>Another question on the source of Medicare funding

>The same friend writes:

Wikipedia also tells me:

“By dollars paid, the U.S. Social Security program is the largest government program in the world and the single greatest expense in the federal budget, with 20.9% for social security and 20.4% for Medicare “

Where the heck does the 20.4% for Medicare come from!?

The short answer is a 3% payroll tax and the rest from general revenue, the more detailed answer below:

Medicare is really three different programs:

Part A is for Hospitals and nursing home care. Currently, there is a 3% tax on wages (half from employee, half employer) that pays for part of the program. If the tax is not enough to pay for about 45% of the program, there’s a provision in the law that the trustees have to produce a plan to get it back on track. In the past, I believe that has involved reducing the payment rates to hospitals, but don’t quote me on it.

Part B is for outpatient and doctor’s office care. This is unfunded by any dedicated tax, and is funded from general revenues (income tax mostly). Medicare Part B has designated rates for reimbursement of doctor visits and procedures, and pays 75% of the costs, with the patient paying 25% as coinsurance.

Part D was passed in 2003 and covers prescription drugs for seniors. The program is complicated but basically includes selecting from dozens if not hundreds of private insurance plans, paying a premium, paying a deductible, obtaining covered drugs at 25% coinsurance until you’ve gotten $2500 worth of drugs, then you pay everything until you’ve paid $3850 out of pocket, then you get drugs for practically free (5% coinsurance).

It’s way more complicated than this, of course, but the wikipedia page will help with anything else.


About perkinsms

I'm an engineer and father interested in transit, parking and economics.
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