Troubling 

reimbursement rates 

for two vital DME 

infusion drugs

underscore the need to 

address Medicare’s

flawed payment

methodology 

Report in Brief 

September 2016

OEI‐12‐16‐00340

Why This Review Matters 

Unlike most other Part B drugs,

Medicare payment amounts for drugs

infused through durable medical

equipment (DME) are still based on list

prices – known as AWPs – from 2003.

Prior Office of Inspector General (OIG)

studies found that AWP was a flawed

benchmark for determining payments,

because it does not adequately reflect

market prices. Paying based on

flawed, out‐of‐date AWPs may create

access issues for vital drugs or lead to

excessive billing. For example,

payments that are below costs could

make providers less willing to provide

a drug, while payments that

substantially exceed costs create

incentives to overutilize a product.

How We Did This Review 

In February 2013, OIG issued a report

to the Centers for Medicare &

Medicaid Services (CMS) regarding

Medicare payments for DME infusion

drugs. In that report, we made one

recommendation and suggested two

options for its implementation (see

graphic on the right). Because CMS

had not taken steps to address our

recommendation, and payments

continued to be misaligned with drug

costs, OIG revisited this issue in a 2015

report.

This current report, following up on

our earlier recommendation, builds on

previous OIG findings by illustrating

the impact of the current payment

methodology on provider

reimbursement rates for two vital

DME infusion drugs:

pump‐administered insulin and

milrinone lactate.

CMS Should Address Medicare’s Flawed Payment 

System for DME Infusion Drugs 

What We Found 

OIG published its first report

recommending changes to Medicare

payments for DME infusion drugs 3 years

ago, yet CMS still reimburses for these

drugs at prices that are unrelated to the

amounts providers pay to acquire them.

Under Medicare’s current reimbursement

methodology, which is based on average

wholesale prices (AWPs) from October

2003, Medicare paid suppliers 65 percent

less than their cost for pump‐administered insulin – hindering beneficiary

access to the drug. Using this same reimbursement methodology,

Medicare paid suppliers of milrinone lactate, an infusion drug used to

treat congestive heart failure, 20 times the drug’s cost, thereby creating

incentives for overutilization and improper billing.

 What We Recommend 

OIG again recommends that

CMS take action to address

payment issues associated

with DME infusion drugs.

The agency could seek a

legislative change that would

require payments for DME

infusion drugs to be based on

average sales prices (ASPs),

as is the case with most other

Part B drugs. Alternatively,

CMS could address our

recommendation by using its

existing authority to include

DME infusion drugs in the

competitive bidding program.

Full report can be found at http://oig.hhs.gov/OEI‐12‐16‐00340
 

 

 

HHS OIG Recommendation Followup • August 2016 • OEI-12-16-00340 

CMS Should Address Medicare’s Flawed Payment 

System for DME Infusion Drugs 

BACKGROUND 

Medicare reimburses providers of most Part B-covered prescription drugs on the basis of average 

sales prices (ASPs) – a pricing benchmark defined by Federal law and calculated using actual 

sales data.1 However, as required by statute, Medicare sets payment amounts for drugs infused 

through durable medical equipment (DME infusion drugs) at 95 percent of the average wholesale 

prices (AWPs) in effect on October 1, 2003.2, 3

 AWPs, which represent list prices rather than 

actual marketplace prices, have been long been recognized as a flawed pricing benchmark.4 

Prior Office of Inspector General (OIG) work consistently found that AWPs, even when timely, 

had little relation to provider acquisition costs.5 

In a February 2013 report, we found that, overall, the AWP-based Medicare payment amounts 

for DME infusion drugs substantially exceeded estimated provider acquisition costs, and that 

paying on the basis of ASPs, instead, would have reduced Medicare expenditures by hundreds of 

millions of dollars between 2005 and 2011.6 To ensure that payment amounts for DME infusion 

drugs more accurately reflect acquisition costs, we recommended that the Centers for Medicare 

& Medicaid Services (CMS) either (1) seek a legislative change requiring that DME infusion 

drugs are paid using the ASP-based methodology or (2) include DME infusion drugs in the next 

round of the competitive bidding program.7 As of August 2016, CMS had not taken steps toward 

seeking legislation. CMS has stated that it is considering phasing in competitive bidding for 

DME infusion drugs. 

