What is the primary funding source for Medicare?

The primary funding source for Medicare comes from a payroll tax earmarked specifically for the program. This tax is collected from both employees and employers as a percentage of wages. It is designed to fund Medicare Part A, which covers hospital insurance, and is often referred to as the Hospital Insurance (HI) tax. This system ensures a stable and consistent flow of revenue directly tied to the workforce and its wages, providing the necessary funding to support the healthcare needs of Medicare beneficiaries.

While premiums paid by retirees do contribute to Medicare, particularly for Part B and Part D, they do not provide the majority of the funding for the overall program. General revenue and loans are also not the main sources of funding for Medicare, as the program is structured primarily around the payroll tax model to ensure sustainability and support for the large population of elderly and disabled individuals who rely on its services.