In 2017, Medicare benefit payments topped $700 billion. Medicare funding made up 15 percent of total federal spending in the same year, which equaled that of defense spending.1
Medicare is paid for through two Medicare trust funds that get their money from payroll taxes, Social Security benefit taxes and from certain Medicare premiums.
Here we explain more of exactly just how Medicare is paid for.
The U.S. Treasury maintains the two Medicare trust funds:
The Medicare HI Trust Fund is paid for by:
The money in this account is used to fund Medicare Part A (hospital insurance). It also pays for Medicare administration costs and fighting Medicare fraud and abuse.
The Medicare SMI Trust Fund is paid for by:
The chart below illustrates Medicare’s total revenue in 2017 for Medicare Part A, Part B and Part D combined.
As you can see, general revenue (which is mostly from federal taxes) along with payroll taxes account for nearly 80 percent of all Medicare funding. Premiums paid by beneficiaries made up just 14 percent of Medicare revenue.
We can further break down how each part of Medicare is funded.
In many (but not all) cases, Medicare beneficiaries must still make premium payments in order to maintain coverage.
Before Original Medicare (Part A and Part B) will pay for most qualified expenses, beneficiaries must first satisfy a deductible.
In 2019, the Medicare deductibles are as follows:
Do you have additional questions about Medicare coverage? Do you want to compare Medicare Advantage plans available in your area that may be able to help you save money on your Medicare costs?
Get started today and find a Medicare Advantage plan that fits your coverage needs. Speak with a licensed insurance agent by calling TTY Users: 711, 24 hours a day, 7 days a week.
1 Cubanski, Juliette; Neuman, Tricia. The Facts on Medicare Spending and Financing. (Jun. 22, 2018). Kaiser Family Foundation. Retrieved from www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing.
2 CMS. Medicare Advantage premiums continue to decline while plan choices and benefits increase in 2019. (Sep. 28, 2018). Retrieved from www.cms.gov/newsroom/press-releases/medicare-advantage-premiums-continue-decline-while-plan-choices-and-benefits-increase-2019.
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