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How Medicare is Financed Through Your Taxes
The way how Medicare is financed is done through various different taxes that are taken from what person earn. The way of how Medicare is financed will also be different in accordance to people who are employed by a company and those who are self-employed. These taxes are all done in order to help people afford the costs of Medicare that they may need to take care of when they are older and will require greater levels of medical care.
The Federal Insurance Contributions Act tax, which was established after Social Security was formed in the 1930s, is one of the important ways of how Medicare is financed. This tax is taken from a person’s pay from that person’s employer to help with funding both Social Security and Medicare. 1.45% of a person’s check goes to take care of Medicare costs from the person who is employed. The employer will match the amount that is paid and will also pay 1.45% of the check to Medicare. With the millions of people who are working today it can be seen how Medicare is financed in a way that is especially helpful to it.
People who are self employed will have to pay the FICA tax in a different method. This is also done to help paid for Medicare costs. 2.9% of a person’s net earnings will go towards the FICA tax. The person who is self employed will have to pay for this.
Originally there was a limit as to how much of one’s wages could be withheld every year to help with how Medicare is financed. However, with more people requiring Medicare services today the limit was removed so that the amount of money that is used for financing can increase. This change went into effect in 1994.
Why are these taxes important? Because there is a great amount of money that is used every year in Medicare, and for this it is important to use taxes for how Medicare is financed. According to the House Ways and Means Committee the United States government spent more than $250 billion on Medicare costs in 2002. During that same year subscribers to Medicare programs paid for $231 billion of the costs. With this in mind it is important that the taxes are used for Medicare, as it can help to keep the government able to help older generations handle all of their medical concerns. Of course, people will have to pay for Medicare with specific premiums.
The next time you see your pay check and you see that it has FICA taxes in it or you have to pay a good amount of money from your self employment to the government you’ll know that you are helping to finance Medicare. The way of how Medicare is financed is simple to understand, and it will help to make sure that when you reach the age of sixty five you will be able to afford your health needs through Medicare.