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Medicare Funding Where Do Medicare Funds Come From?

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Medicare Part A Hospital Insurance Premium

Total Funds Allocated

Medicare taxes pay for your Part A Medicare hospital benefits.
Employers and employees pay these taxes.
Taxes you paid in the past provided benefits to others.

About 99 percent of Medicare beneficiaries do not pay a premium for Medicare Part A services since they have at least 40 quarters of Medicare-covered employment. However, some enrollees age 65 and over and certain persons with disabilities who have fewer than 30 quarters of coverage obtain Part A coverage by paying a monthly premium established according to a statutory formula.

This premium will be $441 for 2013. Individuals who have between 30 and 39 “quarters of coverage” may buy into Part A at a reduced monthly premium rate of $248 in 2012.

The Centers for Medicare and Medicaid Services allocates approximately $800 or more each month per Medicare recipient to pay Medicare benefits. The amount varies by geographic region on a yearly basis.

Medicare Part B Medical Insurance Premium

Not Enough Dollars

A Medicare Part B premium is withheld from your Social Security check each month. This pays for part of your Part B medical benefits.

The Medicare Part B premium for 2013 will be $104.90

If you have a higher income, your Part B premium will be higher and you will pay a Part D surcharge (see next two sections).

Medicare funds are not designed to cover all of your medical care costs. Additional medical expense coverage can be purchased to cover PART of your other medical care costs.

Medicare Part D Prescription Drug Plan Premium

You pay a Part D premium to your private insurance company for either a stand-alone Prescription Drug Plan or a portion of the premium for your Medicare Advantage plan with built-in Prescription Drug Plan. This benefit is also subsidized in part by Medicare and starting in 2011, higher income beneficiaries will pay a Part D surcharge in addition to their normal premium.

Medicare Part B and Part D Income-Related Premium for Higher-Income Beneficiaries

The 2012 Part B monthly premium rates and Part D surcharges to be paid by beneficiaries who file an individual tax return (including those who are single, head of household, qualifying widow(er) with dependent child, or married filing separately who lived apart from their spouse for the entire taxable year), or joint tax return are:

Beneficiaries who file an individual tax return with income:

Beneficiaries who file a joint tax return with income:

Income-related monthly Part B adjustment amount

Total monthly Part B premium amount

Part D surcharge

Less than or equal to $85,000

Less than or equal to $170,000

$0.00

$104.90

$0.00

Greater than $85,000 and less than or equal to $107,000

Greater than $170,000 and less than or equal to $214,000

$40.00

$146.90

$11.60

Greater than $107,000 and less than or equal to $160,000

Greater than $214,000 and less than or equal to $320,000

$99.90

$209.80

$29.90

Greater than $160,000 and less than or equal to $214,000

Greater than $320,000 and less than or equal to $428,000

$159.80

$272.70

$48.10

Greater than $214,000

Greater than $428,000

$219.80

$335.70

$66.40

In addition, the monthly premium rates to be paid by beneficiaries who are married, but file a separate return from their spouse and lived with their spouse at some time during the taxable year are:

Beneficiaries who are married but file a separate tax return from their spouse:

Income-related monthly Part B adjustment amount

Total monthly Part B premium amount

Part D surcharge

Less than or equal to $85,000

$0.00

$0.00

$0.00

Greater than $85,000 and less than or equal to $129,000

$159.80

$259.70

$48.30

Greater than $129,000

$219.80

$319.70

$66.60

Government General Revenues

The Part B premium you pay covers approximately 1/4th the cost of providing Part B medical benefits. General revenues of the federal government provide for the balance of Part B benefits.