OIG revisited this issue in an April 2015 report and again found that payment amounts for DME 

infusion drugs did not accurately reflect acquisition costs.8 We found that because Medicare 

reimbursement rates still were set at prices from more than a decade earlier, payment amounts 

for approximately one-quarter of DME infusion drugs were below provider acquisition costs – 

potentially leading to beneficiary access issues. However, because payment amounts for most of 

the drugs exceeded acquisition costs – sometimes substantially – we also found that Medicare 

expenditures for DME infusion drugs could have been $251 million lower during one 18-month 

period if the ASP-based payment methodology OIG recommended had been implemented the 

quarter after that report was issued.9 

In this recommendation followup report, we build on our earlier work by illustrating the impact 

of the AWP-based payment methodology on provider reimbursement for two vital DME infusion 

drugs: pump-administered insulin (used to treat diabetes) and milrinone lactate (used to treat 

congestive heart failure).10 Further, we detail how current payment rates may affect beneficiary 

access to vital drugs and may encourage overutilization and excessive billing. 

1
 

RESULTS
 

Suppliers have been substantially under-reimbursed for 

pump-administered insulin since 2012, potentially creating 

barriers to patient access 

Since 2012, Medicare has consistently reimbursed suppliers of pump-administered insulin at 

amounts substantially below the prices suppliers paid to acquire the drug. By the fourth quarter 

of 2015, the average cost of insulin had risen to $7.91 per 50 units, almost triple its cost 4 years 

earlier. Medicare’s payment amount – set by law at 95 percent of the AWP from October 2003 – 

was just $2.80 for the same number of units. In other words, the average supplier would lose 

$5.11 (or 65 percent of the cost) on every 50 units billed to Medicare. 

Figure 1: Medicare Payments for Insulin do not Reflect Cost Increases for the Drug 

Source: OIG analysis of CMS ASP and payment amount data for pump-administered insulin, 2016. 

Note: Costs and payment amounts are from the fourth quarter of each year. 

As Figure 1 illustrates, suppliers have been under-reimbursed for pump-administered insulin in 

each of the last 4 years (2012—2015), as rising costs have not been accompanied by 

corresponding increases in payments. As a result, suppliers are subject to escalating losses when 

providing the drug to Medicare beneficiaries. If the average cost of insulin holds at $7.91 

through 2016, Medicare suppliers could expect to face an annual net loss of $30 million on the 

drug, or approximately $2,100 per beneficiary receiving pump-administered insulin.11 

The media also has taken note of the significant rise in insulin prices and the complex array of 

factors driving these increases (see Figure 2).12 However, despite the skyrocketing prices for 

2
 

pump-administered insulin, Part B payment amounts remain the same as they were a dozen years 

ago. In contrast, Medicare reimbursement rates for injectable insulin, which is covered under 

Part D, can be much more responsive to market price fluctuations, as plan sponsors regularly 

renegotiate the amount they pay suppliers.13 For some beneficiaries, continuously infused 

insulin offers significant clinical benefits over injectable insulin, meaning their medical needs are 

better met by continuing treatment with insulin pumps, covered under Part B, than by switching 

to injectable insulin, covered under Part D. 

Figure 2: Recent Headlines Addressing the Rising Cost of Insulin 

Several sources report that beneficiaries are having difficulties finding suppliers who 

accept Medicare payment for pump-administered insulin 

In the 2013 CMS Medicare Ombudsman’s report to Congress, the agency stated that it had heard 

from beneficiaries who could not find an insulin supplier willing to accept Medicare after their 

previous suppliers ceased accepting Medicare for the drug.14 

[CMS] received feedback that some suppliers, including mail-order companies and local 

retail pharmacies, were refusing to submit claims to Medicare because the rate for 

Medicare reimbursement did not cover the cost of the drug, making it difficult for some 

beneficiaries to secure a supplier [...] As a result, some beneficiaries have had to change 

suppliers several times, while others have been unable to find another supplier and had to 

pay out of pocket for insulin. CMS caseworkers assisted beneficiaries in these instances 

as much as possible, but it has become increasingly difficult. 

Also in 2013, the Congressional Research Service (CRS) contacted OIG regarding potential 

access issues for insulin. According to CRS, “One [Congressional] staffer is receiving 

complaint(s) from Medicare beneficiaries because they are not able to buy insulin for their 

insulin pumps (paid for under the Part B DME benefit).” 

