Medicare sequestration is a budget control tool that reduces government payments for Medicare services by a set percentage. Medicare sequestration has quietly shaped healthcare financing, reducing government payments for Medicare services by 2% since 2013 due to the Budget Control Act (BCA). Now, an additional 4% cut may take effect in January 2026 under statutory Pay-As-You-Go (PAYGO) rules. Unless Congress waives one or both sequestrations, Medicare benefit payments will be reduced by 6% in 2026. This includes the ongoing 2% BCA reduction and an additional 4% PAYGO reduction.¹ To prepare for this potential increase in benefit cuts, learn about what Medicare sequestration is, how it impacts different Medicare benefit payments, and how Congress can act to prevent further cuts.