Medicare financing comes from several sources depending on the part. Part A, covering hospital stays, skilled nursing facilities, some home health visits, and hospice care, is primarily funded through payroll taxes. Employers and employees each pay 1.45% of earnings, totaling 2.9%. High earners pay an additional 0.9% Medicare tax on income above $200,000 for singles or $250,000 for married filing jointly, bringing their total to 3.8%.
Part B, which covers doctor visits, outpatient services, and preventive care, is financed through a combination of general tax revenues (approximately 75%) and beneficiary premiums (about 25%). The standard monthly premium for 2026 is $202.90, though higher-income beneficiaries pay more through IRMAA surcharges starting at $109,000 for individuals and $218,000 for couples.
Part C Medicare Advantage plans receive fixed monthly payments from Medicare for each enrolled beneficiary. These payments come from the same funding sources as Parts A and B since Medicare Advantage combines both types of coverage.
Part D prescription drug coverage is funded primarily by general revenues at 74%, beneficiary premiums at 15%, and state payments contributing 11%.