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Medicare Trust Fund

The Medicare and Medicaid programs are not the same. Though, we understand it’s an easy mistake as the names and services are so similar. For information on Medicaid Asset Protection Trusts please visit our home page. If you are interested in knowing more about Medicare, including the Medicare trust, then continue down the page.

Medicare and How it’s Funded (Medicare Trust)

The full name of the program we call “Medicare” is really the CMS, or Centers for Medicare & Medicaid Services. It is in the Department of Health & Human Services. The center orchestrates Medicare and overseas each state’s implementation.

Medicare is one of the largest government expenditures. It costs ~$550B per year to cover ~50M people. This is paid from what’s called the Medicare Trust Fund. The trust fund is actually two separate trusts held with the United States Treasury. The funds are designed to only be spent on Medicare.

Trust Fund for (HI) Hospital Insurance

Who funds the program?

Taxes from payrolls, which covers almost all employees, even the self-employed, and employers of course. Additionally, there exist other revenue streams to fund the Hospital Insurance (HI). E.g., income from the fund’s principal (usually held in treasuries), social security income tax, and for those who wonder where their Part A premiums go it’s into the fund.

Ok, but what is the fund intended to fund?

Medicare has several “Parts”. Part A covers the HI mentioned above. These services include long term skilled facilities, hospice, in-home care (which actually works out to be very cost effective vis-a-vis a hospital), and inpatient care services.

Another important part of the program is to fund administrative duties. These include, but are not limited to, handling Medicare taxes, investigating Medicare Abuse and Fraud, filing paperwork, keeping accurate records, developing a fee schedule and paying out benefits.

What can you tel me about the (SMI) Supplementary Medical Insurance Trust Fund?

Let’s start with it’s source of funding:

  1. Congress authorizes payment
  2. Medicare B premiums and prescription drug coverage, Parts B and D respectively.
  3. Earnings on principal (generally interest from government securities).

How should we understand its purpose?

This part is fairly straightforward, actually. The SMI pays:

  1. B benefits not covered by patient’s premium
  2. Costs from Part D – this is the administrative portion, as mentioned above it handles payments, taxes, reports of abuse etc.

Hopefully this has cleared up some of the confusion. There is no Medicare Trust in the same way that there is one for Medicaid. This is because the programs are different. We hope you enjoyed reading about the Medicare Trust Fund.