How Is Medicare Funded?

Christian Worstell
In this article...
  • How is Medicare funded? There are various ways this government program receives its funding. Learn more about these funding methods in our guide today.

Medicare is a national government health insurance program that started in 1965. Although it was initially begun by the Social Security Administration (SSA), it's now managed by the Centers for Medicare and Medicaid Services. The program provides free or low-cost health care to anyone over age 65. 

How Is Medicare Funded?

Medicare has various funding methods that come from both the government and taxpayers. Where funding comes from also depends on the different types of Medicare. 

Medicare Part A Funding

Medicare Part A covers hospital costs, including hospitalization and emergency services. One form of funding for Part A comes from the Hospital Insurance trust fund, which covers specific types of inpatient care, including home health care, skilled nursing facilities and hospice. 

You also contribute to Medicare Part A through your payroll earnings when you earn money from working. Generally, you'll pay 1.45% of your earnings on Medicare taxes, and your employer matches that contribution for a total contribution equal to 2.9% of your income. Taxes from Social Security benefits are another form of funding, as is interest accrued on trust fund investments and premiums associated with Part A. 

Medicare Part B Funding

Medicare Part B helps cover the enrollee's costs associated with preventative care, including doctor visits and routine labs. Part B is primarily funded by the Supplementary Medical Insurance trust fund, which operates the Medicare program itself. 

The United States Congress sanctions some funding for Medicare Part B, and interest accrued through the trust fund's investments also contributes. Other forms of Part B funding include premiums paid for this Medicare plan and Part D (which helps pay for prescriptions). 

Medicare Advantage Funding

Medicare Advantage funding is primarily funded through premiums, payroll taxes and revenues. Each year, the government determines an amount of money that goes to private insurers for each Advantage enrollee. These funds come from both the Hospital Insurance and the Supplementary Medical Insurance trust funds. 

Medicare Supplement Funding

Medicare offers various supplemental packages covering additional services such as prescriptions and dental, vision and hearing services. These packages are funded almost exclusively through premiums. However, some retirees may have their premiums paid by former employers. 

How Do Medicare Advantage Providers Make Money?

Medicare Advantage plans are through private insurance carriers who have agreed to work with Medicare. Each of these companies receives a set amount of money per enrollee from the Medicare program. Separate payments are made for plans with prescription drug coverage. 

Christian Worstell
About the Author

Christian Worstell is a senior Medicare and health insurance writer with He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.

Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

While at HelpAdvisor, Christian has written hundreds of articles that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. You can find Christian’s most recent articles in our blog.

If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at

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