CARC 253 Active

CO-253: Sequestration Reduction in Federal Payment

TL;DR

CO-253 is the standard Medicare sequestration adjustment. Post the 2% reduction as a contractual adjustment. Do not attempt to collect this from patients.

Action
Review & Decide
Who Pays
Provider
Appeal
No
Patient Impact
None
Disclaimer
This content is for informational purposes only and does not constitute professional billing advice. Always verify information against your payer contracts and current coding guidelines. Consult a certified billing specialist for specific claim issues.

What Does CO-253 Mean?

CO-253 is the standard and expected group code pairing for the sequestration reduction. The CO designation confirms this is a contractual obligation — the 2% reduction is mandated by federal law and is the provider's responsibility to absorb. The amount cannot be collected from the patient.

CARC 253 represents the federal sequestration reduction that has been applied to Medicare payments since 2013 under the Budget Control Act of 2011. Every Medicare FFS claim is subject to this uniform 2% reduction, which is calculated after the approved amount is determined and after deductible and coinsurance amounts are applied.

This adjustment is not a denial, an error, or a coverage dispute. It is a legislatively mandated reduction in federal spending that affects all Medicare Part A, Part B, and Part D claims equally. The reduction applies to the Medicare payment amount only — it does not change the patient's cost-sharing obligations.

Providers should treat CO-253 as a standard contractual adjustment in their revenue cycle. The amount should be posted as a contractual allowance and cannot be balance-billed to the patient. While sequestration rates have been temporarily modified during certain legislative periods, the 2% reduction has been the standard rate for most of its existence.

Common Causes

Cause Frequency
Mandatory 2% Medicare sequestration reduction The Budget Control Act of 2011 mandates a 2% reduction to all Medicare Fee-for-Service claim payments. This reduction is applied automatically after the claim is processed and the approved amount is calculated, including after deductibles and coinsurance are applied Most Common
Federal spending reduction applied to Medicare Part A and Part B claims Sequestration applies to Medicare Part A, Part B, and Part D claims as a uniform percentage reduction in federal payment, affecting all providers who bill Medicare Most Common

How to Resolve

  1. Verify the 2% calculation Confirm the CO-253 amount equals approximately 2% of the Medicare-approved amount after deductibles and coinsurance. Minor rounding differences are normal.
  2. Confirm accompanying RARC N830 Verify that RARC N830 (sequestration alert) accompanies the adjustment, confirming this is a standard sequestration reduction.
  3. Post as contractual adjustment Record the adjustment as a contractual allowance in your billing system. Configure auto-posting rules for CO-253 to streamline processing.
  4. Request review if amount seems wrong If the calculated amount appears to deviate significantly from 2%, contact the MAC to request a payment review. Do not contact the payer for clarification as sequestration itself is not appealable.
Do Not Appeal This Code

CO-253 is not a denial but a mandated 2% federal sequestration reduction applied to all Medicare FFS claims under the Budget Control Act. This reduction cannot be appealed, reversed, or billed to the patient. Write off the amount as a contractual adjustment.

Common RARC Pairings

The RARC code tells you exactly what triggered the CO-253:

RARC Description
N830 Alert: Payment adjusted based on the sequestration legislation/regulation. Informational only. Post the 2% sequestration adjustment as a contractual write-off. →

How to Prevent CO-253

General Prevention

Also Filed As

The same CARC 253 may appear with different Group Codes:

PR-253 OA-253

Related Denial Codes

CO-237 — Legislated/Regulatory Penalty CO-24 — Charges Covered Under Capitation/Managed Care CO-44 — Prompt-Pay Discount CO-45 — Charge Exceeds Fee Schedule/Maximum Allowable CO-69 — Day Outlier Amount

Sources

  1. https://medibillmd.com/blog/denial-code-253/
  2. https://www.mdclarity.com/denial-code/253
  3. https://med.noridianmedicare.com/web/jfa/fees-news/fee-schedules/sequestration
  4. https://x12.org/codes/claim-adjustment-reason-codes
  5. Codes maintained by X12. Visit x12.org for official definitions.