	Introduction

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 Congress established in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the Gramm-Rudman-Hollings Act; P.L. 99-177 ) intended to encourage compromise and action, rather than actually being implemented (also known as triggered ). Generally, this budget enforcement tool has been incorporated into laws to either discourage Congress from violating specific budget objectives or encourage Congress to fulfill specific budget objectives. When Congress breaks these types of rules, either through the enactment of a law or lack thereof, a sequester is triggered and certain federal spending is reduced. Sequestration is of recent 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 ) and the Budget Control Act of 2011 (BCA; P.L. 112-25 ). However, the Statutory PAYGO sequester and the BCA 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). Medicare, which is a federal program that pays for covered health care services of qualified beneficiaries, is subject to a reduction in federal spending associated with the implementation of these three sequesters, although special rules limit the extent to which it is impacted. One automatic spending reduction involved the sequestration of certain mandatory spending from FY2013 to FY2021. Through subsequent legislation, including, most recently, the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123 ), Congress extended this reduction through FY2027. Due to the varying payment structures of the four parts of the program, sequestration is applied differently across Medicare. Administrative Spending

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, respectively. 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. (See " Reductions in Benefit Spending ".) These orders can be issued either before or during the fiscal year in which they apply, depending on the trigger. Traditionally, Medicare benefit payments comprise the largest single source of sequestered funds in a given mandatory sequestration order.
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 established by Congress in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the Gramm-Rudman-Hollings Act; P.L. 99-177) and was intended to encourage compromise and action, rather than actually being implemented (also known as triggered). Generally, this budget enforcement tool has been incorporated into laws to either discourage Congress from violating specific budget objectives or encourage Congress to fulfill specific budget objectives. When Congress breaks these types of rules, either through the enactment of a law or the lack thereof, a sequester is triggered and certain federal spending is reduced.
Sequestration is of recent 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) and the Budget Control Act of 2011 (BCA; P.L. 112-25). At present, only the BCA mandatory sequester is triggered. Under the BCA, the sequestration of mandatory spending was originally scheduled to occur in FY2013 through FY2021; however, subsequent legislation, including the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123), extended sequestration for mandatory spending through FY2027. The Statutory PAYGO sequester and BCA discretionary sequester are current law and can be triggered if associated budget enforcement rules are broken (and Congress does not take action to change or waive these rules).
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 aforementioned laws. Medicare is mainly impacted by the sequestration of mandatory funds since Medicare benefit payments are considered mandatory spending. 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 sequestration order.
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 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 do not apply to discretionary administrative Medicare spending under a BCA discretionary sequestration order.
Generally, Medicare's benefit structure remains unchanged under a mandatory sequestration order and beneficiaries see few direct impacts. However, due to varying plan and provider payment mechanisms among the four parts of the program, sequestration is implemented somewhat differently across the program.