Similarly, the Lincoln Journal Star reported on a Medicare beneficiary who was having difficulty 

finding a provider for pump-administered insulin: 

3
“For about nine months, Carr has had increasing difficulty finding a pharmacy willing to 

supply his insulin on a long-term basis because he is a money-losing proposition for any 

business. And he's not the only one facing the bureaucratic problem[...] First Liberty 

Medical, a mail order firm Carr traditionally has used, stopped providing insulin for 

Medicare Part B. Carr, who lives in Wymore, got his insulin one month from a local 

pharmacy, then from Walmart, then from another mail order company. He's had nine 

providers in the past year.”15 

The access issues cited above are not caused by insulin shortages, but by Medicare 

reimbursement practices that make it uneconomic for suppliers to provide the drug to 

beneficiaries. As a result, beneficiaries face difficulties in finding suppliers who accept 

Medicare reimbursement for insulin, so they may have to pay out-of-pocket for a drug they need 

to survive. 

Large suppliers of pump-administered insulin have stopped providing the drug to 

Medicare beneficiaries 

In July 2010, OIG and CMS received a letter 

from one of Medicare’s largest suppliers of 

pump-administered insulin. The supplier 

claimed that the company was unable to 

purchase insulin from manufacturers at prices 

below or equal to Medicare payment rates and 

stated that “[w]ithout swift action to correct 

these inequitable policies, [we] will have no 

choice but to stop supplying rapid-acting 

insulin to people with Medicare who use 

insulin pumps.” In 2011, this supplier 

provided pump-administered insulin to 

56 percent (7,739) of the Medicare 

beneficiaries who received the drug; in 2012, 

just 4 beneficiaries received pumpadministered insulin from this supplier, and 

future years, 1 or 0. 

Other large suppliers appear to have made the same decision. Three companies (including the 

company referenced above) supplied 70 percent of the insulin paid for under Medicare Part B in 

2011. Just 4 years later, these companies didn’t have a single paid claim for the drug, meaning 

that more than 10,000 Medicare beneficiaries had to find new suppliers — suppliers willing to 

incur a loss when providing insulin. 

As large suppliers have stopped providing pump-administered insulin to Medicare beneficiaries, 

smaller “low-volume” suppliers have become the primary billers. In 2015, 80 percent of the 

insulin paid under Part B was provided by “low-volume” suppliers, i.e., suppliers associated with 

3 or fewer Medicare beneficiaries. In 2011, just 27 percent of pump-administered insulin was 

4
 

provided by low-volume suppliers. Because these smaller suppliers are losing money on every 

Medicare prescription they fill for the drug, eventually they may follow the lead of large 

suppliers and stop accepting Medicare for pump-administered insulin. 

Medicare’s payment amount for milrinone lactate was 

20 times its acquisition cost in the fourth quarter of 2015, 

creating potential incentives for overbilling 

Milrinone lactate, a life-saving drug used to treat congestive heart failure, is consistently one of 

the highest-expenditure DME infusion products. In the fourth quarter of 2015, Medicare 

reimbursed suppliers $51.58 per 5 mg of milrinone lactate; during this same period, suppliers of 

the drug paid an average of $2.53 per 5 mg. Medicare beneficiaries were responsible for a 

copayment of $10.32 per 5 mg – more than 4 times the cost of the drug. Medicare covered the 

remaining $41.26 (see Figure 3). To put this in perspective, the average Medicare beneficiary 

who was prescribed milrinone lactate in 2015 received 6,500 mg of the drug, resulting in 

copayments of approximately $13,000 per patient that year. 

Figure 3: Medicare and Beneficiaries Together Pay More than 

$50 for a Drug that Costs Suppliers Approximately $2.50 

Source: OIG analysis of fourth-quarter 2015 Medicare payment data and ASP data for milrinone lactate, 2016. 

