How is Part A of Medicare funded?

Part A of Medicare, which covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health care services, is primarily funded through the Medicare Hospital Insurance (HI) Trust Fund. This Trust Fund is predominantly financed by payroll taxes collected under the Federal Insurance Contributions Act (FICA) from earnings, which come from Social Security taxes. Employees and employers each contribute a specific percentage of wages to these taxes, which go directly into the HI Trust Fund to support Medicare Part A.

This funding mechanism emphasizes the program's insurance-based nature, where the contributions made during a person's working life are intended to support the healthcare services they receive later on. This is in contrast to other funding sources like premiums or general tax revenues, which play smaller roles in the financing structure for Part A. For instance, while premiums are a part of Medicare funding, they mainly apply to Part B and Part D rather than Part A. State tax contributions are not involved in the funding of Medicare on a federal level, as Medicare is a federal program and not dependent on state financing.