Medicare Minute: How is Medicare Funded?
By David S. Edge
While many folks on Medicare and Medicare Disability enjoy their benefits, many have no
idea how it’s funded and where the money comes from. Well, it’s not a magic genie and
three wishes that’s for sure!
The bulk of funding comes from the U.S. general budget and this accounts for about 41% of
Medicare funding each year. This continues to be the largest contributor to the Medicare
budget.
The second largest source of Medicare funding is payroll taxes from working Americans.
This accounts for approximately 38% of the current Medicare budget. There has been some
discussion on increasing this amount to enable the Medicare fund to remain more solvent in
the coming years, but at this point this is still in the discussion stage.
The third and final source of income for Medicare is the monthly Part B premiums that
account for approximately 13%. Part B premiums are what cover medical services. This
Part B premium is currently $121.80 per month for new persons on Medicare Part B and is
taken directly from your monthly Social Security check or billed directly from Medicare
until you start drawing Social Security benefits.
Part A is hospital, and there is no monthly premium as long as you or
your spouse has worked in the USA for 10 years or 40 quarters.
Funding for Part A is derived almost entirely from Payroll Taxes
and account for 87% of the budgeted funding. This fund’s
budget is approximately $216 billion. The additional funding
comes from interest from the Medicare Hospital Insurance
Trust Fund. This fund holds, in trust, excess money that wasn’t
needed from past years and the interest that is earned from this
fund assists in current budgeting.
The current budget for Medicare is approximately $600 billion per year in the USA!
There are currently approximately 55,504,005 Americans on Medicare. The top five states
with the most Medicare recipients are; California with 5.6 million, Florida with 4 million,
Texas with 3.6 million, New York with 3.3 million, and Pennsylvania with 2.5 million
recipients.**
*Budget Figures based on 2015 Medicare Trustees Annual Report.
** Figures from Kaiser Family Foundation