5
 

 

 

In contrast to suppliers of pump-administered insulin, who have been subject to substantial losses 

on each prescription, suppliers of milrinone lactate have benefited from years of being 

reimbursed at amounts considerably higher than their costs for the drug. From 2006 through 

2015, average provider acquisition costs for 5 mg of milrinone lactate have ranged from $1.89 to 

$5.51, while Medicare payment has remained at $51.58. OIG previously found that Medicare 

expenditures for milrinone lactate would have been reduced by almost $166 million during an 

18-month period if reimbursement for the drug, instead, had been set at 106 percent of ASP.16 

The substantial difference between Medicare payment amounts and supplier acquisition 

costs for milrinone lactate provides incentives for overutilization and improper billing 

The 357 suppliers who Medicare paid for milrinone lactate in 2015 could each expect to net 

about $64,000 annually per beneficiary based on the difference between payment amounts and 

acquisition costs.17 Thirty-five of these suppliers each would capture over $1 million a year 

above cost, with the top supplier netting approximately $7 million.18 

The substantial difference between Medicare payment amounts and supplier acquisition costs for 

milrinone lactate creates incentives for overutilization and improper billing. Two prepayment 

reviews for milrinone lactate, completed by a Medicare DME contractor in 2015, shed light on 

the extent of overutilization and improper billing that may be occurring. The first involved 

prepayment medical reviews of 102 milrinone lactate claims.19 Eighty-two of the 102 claims 

were either completely denied or partially denied, resulting in an overall charge denial rate of 

73.4 percent (the overall charge denial rate equals the dollar amount of services determined to be 

billed in error divided by the dollar amount of services under review). The second involved 

prepayment medical reviews of 75 claims, 60 of which were either completely denied or partially 

denied, resulting in an overall charge denial rate of 75.6 percent.20 

In both reviews, the reasons cited for denying payment included: (1) claims not meeting 

coverage criteria; (2) missing, incomplete, or invalid written orders; and (3) proof-of-delivery 

issues. These reasons call into question whether milrinone lactate should have been provided in 

all of these cases and whether it was over-supplied because of the financial incentives. 

6
CONCLUSION
 

OIG studies have repeatedly shown that Medicare’s reimbursement methodology for DME 

infusion drugs has resulted in payment amounts that bear little relationship to provider 

acquisition costs. Rather, payment amounts for DME infusion drugs are determined using 

13 year-old AWPs – a benchmark that, even when timely, has been shown to be a flawed basis 

for setting provider reimbursement rates. 

The troubling payment-related issues for two vital DME infusion drugs, as discussed in this 

report, illustrate why Medicare’s current reimbursement methodology must be revised. Underreimbursement for pump-administered insulin has led some suppliers to cease providing the drug 

to Medicare beneficiaries, which may make it difficult for vulnerable patients to obtain their lifesaving medicine. In contrast, when Medicare payments greatly exceed provider acquisition 

costs, as is the case with milrinone lactate, there may be incentives for providers to overutilize a 

particular drug, resulting in excessive Medicare payments. 

Moreover, the reimbursement practices affecting the two drugs presented in this analysis are not 

anomalies. In our previous work, we found that approximately one-quarter of DME infusion 

drugs were reimbursed at amounts that, like insulin, were below their acquisition costs. Further, 

Medicare reimbursed at least 42 percent of DME infusion drugs at amounts that, like milrinone 

lactate, were more than twice their estimated acquisition costs. 

Therefore, OIG continues to recommend that: 

CMS take action to ensure that Medicare payment amounts for DME infusion drugs 

more accurately reflect provider acquisition costs. 

The agency could choose to seek a legislative change that would require payments for DME 

infusion drugs to be based on ASPs. We recognize that seeking such a change through the 

legislative proposal process would not, in itself, change payments unless Congress chooses to 

enact this change. Another available option would be for CMS to use its existing authority to 

include DME infusion drugs in the competitive bidding program as soon as possible. 

7
 

 

METHODOLOGY
 

Data Collection and Analysis 

We obtained all paid Part B DME claims for pump-administered insulin and milrinone lactate 

from 2005 through 2015. We obtained the AWP- and ASP-based payment amounts for both 

drugs in the fourth quarter of each year from CMS’s payment limit files.21 Because ASPs are 

based on actual sales in the marketplace, they provide a reasonable estimate of the drug 

provider’s acquisition costs. We used the ASP-based payment amounts to calculate estimated 

acquisition costs in each quarter by dividing each drug’s ASP-based payment amount by 1.06.22 

For each quarter, we calculated the difference between the AWP-based payment amount and the 

estimated acquisition cost for insulin and milrinone lactate. 

We summarized annual claims data for insulin and milrinone lactate by national provider 

identifier to determine the number of suppliers who were paid for the drugs each year and the 

amount each supplier received in reimbursement. We performed a similar analysis by 

beneficiary to determine the number of beneficiaries who received insulin and milrinone lactate, 

as well as the amount each beneficiary received. 

