>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.

Advertisements

About perkinsms

I'm an engineer and father interested in transit, parking and economics.
This entry was posted in budget, fiscal, transit. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s