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 (HHS)

. CMS also monitors 

Medicaid [Glossary]

 programs offered by each state.

In 2017, Medicare covered over 58 million people. Total expenditures in 2017 were $705.9 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?

Supplementary Medical Insurance (SMI) Trust Fund

How is it funded?

What does it pay for?

  • Part B benefits
  • Part D
  • Medicare Program administration, like costs for paying benefits and for fighting fraud and abuse