/, at https://www.cbo.gov/publication/~~57038~~57971. .
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Appendix A. Additional CRS Resources
To gain a deeper understanding of the topics covered in this report, readers may also wish to To gain a deeper understanding of the topics covered in this report, readers may also wish to
consult the following CRS reports: consult the following CRS reports:
CRS Report R40425, CRS Report R40425, Medicare Primer
CRS Report R43122, CRS Report R43122, Medicare Financial Status: In Brief
CRS Report R45494, CRS Report R45494, Medicare Advantage (MA)–Proposed Benchmark Update and Other
Adjustments for CY2020: In Brief
CRS Report R40611, CRS Report R40611, Medicare Part D Prescription Drug Benefit
CRS Report CRS Report ~~98-721~~R46240, , Introduction to the Federal Budget Process
CRS Report R41965, CRS Report R41965, The Budget Control Act of 2011
CRS Report R42506, CRS Report R42506, The Budget Control Act of 2011 as Amended: Budgetary Effects
CRS Report RL34424, CRS Report RL34424, The Budget Control Act and Trends in Discretionary Spending
CRS Report R46752, CRS Report R46752, Expiration of the Discretionary Spending Limits: Frequently Asked
Questions
CRS Insight IN11148, CRS Insight IN11148, The Bipartisan Budget Act of 2019: Changes to the BCA and Debt Limit
CRS Report R42050, CRS Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special
Rules
CRS Report R42972, CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked
Questions
CRS Report R45941, CRS Report R45941, The Annual Sequester of Mandatory Spending through FY2029
CRS Report R41157, CRS Report R41157, The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative
History
CRS Insight IN12168, Discretionary Spending Caps in the Fiscal Responsibility Act of 2023 CRS Insight IN12183, The FRA’s Discretionary Spending Caps Under a CR: FAQs Congressional Research Service Congressional Research Service

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Appendix B. Budget Terminology Definitions
As defined by As defined by the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-
177, as amended) and simplified where appropriate: 177, as amended) and simplified where appropriate:
Budget Authority—Authority provided by federal law to enter into financial obligations that will —Authority provided by federal law to enter into financial obligations that will
result in immediate or future outlays involving federal government funds. result in immediate or future outlays involving federal government funds.
Budgetary Resources—Amounts available to enter into new obligations and to liquidate them. —Amounts available to enter into new obligations and to liquidate them.
Budgetary resources are made up of new budget authority (including direct spending authority Budgetary resources are made up of new budget authority (including direct spending authority
provided in existing statute and obligation limitations) and unobligated balances of budget provided in existing statute and obligation limitations) and unobligated balances of budget
authority provided in previous years. authority provided in previous years.
Discretionary Appropriations—Budgetary resources (except to fund direct-spending programs) —Budgetary resources (except to fund direct-spending programs)
provided in appropriation Acts. provided in appropriation Acts.
Mandatory Spending—Also known as —Also known as direct spending, refers to budget authority that is , refers to budget authority that is
provided in laws other than appropriation acts, entitlement authority, and the Supplemental provided in laws other than appropriation acts, entitlement authority, and the Supplemental
Nutrition Assistance Program. Nutrition Assistance Program.
Medicare Benefit Payments—All payments for programs and activities under Title XVIII of the —All payments for programs and activities under Title XVIII of the
Social Security Act. Social Security Act.
Revised Nonsecurity Category—Discretionary appropriations other than in budget function 050, —Discretionary appropriations other than in budget function 050,
often referred to as often referred to as nondefense category. .
Revised Security Category—Discretionary appropriations in budget function 050, often referred —Discretionary appropriations in budget function 050, often referred
to as to as defense category. .
Sequestration—The cancellation of budgetary resources provided by discretionary —The cancellation of budgetary resources provided by discretionary
appropriations or direct spending laws. appropriations or direct spending laws.
For definitions of other budget terms mentioned in this report but not defined by BBEDCA, see For definitions of other budget terms mentioned in this report but not defined by BBEDCA, see
U.S. Government Accountability Office, U.S. Government Accountability Office, A Glossary of Terms Used in the Federal Budget
Process, GAO-05-734SP, September 1, 2005, at https://www.gao.gov/assets/80/76911.pdf. , GAO-05-734SP, September 1, 2005, at https://www.gao.gov/assets/80/76911.pdf.

Author Information

~~Patricia A. Davis~~

~~Specialist~~Ryan J. Rosso Analyst in Health Care Financing in Health Care Financing

Acknowledgments
~~This report was originally written by Ryan Rosso, Analyst in Health Care Financing~~Patricia Davis, former Specialist in Health Care Financing, was responsible for recent updates to this report. Bill Heniff Jr., . Bill Heniff Jr.,
Analyst on Congress and the Legislative Process, made significant contributions to this report.Analyst on Congress and the Legislative Process, made significant contributions to this report.
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