Limitations 

We did not review Part B DME claims for accuracy, nor did we review any documentation in 

support of the claims included in our study. We also did not examine any infusion-related 

services that may have been provided to beneficiaries who received DME infusion drugs. 

Under sequestration, the effective payment rate for Part B drugs (including DME infusion drugs) 

was reduced between 1 and 2 percent.23 Neither the published pricing data nor CMS expenditure 

data reflect these reductions. Our acquisition cost comparisons were calculated without regard to 

sequestration and therefore may be minimally overstated. We did not estimate how a new 

payment methodology might change provider behavior and Medicare spending. 

Standards 

This study was conducted in accordance with the Quality Standards for Inspection and 

Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 

8
 

ACKNOWLEDGMENTS
 

This report was prepared under the direction of Dave Tawes, Regional Inspector General for 

Evaluation and Inspections in the Baltimore regional office, and Louise Schoggen, Assistant 

Regional Inspector General. 

Dave Tawes also served as the team leader for this study. Other Office of Evaluation and 

Inspections staff from the Baltimore regional office who assisted with the study include Bahar 

Adili. Office of Evaluation and Inspections staff who provided support include Maria 

Maddaloni, Meghan Kearns, and Joanne Legomsky. Other OIG staff who provided support 

include Jessica Swanstrom. 

9
                                         

                                         

                                        

                     

                         

                                    

                                     

                                    

                                    

                                 

                                          

                                     

                              

                             

                               

   

                              

       

                             

                                 

                               

                                

                                 

                            

                                

                 

                               

         

   

                                    

                             

                                       

                          

                                 

                                    

               

                                     

                                     

                           

       

                                 

                            

                              

                     

                            

                                   

        

                                                            

ENDNOTES
 

1 Section 1847A(c) of the Social Security Act (the Act) defines ASP as a manufacturer’s sales of a drug (with certain

exceptions) to all purchasers in the United States in a calendar quarter divided by the total number of units of the

drug sold by the manufacturer in that same quarter. The ASP is net of any price concessions, such as volume

discounts, “prompt pay” discounts, cash discounts, free goods contingent on purchase requirements, chargebacks,

and rebates other than those obtained through the Medicaid drug rebate program. 2 Section 1842(o)(1)(D)(i) of the Act. According to section 20.1.3 of chapter 17 of the Medicare Claims Processing

Manual, Pub. No. 100‐04, this methodology does not apply if the drug is compounded or furnished incident to a

professional service. For DME infusion drugs not listed in the compendia as of October 1, 2003, payments are set

at 95 percent of their first published AWPs. Also, pursuant to section 1842(o)(1)(D)(ii) of the Act, payments for

DME infusion drugs are not based on 95 percent of AWP if subject to competitive bidding. 3 Only a small number of Part B drugs are subject to the DME infusion payment methodology. For example, in an

earlier report, OIG found that 31 Part B drugs were paid for under the DME infusion payment methodology from

the second quarter of 2013 through the third quarter of 2014. See Implementing OIG Recommendation Could

Have Reduced Payments for DME Infusion Drugs by Hundreds of Millions of Dollars, OEI‐12‐15‐00110, April 2015. 4 National Health Policy Forum, Average Wholesale Price for Prescription Drugs: Is There a More Appropriate

Pricing Mechanism?, June 2002. 5 For example, see Medicaid Drug Price Comparison: Average Sales Price to Average Wholesale Price,

OEI‐03‐05‐00200, June 2005. 6 OIG, Part B Payments for Drugs Infused Through Durable Medical Equipment, OEI‐12‐12‐00310, February 2013. 7 The DME, Prosthetics, Orthotics, and Supplies Competitive Bidding Program was mandated by section 302 of the

Medicare Prescription Drug, Improvement, and Modernization Act of 2003, P. L. No. 108‐173, to reduce expenses

for Medicare and its beneficiaries. DME suppliers submit bids to become Medicare contract suppliers and to

furnish items in competitive bidding areas. 42 C.F.R. § 414.412(a). Payment amounts resulting from the bids

replace the fee‐schedule payment amounts. Competitive bidding has been implemented in phases beginning with

bids for items with the highest cost and highest volume or with the largest savings potential. CMS, Medicare

Claims Processing Manual, Pub. 100‐04, ch. 36, § 20.1. 8 OIG, Implementing OIG Recommendation Could Have Reduced Payments for DME Infusion Drugs by Hundreds of

Millions of Dollars, OEI‐12‐15‐00110, April 2015. 9 Ibid.

