CO-253 is not a denial. It is the federal sequestration cut applied to Medicare payments, currently 2% of the Medicare payment. It is a contractual adjustment: post it and do not bill the patient for it.
The official wording
The X12 Claim Adjustment Reason Code list defines 253 as: "Sequestration - reduction in federal payment"
The letters in front are the group code. CO means contractual obligation (the provider absorbs it), PR means patient responsibility, and OA is other adjustment. The same reason code can come with different group codes, so always read both.
What CO-253 is telling you
Under federal budget sequestration, Medicare fee-for-service payments are cut by 2%. The cut applies to the amount Medicare pays, not to the patient's deductible or coinsurance. Many Medicare Advantage plans also apply it under their contracts.
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How to post it
- Post it as a contractual adjustment.
- Do not move it to the patient. The patient's share is calculated before sequestration.
- Check your contract if a commercial or Medicare Advantage payer applies it, to confirm the contract allows it.
One Medicare payment with sequestration
Medicare allows $100.00 for an office visit. The patient's 20% coinsurance is $20.00.
| Item | On the claim | What it means |
|---|---|---|
| Allowed amount | $100.00 | From the fee schedule |
| Patient coinsurance | $20.00 | PR-2 on the remittance |
| Medicare's share before cut | $80.00 | Allowed minus coinsurance |
| Sequestration (2%) | CO-253 $1.60 | 2% of $80.00 |
| Medicare pays | $78.40 | This is correct; no action |
The 2% comes off Medicare's share only. The patient's coinsurance is not reduced.
How to post CO-253
Treat it like a contractual adjustment. It is not a denial.
| Step | What to enter | Why |
|---|---|---|
| Payment | The paid amount from the ERA | Matches the bank deposit |
| Adjustment | CO-253 amount as a contractual write-off | You cannot bill anyone for it |
| Patient balance | Only the PR amounts | Sequestration never moves to the patient |
| Reports | Track CO-253 apart from CO-45 | So underpayment checks use the right expected amount |
Medicare Advantage plans may apply the same cut if their contract says so. Check the contract.
How to fix CO-253
- Post the CO-253 amount as a contractual adjustment.
- Do not bill the patient or a secondary payer for it.
- Use the paid amount plus CO-253 when you compare payments to the fee schedule.
- If a commercial payer takes CO-253 with no contract basis, ask them to explain or reprocess.
CO-253 checklist
- ☐ CO-253 posted as a write-off, not left as a balance.
- ☐ Patient balance includes only PR amounts.
- ☐ Underpayment checks add the 2% back before comparing.
- ☐ MA contracts checked for a sequestration clause.
Questions people ask about CO-253
Can I bill the patient for CO-253?
No. Sequestration reduces the Medicare payment only.
How much is the sequestration cut?
2% of the Medicare payment amount.
Is CO-253 a denial?
No. It is a small federal payment reduction. The claim was paid.
Can a secondary payer pay the CO-253 amount?
No. It is a reduction to Medicare's payment, not a patient cost, so it is not passed on.
Why do my Medicare payments look 2% low?
That is sequestration. Add the CO-253 amount back when you check if Medicare paid the right rate.
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PR-1 · PR-2 · PR-3 · CO-4 · CO-5 · CO-11 · CO-15 · CO-16 · OA-18 · CO-22 · OA-23 · CO-24 · CO-26 · CO-27 · CO-29 · CO-31 · CO-45 · CO-49 · CO-50 · CO-59 · PR-96 · CO-97 · CO-109 · CO-119 · CO-129 · CO-140 · CO-146 · CO-151 · CO-167 · CO-170 · CO-181 · CO-185 · CO-197 · CO-198 · PR-204 · CO-234 · CO-236 · CO-242 · CO-252 · CO-253 · CO-288 · CO-A1 · CO-B7 · MA130 · N130 · N23 · N290
Timely filing limits by payer: Cigna timely filing limit · HealthSpring timely filing limit · Aetna timely filing limit · UnitedHealthcare timely filing limit · Humana timely filing limit · corrected claim timely filing limits
Sources: X12 Claim Adjustment Reason Code list (253), read October 12, 2026; CMS Medicare guidance where Medicare rules are mentioned. Last reviewed October 12, 2026. General information, not coding or legal advice. Payer rules differ, so check the remark code and the payer's own policy.