Medicare Part D: How is it funded?

The prescription drug program of Medicare Part D is available to all of the 58 million Americans who currently have Medicare, including those over 65 years and people below 65 with disabilities or certain conditions under which they qualify for insurance of Medicare. According to the Kaiser Family Foundation, about 41 million Medicare beneficiaries enrolled in 2016 for this voluntary program. Here is a brief summary of Medicare prescription drug policies and Medicare funds for the program. When were Medicare prescription drug policies formulated? Get quotes at

Congress approved the establishment of Medicare Part D prescription drug policies under the Medicare Modernization Act of 2003, though benefits were not available until 2006. The Office of the Budget of Congress (CBO) estimated that spending on Medicare Part D in 2017 was $ 94 billion, or approximately 16% of all Medicare spending in the year. Medicare Part D, according to the CBO, is the most important expansion made to the Medicare policy since its inception in 1965 by Congress. What is the source of funding for Medicare prescription drug policies?

All Medicare benefits are paid by two US Treasury trust funds designed specifically for use by Medicare:

  • The hospital insurance trust fund (HI)
  • The supplemental medical insurance trust fund (SMI)

Each of the two trust funds has different sources of financing. HI Trust Fund receives its Medicare funds mainly from taxes on payroll paid by employees, businesses, and self-employed workers. The smallest amounts come from personal income tax, interest on trust funds and Part A premiums paid by people who do not qualify for Part A.

HI Trust Fund insures Medicare Part A benefits, including hospitalization, home care, and hospice care for inpatients. Also, it pays the administration costs associated with Medicare Part A. According to the Tax Policy Center, the HI Medicare Trust Fund had a balance of $ 205 billion in 2015 and Medicare funds of $ 275 billion for the year.

The SMI Trust Fund receives its Medicare funds from the Congress funds and premiums from the Medicare Part B and Medicare Part D prescription drug policies. The SMI Trust Fund will cover the cost of outpatient Part B outpatient care services and Medicare Part D prescription benefits.

According to the Center for Tax Policy, the SMI Trust Fund had an asset base worth $ 69.5 billion in 2015 and an inflow of $ 369 billion.

How much does the Medicare program cost per year?

According to the Centers for Medicare and Medicaid Services (CMS), national health spending in 2015 was $ 3.2 billion. Last year’s data is completely available. That’s a little less than $ 10,000 per person who lives in the United States. In total, Medicare spent $ 646.2 billion, or approximately 20% of all health care expenses in the United States. According to the Centers for Medicare & Medicaid Services (CMS), the spending on Medicare will generally increase at a rate of 7.1% per year, but most importantly, Medicare Part D spending reduced from 9% in 2015 to 5% in 2016, mainly due to the amount of expensive brand specialty drugs that are losing patent protection and are available as formulations at prices that are much lower.