CMS Pub. 100-04, ch. 22, § 60.2

Claim Adjustment Reason Codes (CARCs) are used on the Medicare electronic and paper

remittance advice, and Coordination of Benefit (COB) claim transaction. The Claim

Adjustment Status and Reason Code Maintenance Committee maintains this code set. A

new code may not be added, and the indicated wording may not be modified without the

approval of this committee. These codes were developed for use by all U.S. health

payers. As a result, they are generic, and there are a number of codes that do not apply to

Medicare. This code set is updated three times a year. MACs shall use only most current

valid codes in ERA, SPR, and COB claim transactions.

Any reference to procedures or services mentioned in the reason codes apply equally to

products, drugs, supplies or equipment. References to prescriptions also include

certificates of medical necessity (CMNs).

These reason codes explain the reasons for any financial adjustments, such as denials,

reductions or increases in payment. These codes may be used at the service or claim

level, as appropriate. Current ASC X12 835 structures only allow one reason code to

explain any one specific adjustment amount.

There are basic criteria that the Claim Adjustment Status and Reason Code Maintenance

Committee considers when evaluating requests for new claim adjustment reason codes:

• Can the information be conveyed by the use or modification of an existing reason

code?

• Is the information available elsewhere in the ASC X12 835?

• Will the addition of the new reason code make any significant difference in the

action taken by the provider who receives the message?

The list of Claim Adjustment Reason Codes can be found at the official Washington

Publishing Company website.

The updated list is published three times a year after the committee meets before the ASC

X12 trimester meeting in the months of January/February, May/June, and

September/October. MACs must make sure that they are using the latest approved claim

adjustment reason codes in ERA, SPR and COB transaction by implementing necessary

code changes as instructed in the Recurring Code Update Change Requests (CRs) or any

other CMS instruction and/or downloading the list from the WPC website after each

update. The Shared System Maintainers shall make sure that a deactivated code (either

reason or remark) is not allowed to be used in any original business message, but is

allowed and processed when reported in derivative business messages. Code deactivation

may be implemented prior to the stop date posted at the WPC web site to follow

Medicare release schedule. SSMs shall implement deactivation on the earlier date if the

implementation date in the recurring code update CR is different than the stop date posted

at the WPC Web site.

The MACs are responsible for entering claim adjustment reason code updates to their

shared system and entry of parameters for shared system use to determine how and when

particular codes are to be reported in remittance advice and coordination of benefits

transactions. In most cases, reason and remark codes reported in remittance advice

transactions are mapped to alternate codes used by a shared system. These shared system

codes may exceed the number of the reason and remark codes approved for reporting in a

remittance advice transaction. A particular ASC X12 835 reason or remark code might

be mapped to one or more shared system codes, or vice versa, making it difficult for a

MAC to determine each of the internal codes that may be impacted by remark or reason

code modification, retirement, or addition.

Shared systems must provide a crosswalk between the reason and remark codes to the

shared system internal codes so that a MAC can easily locate and update each internal

code that may be impacted by a remittance advice reason/remark code change to

eliminate the need for lengthy and error prone manual MAC searches to identify each

affected internal code. Shared systems must also make sure that 5-position remark codes

can be accommodated at both the claim and service level for ASC X12 835 version 4010

onwards.

The effective date of programming for use of new or modified reason/remark codes

applicable to Medicare is the earlier of the date specified in the CMS manual transmittal

or CMS Recurring Code Update change request or the Medicare Claims Processing

Manual transmittal that implemented a policy change that led to the issuance of the new

or modified code. MACs must notify providers of the new and/or modified codes and

their meanings in a provider bulletin or other instructional release prior to issuance of

remittance advice transactions that include these changes. Some CARCs are so generic

that the reason for adjustment cannot be communicated clearly without at least one

remark code. These CARCs have a note added to the text for identification. A/B MACs

and DME MACs must use at least one appropriate remark code when using one of these

CARCs.