How is Medicare Funded

There’s such a high demand for health coverage, and everyone in the workforce watches payroll deductions slip from their paychecks. Indeed by now, you’re probably asking yourself how these programs are funded. The federal program takes a percentage of your payroll taxes as a deduction from employers, employees, and self-employed individuals. The U.S. Treasury Department runs two trust funds. One for Social Security and one for Medicare.

Typically, people pay 2.9% on Medicare taxes from their payroll earnings. The 2.9% comes from 2 parties; employers contribute 1.45%, and employees contribute 1.45%.

Another source of funding for the program comes from:

• Income taxes on Social Security benefits
• Premiums associated with Part A
• Interest accrued on trust fund investments

This trust fund receives funds through the following avenues:

• Funds that are sanctioned by the United States Congress
• Interest accrued through trust fund’s investments
• Part B and D-related premiums
• The SMI trust fund is also responsible for funding Part D

The government sets a pre-determined amount every year to private insurers for each Advantage member. These funds come from both the HI and the SMI trust funds.

Bids that meet all qualifications receive approval. Benchmark amounts vary depending on the region. Benchmark amounts can range from 95% to 115% of Medicare costs. If bids come in higher than benchmark amounts, the enrollees must pay the cost difference in a monthly premium.

When bids are lower than benchmark amounts, Medicare and the health plan provide a rebate to enrollees after splitting the difference in cost. A new bonus system works to compensate for health plans that have high-quality ratings. Advantage plans that have four or more stars receive bonus payments for their quality ratings.

Sometimes the Medicare Advantage plan will get over $9,000 from the government to handle the claims of a “high risk” patient. High risk can include patients with heart disease, diabetes, or other chronic condition.

Of course, this isn’t saying Medicare will halt payments on hospital benefits; more likely, Congress will raise the national debt. Medicare already borrows most of the money it needs to pay for the program. The Medicare program’s spending came to over $600 billion, 15% of the federal budget.

The federal government doesn’t contribute financially to Medigap premiums.

If you’d like more information on Medicare plans near you, complete an online rate comparison form to have an agent get in contact with you. Also, you can call the number above and speak with a licensed insurance representative today!