Editing Medicare (United States) (section)

==Financing==
Medicare has several sources of financing.

Part A's [[Inpatient care|inpatient]] admitted hospital and skilled nursing coverage is largely funded by revenue from a 2.9% [[payroll tax]] levied on employers and workers (each pays 1.45%). Until December 31, 1993, the law provided a maximum amount of compensation on which the Medicare tax could be imposed annually, in the same way that the Social Security payroll tax operates.<ref>Title 26, Subtitle C, Chapter 21 of the [[United States Code]].</ref> Beginning on January 1, 1994, the compensation limit was removed. Self-employed individuals must calculate the entire 2.9% tax on self-employed net earnings (because they are both employee and employer), but they may deduct half of the tax from the income in calculating income tax.<ref>{{cite web|work=IRS|url=https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employment-Tax-%28Social-Security-and-Medicare-Taxes%29|title=Self-Employment Tax (Social Security and Medicare Taxes)|access-date=December 28, 2021|archive-date=September 26, 2015|archive-url=https://web.archive.org/web/20150926183100/http://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Self-Employment-Tax-%28Social-Security-and-Medicare-Taxes%29|url-status=dead}}</ref> Beginning in 2013, the rate of Part A tax on earned income exceeding $200,000 for individuals ($250,000 for married couples filing jointly) rose to 3.8%, in order to pay part of the cost of the subsidies to people not on Medicare mandated by the Affordable Care Act.<ref>{{cite web|url=https://www.ssa.gov/OACT/ProgData/taxRates.html|title=FICA & SECA Tax Rates|first=Sue|last=Kunkel|website=Ssa.gov|access-date=June 15, 2019}}</ref>

In 2022, Medicare spending was over $900 billion, near 4% of U.S. gross domestic product according to the Trustees Figure 1.1 and over 15% of total US federal spending.<ref name="kff.org">{{Cite web|date=2011-01-31|title=A Primer on Medicare Financing|url=https://www.kff.org/health-reform/issue-brief/a-primer-on-medicare-financing/|access-date=2023-01-06|website=KFF|language=en-US}}</ref> Because of the two Trust funds and their differing revenue sources (one dedicated and one not), the Trustees analyze Medicare spending as a percent of GDP rather than versus the Federal budget.

The aging of the [[Post–World War II baby boom|Baby Boom]] generation into Medicare is projected by 2030 (when the last of the baby boom turns 65) to increase enrollment to more than 80 million. In addition, the fact that the number of payroll tax payors per enrollee will decline over time and that overall [[health care prices in the United States|health care costs in the nation]] are rising pose substantial financial challenges to the program. Medicare spending is projected to increase from near 4% of GDP in 2022 to almost 6% in 2046.<ref name="kff.org"/> Baby-boomers are projected to have longer life spans, which will add to the future Medicare spending. In response to these financial challenges, Congress made substantial cuts to future payouts to providers (primarily acute care hospitals and skilled nursing facilities) as part of PPACA in 2010 and the [[Medicare Access and CHIP Reauthorization Act of 2015]] (MACRA) and individual Congresspeople have offered many additional competing proposals to stabilize Medicare spending further. Many other factors have complicated the forecasting of Medicare Trust Fund health and spending trends including but not limited to the Covid pandemic, the overwhelming preference of people joining Medicare this century for Part C, and the increasing number of dual eligible (Medicaid and Medicare eligibility) beneficiaries.

In 2013 the [[Urban Institute]] published a report which analyzed the amounts that various households (single male, single female, married single-earner, married dual-earner, low income, average income, high income) contributed to the Medicare program over their lifetimes, and how much someone living to the statistically expected age would expect to receive in benefits.{{ r | PF_2014-09 | Urban_2013 }} They found differing amounts for the different scenarios, but even the group with the "worst" return on their Medicare taxes would have concluded their working years with $158,000 in Medicare contributions and growth (assuming annual growth equal to inflation plus 2%) but would receive $385,000 in Medicare benefits (both numbers are in 2013 inflation adjusted dollars).{{ r | PF_2014-09 | Urban_2013 }} Overall, the groups paid into the system 13 to 41 percent of what they were expected to receive.<ref name=PF_2014-09 >{{ cite web | url=https://www.politifact.com/factchecks/2014/sep/09/national-republican-senatorial-committee/how-much-have-medicare-beneficiaries-paid-system/ | title=How much have Medicare beneficiaries 'paid in' to the system? | last=Jocobson | first=Louis | newspaper=[[PolitiFact]] | date=2014-09-09 | quote=To make the final amounts comparable to what might have been done with the tax money had it been invested privately, the institute adjusted all dollar figures at 2 percentage points above the rate of inflation. (The authors note that different assumptions for long-term returns on investment would change the results.) ... We found that, for Medicare recipients, the "worst" deal for any of these demographic groups is still quite generous. A two-earner couple, with one high earner and one average earner, who both turned 65 in 2010 would have paid $158,000 in Medicare taxes over their lifetimes, but can be expected to be the recipient of $385,000 in Medicare spending. That’s a ratio of $2.40 in benefits for every dollar paid in taxes -- and that’s the least generous ratio we found. ...  For today’s typical Medicare beneficiary, what they paid into the system represents just 13 percent to 41 percent of what they can expect to get out of it. The rest is funded by younger Americans’ payroll taxes. }}</ref><ref name=Urban_2013 >{{cite web |url=https://www.urban.org/UploadedPDF/412945-Social-Security-and-Medicare-Taxes-and-Benefits-over-a-Lifetime.pdf |title=Social Security and Medicare Taxes and Benefits over a Lifetime |last1=Steuerle |first1=C. Eugene |author-link=C. Eugene Steuerle |last2=Quakenbush |first2=Caleb |work=[[Urban Institute]] |date=2013-11-01 |access-date= |archive-url=https://web.archive.org/web/20140701195505/https://www.urban.org/UploadedPDF/412945-Social-Security-and-Medicare-Taxes-and-Benefits-over-a-Lifetime.pdf |archive-date=2014-07-01 |url-status=dead }}</ref>

Cost reduction is influenced by factors including reduction in inappropriate and unnecessary care by [[Managed care|evaluating evidence-based practices]] as well as reducing the amount of unnecessary, duplicative, and inappropriate care. Cost reduction may also be effected by reducing medical errors, investment in [[healthcare information technology]], improving transparency of cost and quality data, increasing administrative efficiency, and by developing both clinical/non-clinical guidelines and quality standards.<ref>{{cite web|url=https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf|title=CMS Quality Strategy, 2016|website=Cms.gov|access-date=September 16, 2016|archive-date=March 28, 2021|archive-url=https://web.archive.org/web/20210328184650/https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/qualityinitiativesgeninfo/downloads/cms-quality-strategy.pdf|url-status=dead}}</ref> Of course all of these factors relate to the entire United States health care delivery system and not just to Medicare.