Medicare Vs. Medicaid Funding | Government Healthcare Financing

 Medicare and Medicaid are both government-funded healthcare programs in the U.S., but they are funded and administered differently.

Medicare Funding (Federal Program)

Medicare is a federal program that provides healthcare coverage primarily for individuals aged 65 and older, as well as some younger people with disabilities. It is funded mainly through:

1. Payroll Taxes (FICA & SECA)

   • Employees and employers each pay 1.45% of wages for Medicare (2.9% total).

   • Self-employed individuals pay 2.9% through SECA.

   • High-income earners pay an additional 0.9% Medicare surtax on earnings over $200,000 (individual) or $250,000 (married filing jointly).

2. General Revenue (Federal Budget)

   • Congress allocates funds from income taxes and other federal revenue sources.

3. Medicare Premiums & Beneficiary Payments

   • Parts B (medical insurance) and D (prescription drug coverage) are funded by monthly premiums paid by enrollees.

   • Part A (hospital insurance) is mostly covered by payroll taxes but may require deductibles and copayments.

Medicaid Funding (Joint Federal & State Program)

Medicaid provides healthcare for low-income individuals and families, and it is jointly funded by federal and state governments:

1. Federal Government Contribution (FMAP)

   • The Federal Medical Assistance Percentage (FMAP) determines how much the federal government contributes to each state's Medicaid costs.

   • FMAP varies by state (based on income levels) but generally ranges from 50% to 78% (poorer states get more federal funds).

   • The federal government covers 90% of costs for Medicaid expansion enrollees under the Affordable Care Act (ACA).

2. State Contributions

   • States cover the remainder of Medicaid costs.

   • Each state decides eligibility rules, benefits, and payment rates within federal guidelines.

   • States fund their share through state taxes, such as:

     • General state revenues (income/sales taxes)

     • Provider taxes (fees on hospitals or healthcare providers)

     • Tobacco, alcohol, or lottery revenues (in some cases)

Key Differences Between Medicare & Medicaid Funding

Feature	Medicare	Medicaid
Administered By	Federal government	Joint federal & state program
Funded By	Payroll taxes, premiums, general revenue	Federal & state tax revenue
State Role	Limited (only supplements in some cases)	Major (states design programs & share  costs)