How Is Medicare Funded?


Quick Answer

Medicare is funded through two trust funds controlled by the United States Treasury Department. The funds are exclusively designated for Medicare needs, and they are obtained through various taxes and other sources.

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How Is Medicare Funded?
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Full Answer

The two trust funds that fund Medicare are the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund. HI is funded through payroll taxes paid by employers, employees and the self-employed.

HI covers Medicare Part A care benefits such as hospice, home health, inpatient hospital care and skilled nursing care in a licensed nursing home.

SMI funds are approved by Congress. People paying premiums toward Medicare Part B and D contribute to the SMI fund. SMI covers Medicare Part B, Medicare Part D and administrative costs.

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