Medicare 2026

Medicare's 2% Sequestration: What It Is, Who It Affects, and How Long It Lasts

If you've ever looked closely at a Medicare remittance notice, you may have seen a small reduction labeled "sequestration." It's a longstanding, across-the-board trim to what Medicare pays — not a cut to your benefits, and not a change to what counts toward your deductible or coinsurance. Here's a plain-English explainer of what it is, who it touches, and how long it's scheduled to continue.

What "sequestration" actually means

Sequestration is a budget tool: an automatic, across-the-board reduction in certain federal spending. The 2 percent Medicare reduction comes from the Budget Control Act of 2011 and first applied to Original Medicare claims with dates of service or discharge on or after April 1, 2013.

Importantly, this is a reduction to what Medicare pays, applied after Medicare has already calculated your coinsurance, any deductible, and any Medicare Secondary Payer adjustment. In other words, your share of the bill is figured first, using the standard rules. The 2 percent is then taken off Medicare's portion of the payment.

The Medicare Trustees have been clear on one key point: the "allowed charges" — the amounts your coinsurance is calculated against — are not affected by sequestration. So if you're used to paying, say, 20 percent coinsurance on a Part B service, that 20 percent is still based on the full allowed amount, not a reduced one.

Does it change what you pay?

Usually, no. For most assigned claims, sequestration is invisible on your side of the ledger. There is one wrinkle worth knowing: on an unassigned claim — where a provider doesn't accept Medicare's approved amount as payment in full and Medicare sends payment directly to the patient — Medicare's payment to the patient is reduced by 2 percent. That doesn't change your deductible or coinsurance; it just means the check you receive from Medicare (which you then apply toward the provider's bill) reflects the reduction.

A short timeline

Sequestration has had a few pauses and ramp-ups:

• April 1, 2013: the 2 percent reduction began.
• May 1, 2020 – March 31, 2022: fully suspended during the COVID-19 public health response.
• April 1, 2022 – June 30, 2022: reduced to 1 percent.
• July 1, 2022: returned to the full 2 percent.

Under the Consolidated Appropriations Act, 2026 (Public Law 119-75, enacted February 3, 2026), the schedule was extended. According to the 2026 Medicare Trustees Report, the 2 percent reduction now continues through August 31, 2033, because the law changed the reduction for March through August 2033 from 0 percent to 2 percent.

Who and what sequestration touches

Per the Trustees, the 2 percent reduction applies to:

• Original Medicare payments to providers and suppliers.
• Medicare payments to private Medicare Advantage plans.
• Part D direct premium subsidy payments (the government's contribution toward Part D plan premiums).

It does not apply to:

• Part D reinsurance payments.
• The low-income cost-sharing subsidy under Extra Help.
• Net risk-sharing payments in Part D.

So people enrolled in Extra Help don't see their cost-sharing subsidies cut by sequestration.

A separate law to be aware of

There's also the Statutory Pay-As-You-Go Act of 2010 (Public Law 111-139). It can trigger a different sequestration order if an end-of-session report shows a net deficit increase on a "PAYGO scorecard," and it caps the Medicare reduction under that law at 4 percent. The Congressional Research Service reported on September 9, 2026, that no sequester under that law has ever been ordered. Separately, Public Law 119-37 (enacted November 12, 2025) set the Statutory PAYGO scorecard balances to zero at the adjournment of the first session of the 119th Congress, which CRS says prevented an end-of-session sequester at that time.

What this means as you shop for 2027 coverage

Sequestration runs in the background. Your focus during Annual Enrollment — October 15 through December 7, 2026, for coverage starting January 1, 2027 — is the coverage itself.

A few program-level facts for 2027 that are already confirmed:

• The Part D out-of-pocket cap rises to $2,400 in 2027 (it's $2,100 in 2026).
• The maximum deductible any Part D plan may charge in 2027 is $700.
• The Part D base beneficiary premium for 2027 is $41.33 (a national figure used to calculate the late-enrollment penalty; actual plan premiums are set plan by plan).
• Social Security announced a 3.6 percent cost-of-living adjustment for benefits payable beginning January 2027.

The 2027 Part B standard premium and deductible, and the 2027 IRMAA income brackets and surcharges, have not yet been announced. CMS typically releases them in the fall, usually in November.

Choosing coverage: a neutral note

Many people compare Original Medicare (often paired with a stand-alone Part D plan and sometimes a Medigap policy) with Medicare Advantage. Each path has trade-offs — differences in provider access, cost-sharing structure, extra benefits, and rules about referrals and networks — and the right fit depends on your health, budget, and preferences. Sequestration affects payments on both sides of that choice, not your benefits.

If you have Medicaid or Extra Help, since 2025 you have a monthly Special Enrollment Period to move to Original Medicare with a stand-alone Part D plan, or to switch stand-alone Part D plans. If you're a full-benefit dual-eligible, you can also join an integrated Dual Eligible Special Needs Plan (D-SNP) in any month.

Where to go next

For official, up-to-date information — including the 2027 Part B figures when CMS releases them — visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227), available 24/7. Sequestration will keep running in the background through August 31, 2033, but your enrollment choices and benefits are what to focus on each year.