Question

In: Economics

what are the major sources of funding for medicaid?

what are the major sources of funding for medicaid?

Solutions

Expert Solution

The Medicaid program is jointly funded by the federal government and states. The federal government pays states for a specified percentage of program expenditures, called the Federal Medical Assistance Percentage (FMAP). States must ensure they can fund their share of Medicaid expenditures for the care and services available under their state plan.

States can establish their own Medicaid provider payment rates within federal requirements, and generally pay for services through fee-for-service or managed care arrangements. To change the way they pay Medicaid providers, states must submit a State Plan Amendment (SPA) for CMS review and approval

How is Medicare funded?

The Centers for Medicare & Medicaid Services (CMS) is the federal agency that runs the Medicare Program. CMS is a branch of the Department of Health and Human Services (HHS). CMS also monitors Medicaid programs offered by each state.

In 2017, Medicare covered over 58 million people. Total expenditures in 2017 were $705.9 billion. This money comes from the Medicare Trust Funds.

Medicare Trust Funds

Medicare is paid for through 2 trust fund accounts held by the U.S. Treasury. These funds can only be used for Medicare.

Hospital Insurance (HI) Trust Fund

How is it funded?

  • Payroll taxes paid by most employees, employers, and people who are self-employed
  • Other sources, like these:
    • Income taxes paid on Social Security benefits
    • Interest earned on the trust fund investments
    • Medicare Part A premiums from people who aren't eligible for premium-free Part A

What does it pay for?

  • Medicare Part A (Hospital Insurance)   benefits , like inpatient hospital care, skilled nursing facility (snf) care , home health care , and hospice care
  • Medicare Program administration, like costs for paying benefits, collecting Medicare taxes, and fighting fraud and abuse

Supplementary Medical Insurance (SMI) Trust Fund

How is it funded?

  • Funds authorized by Congress
  • Premiums from people enrolled in Medicare Part B (Medical Insurance) and Medicare drug coverage (Part D)
  • Other sources, like interest earned on the trust fund investments

What does it pay for?

  • Part B benefits
  • Part D
  • Medicare Program administration, like costs for paying benefits and for fighting fraud and abuse

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