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How is Medicare Part B funded?

Medicare Part B on money
Just the essentials...
  • Medicare Part B is the medical insurance part of the national Medicare law
  • Medicare Part A and Medicare Part B make up the Original Medicare
  • The US government funds Medicare Part A and Part B
  • It funds Medicare Part B mainly with US Medicare Trust Funds and premiums

The Medicare program began as amendments to the Social Security Act. It has grown into an entitlement for older Americans to have comprehensive medical and hospitalization insurance coverage.

Most participants pay for the insurance benefits from payroll deductions for social security over years of work in jobs or businesses with taxable income. The Congress added prescription drug coverage, and greater choices in medical insurance with Medicare Advantage or Medicare Part C.

Comparison shopping can help decide whether government-run Original Medicare or Medicare Advantage is best for an individual.

Enter your zip above to compare your state’s cheapest private Medicare plans!

The Medicare Trust Funds

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The US government maintains two Medicare Trust Finds to finance Medicare. The Supplementary Medical Insurance Trust Fund powers the Part B programs serving millions of older Americans with extensive medical insurance.

Today, there are efforts to convert it to more modern management and better results.

The below-listed items describe the major Medicare trust funds that finance Medicare Part A, and Medicare Parts B and D.

  • The HI Trust Fund
  • The SMI Trust Fund

Part B Programs

Medicare Part B is Medical insurance coverage. It is part of the national health care system that protects more than 50 million people.

Medical insurance combines with Part A Hospital Insurance to form the Original Medicare. As a standalone program, Medicare Part B does not meet the requirements of the Affordable Care Act, however, in combination with Part A, it is a primary solution for health maintenance.

Part B Premiums and Fees

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Part B premiums are about $105.00 per month but cost more for those with higher incomes. They also cost more for those who started late and must pay the Part B late enrollment fee.

Part B premiums can be deducted or paid by other arrangements. When connected with a Part A enrollment, Original Medicare fulfills the Affordable Care Act obligation

Part B and Gap Coverage

Part B coverage leaves a gap that consumers must fill on their own efforts. Many use backup insurance like the Medicare Supplement policies.

Those eligible for Medicaid as well as Medicare can use Medicaid to help fill in the funding gaps left by Part B Medical Insurance.

Sequester and Medicare Spending

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The Budget Control Act of 2011 set terms for Congress to establish certain spending reductions, new funding authorizations and accounting reforms by a certain date. Failing that, some automatic budget and spending reductions would take effect.

While the sequester excluded many public safety, and defense functions along with other regulatory and financial systems, the broad spending and budget cuts took place as Congress failed to act.

The Sequester cuts were largely not chosen but blind, forced cuts that neither reflected budget policies nor spending priorities.

Medicare and the Affordable Care Act

The Affordable Care Act reduced the disparity in drug costs by closing the Donut Hole between the authorizations for prescription benefits.

The ACA reduced some payments to beneficiaries while increasing services in the qualified health plan requirements. Original Medicare meets the standards for Obamacare coverage due to the addition of the below-described essential benefits, prevention services, and wellness reforms.

  • Added prevention and wellness benefits at no costs to users
  • Reduced the Donut Hole and help it disappear in future years
  • Management improvement, costs reduction, and better patient outcomes
  • Strengthened the Trust Fund for Hospital Insurance

Medicare Trends Better than Private Sector

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Since 2010, Medicare has grown at a lower rate than comparable private insurance. Combined with the Sequester, the Affordable Care Act made spending reductions in Medicare.

It moved funds away from benefits by reforming and improving payment and administration processes, and put money into relief for prescription drugs, and added new no cost prevention and wellness benefits.

Future of Part B Funding

In the window from 2016 through 2026, Medicare Part B will grow remarkably larger. It will swell as the population ages and lives longer, healthier lives. The funding for Medicare Part B will likely remain the same without some new legislation and reform ideas.

The major source of funding will be from general revenues which are taxes on individual incomes and businesses. The secondary source of funding will continue to be insurance premiums.

Following that will be income produced by funds in the Supplemental Medicare Insurance Trust.

Managing for Success and Savings

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The Affordable Care Act has revised the fee for services approach to Medicare and particularly the Original Medicare. The law has moved Medicare to a value-based approach that has turned in some solid signs of improvement in payments, costs, and performance.

The system detects and discourages waste, inaccuracy, and overcharges by providers. Fee for service medicine emphasized the volume of patients seen and the number of services performed.

This approach put pressure on providers to see patients too frequently and perform tests, procedures, and activities with only marginal benefits. The value basis goes to results and efficiency.

Better Care, Better Outcomes

The Affordable Care Act has moved Medicare to a value based system of management. This emphasizes the importance of initial care.

Thorough diagnostics and impactful treatment processes reduce the need for further and far more costly treatment in future years for these patients. This, in turn, reduces demands on Medicare and re-admissions.

The old system promoted higher demands with incentives based on the volume of care rather than the quality of care. The Act stabilized funding for the Medicare HI Trust through 2028.

Accountable Care Organizations

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Using advanced management techniques, nearly 500 accountable care organizations have begun the serious work of analyzing and improving healthcare delivery and management. Working under contract with the Centers for Medicare and Medicaid, the ACO’s have earned millions in incentives for proving inefficiencies and correcting them.

The major Medicare insurers turn to ACO’s also. They can benefit from the dedication to capturing opportunities for value-based medicine. Their provider systems can be more efficient, and effective when built upon value-based principles.

Modern Techniques and Technology

The underlying structure of medical practice has not changed because of Medicare reimbursement. Medicare has neatly fit into a structure that predates some of the more powerful development tools such as health Information Technology.

The Affordable Care Act advanced business models that encourage greater use of value and demand better use of available technology. Making a clear commitment to value-based assessments, the HHS has turned a corner on the direction and costs of healthcare management.

Funding Part B through Taxes, Premiums, and Trust Income

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The US government funds Medicare Part B through the SMI Trust Fund.

The fund also supports the Prescription Drug benefit in Part D. Trust Fund money comes through Congressional authorizations from the general funds, Trust income, premiums for Part D, and premiums for Medicare Part B.

Comparison shopping is an excellent tool for finding the best values among private insurance plans offered through Medicare Advantage, Medicare Part D, and Medigap.

Click here to enter your zip in our free search tool and receive personalized quotes today!

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MedicareInsurance.com is privately owned and operated. MedicareInsurance.com is a non-government asset for people on Medicare, providing resources in easy to understand format. The government Medicare site is www.medicare.gov.

This website and its contents are for informational purposes only and should not be a substitute for experienced medical advice. We recommend consulting with your medical provider regarding diagnosis or treatment, including choices about changes to medication, treatments, diets, daily routines, or exercise.

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