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 .

CMS also monitors Medicaid programs offered by each state.

In 2022, Medicare covered over 65 million people. Total expenditures in 2022 were $905 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?

  • Medicare Part A (Hospital Insurance) benefits, like inpatient hospital care, skilled nursing facility (SNF) care , home health care , and hospice care
  • Medicare Program administration, like costs for paying benefits, collecting Medicare taxes, and fighting fraud and abuse

  Supplementary Medical Insurance (SMI) Trust Fund

  How is it funded?

  • Funds authorized by Congress
  • Premiums from people enrolled in Medicare Part B (Medical Insurance) and Medicare drug coverage (Part D)
  • Other sources, like interest earned on the trust fund investments

  What does it pay for?

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