Medicare is funded through which mechanism?

Medicare is funded through which mechanism?

• A. Contributory program through FICA tax
• B. General tax revenue only
• C. Premiums from beneficiaries only
• D. Donations from private funders

Answer: (A)

Medicare is funded primarily through payroll taxes collected under FICA, paid by workers and their employers and deposited into the Hospital Insurance Trust Fund to cover Part A benefits. This makes it a contributory program, since current workers fund the benefits of current and future beneficiaries. While Parts B and D rely on beneficiary premiums and some general revenues, the essential funding mechanism described here is the FICA payroll tax. The other options aren’t correct because general tax revenue isn’t the sole source, premiums alone don’t cover the entire program, and private donations do not fund Medicare.

Medicare is funded primarily through payroll taxes collected under FICA, paid by workers and their employers and deposited into the Hospital Insurance Trust Fund to cover Part A benefits. This makes it a contributory program, since current workers fund the benefits of current and future beneficiaries. While Parts B and D rely on beneficiary premiums and some general revenues, the essential funding mechanism described here is the FICA payroll tax. The other options aren’t correct because general tax revenue isn’t the sole source, premiums alone don’t cover the entire program, and private donations do not fund Medicare.