How is Medicare funded?
The Centers for Medicare & Medicaid Services (CMS) is the federal agency that runs the Medicare Program. CMS is a branch of the Department of Health and Human Services .
CMS also monitors Medicaid programs offered by each state.
In 2022, Medicare covered over 65 million people. Total expenditures in 2022 were $905 billion. This money comes from the Medicare Trust Funds.
Medicare Trust Funds
Medicare is paid for through 2 trust fund accounts held by the U.S. Treasury. These funds can only be used for Medicare.
Hospital Insurance (HI) Trust Fund
How is it funded?
- Payroll taxes paid by most employees, employers, and people who are self-employed
- Other sources, like these:
- Income taxes paid on Social Security benefits
- Interest earned on the trust fund investments
- Medicare Part A premiums from people who aren't eligible for premium-free Part A
What does it pay for?
- Medicare Part A (Hospital Insurance) benefits, like inpatient hospital care, skilled nursing facility (SNF) care , home health care , and hospice care
- Medicare Program administration, like costs for paying benefits, collecting Medicare taxes, and fighting fraud and abuse
Supplementary Medical Insurance (SMI) Trust Fund
How is it funded?
- Funds authorized by Congress
- Premiums from people enrolled in Medicare Part B (Medical Insurance) and Medicare drug coverage (Part D)
- Other sources, like interest earned on the trust fund investments
What does it pay for?
- Part B benefits
- Part D
- Medicare Program administration, like costs for paying benefits and for fighting fraud and abuse