10 Medicare Part B only covers insulin when it is administered through an external infusion pump. According to

CMS, a continuous subcutaneous insulin infusion pump worn outside the body (external), including the insulin

used with the pump, may be covered for some people with Medicare Part B who have diabetes and who meet

certain conditions. CMS, Medicare National Coverage Determinations Manual, Pub. No. 100‐03, ch. 1, part 4, §

280.14(B)(1)(e). Beneficiaries who do not meet these conditions may still receive injectable insulin under Part D.

CMS, Medicare Prescription Drug Benefit Manual, Pub. No. 100‐18, ch. 6, § 10.1 and Appendix B. See also, CMS,

Medicare’s Coverage of Diabetes Supplies & Services at https://www.medicare.gov/Pubs/pdf/11022.pdf. 11 Based on our analysis of Part B claims data, the average Medicare beneficiary who used an insulin pump

received 411 billing units the drug in 2015 (1 billing unit is equivalent to 50 units of pump‐administered insulin). 12 Identifying factors that increased manufacturer sales prices for pump‐administered insulin was beyond the

scope of this study. 13 CMS contracts with private companies, known as plan sponsors, which offer prescription drug plans to their

beneficiaries. Pharmacy reimbursement for Part D drugs is based on negotiations between plan sponsors and

pharmacies (see definition of “negotiated prices” at 42 CFR § 423.100). The Government is prohibited from

interfering in these price negotiations (see § 1860D‐11(i) of the Act). 14 Office of the Medicare Ombudsman, Fiscal Year 2013 Report to Congress. Accessed online at

https://www.cms.gov/Center/Special‐Topic/Ombudsman/2013‐Ombudsman‐Report‐to‐Congress‐.pdf. 15 Nancy Hicks, Pharmacies unwilling to take loss on insulin for Medicare patients, Lincoln Star Journal, June 28,

2013. Accessed online at http://journalstar.com/news/local/govt‐and‐politics/pharmacies‐unwilling‐to‐take‐loss‐

on‐insulin‐for‐medicare‐patients/article_185a4e3a‐4873‐505a‐a40d‐245550b4c3b4.html.

10
                                                                                                                                                                                               

                               

         

                                 

             

                          

                          

                                      

                 

                                     

                                  

   

                                           

                                  

   

                          

                               

16 OIG, Implementing OIG Recommendation Could Have Reduced Payments for DME Infusion Drugs by Hundreds of
 

Millions of Dollars, OEI‐12‐15‐00110, April 2015.
 17 This calculation was based on payment levels and acquisition costs from the fourth quarter of 2015.
 18 Calculated based on 2015 billing levels.
 19 NHIC, Corp., DME MAC Jurisdiction A Resource, September 2015. Accessed online at
 

https://med.noridianmedicare.com/documents/6547796/6558261/DME_MAC_A_Resource_37_September+2015.
 

pdf/29d07a6c‐e427‐4989‐8c56‐3aff1d0ed1dc.
 20 NHIC, Corp., DME MAC Jurisdiction A Resource, December 2015. Accessed online at
 

https://med.noridianmedicare.com/documents/6547796/6558261/DME_MAC_A_Resource_38_December+2015.

pdf/2d32c476‐05a7‐4a61‐a337‐bfab84826c31. 21 CMS’s payment limit file did not include milrinone lactate in the fourth quarter of 2015. Therefore, we obtained

the payment amount from CMS’s non‐published ASP background file. 22 There is a two‐quarter lag between the time when ASP sales occur and when Medicare payment amounts reflect

those sales. As a result, ASPs in a given quarter were calculated using ASP‐based payment amounts from two

quarters later. 23 Part B claims dated on or after April 1, 2013 incur a 2 percent reduction in payment in accordance with the

Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 (i.e., sequestration). For further

explanation, see http://www.cms.gov/outreach‐and‐education/outreach/ffsprovpartprog/downloads/2013‐03‐08‐

standalone.pdf. Because this mandatory payment reduction is applied after the beneficiary’s coinsurance has

been determined, the resulting reduction in the effective payment rate is between 1 and 2 percent.

11