Medicare is financed by which mechanism?

Medicare is financed by which mechanism?

• A. General taxes
• B. Private donations
• C. User fees
• D. Payroll taxes

Answer: (D)

Medicare is financed primarily by payroll taxes. Workers and their employers contribute a dedicated Medicare tax under FICA, with each side typically paying 1.45% of earnings (self-employed individuals pay the full 2.9% under SECA). This dedicated tax funds the Hospital Insurance Trust Fund that supports Medicare Part A. While Parts B and D involve general revenues and beneficiary premiums, the main mechanism asked about for Medicare’s funding is these payroll taxes.

Medicare is financed primarily by payroll taxes. Workers and their employers contribute a dedicated Medicare tax under FICA, with each side typically paying 1.45% of earnings (self-employed individuals pay the full 2.9% under SECA). This dedicated tax funds the Hospital Insurance Trust Fund that supports Medicare Part A. While Parts B and D involve general revenues and beneficiary premiums, the main mechanism asked about for Medicare’s funding is these payroll taxes.