How are Social Security and Medicare funded? How many people benefit from the programs?
Latest update on March 8, 2023Social Security is a benefit from the federal government providing a continuing income to the retired, disabled, and family of people deceased workers. Medicare is a federally run health insurance program. While these programs are separate, they are closely linked and are primarily for the 65 and older population. The federal government publishes data on both programs, including enrollment, costs, and usage.
What is the role of the government in health?
USAFacts categorizes government budget data to allocate spending appropriately and to arrive at the estimate presented here. Social Security and Medicare are two of the largest government programs in the US. Spending on each program has increased as the US population has grown and aged.
Government revenue and expenditures are based on data from the Office of Management and Budget, the Census Bureau, and the Bureau of Economic Analysis. Each is published annually.
Agency | Responsibilities |
|---|---|
Social Security Administration | Enforce retirement savings in the form of Social Security |
Centers for Medicare and Medicaid Services | Provide health insurance in the form of Medicare |
Agency |
|---|
Social Security Administration |
Centers for Medicare and Medicaid Services |
How many people are on Social Security and Medicare?
Social Security in the US is formally known as Old-Age, Survivors, and Disability Insurance. Recipients include retired workers and family members, surviving family members of deceased workers, and people with disabilities. People qualify to receive monthly payments based on earnings and associated payroll taxes paid during working years.
Enrollment in Social Security insurance programs has more than doubled since the 1970s. This can be explained by both total population growth and an increasingly aging population. People can start receiving retirement-based Social Security payments as early as age 62.
Beneficiaries of another Social Security Administration-run program called Supplemental Security Income (SSI) are not shown here as it is not considered a part of traditional Social Security. That program is a needs-based monthly payment that is for people with limited income and resources who are disabled, blind, or age 65 or older.
In 2022, 63.8 million people were enrolled in Medicare programs.
Medicare is a federally-run health insurance program primarily for people 65 and older but also for younger people with disabilities and those with End-Stage Renal Disease. In 1967, its first year of existence, 19.3 million people were enrolled. Enrollment has since tripled due to a growing and aging US population.
Medicare coverage comes in multiple parts. Part A, or hospital insurance, has the largest enrollment and covers inpatient care, including hospitals, hospices, and home health care. Part B covers outpatient care. Part D covers prescription drugs. Most people don’t pay monthly premiums for Part A. Parts B and D require monthly premiums and have lower enrollments than Part A.
Part C (Medicare Advantage) and Medigap are private supplements or alternatives to traditional Medicare. Enrollment in these programs is not represented in the graphs below.
What does each person get on Social Security and Medicare?
The Social Security Administration data shown here is an average of all monthly payments in the last month of each calendar year.
What individual Social Security recipients get every month depends on a few factors. Social Security benefits are calculated based on a formula using a person’s earnings history (up to 35 years) and adjusting for changes in average wages over time. Retirement age also determines a person’s benefits: People with the same earnings and who begin drawing Social Security at age 62 get lower payments than people who retire at 70. By law, Social Security benefits increase yearly based on a cost-of-living adjustment. For 2023, the increase was 8.7%, the highest since 1981.
The Centers for Medicare & Medicaid Services has documented the average costs of Medicare per beneficiary since 1967. The data is based on spending from Medicare's two trust funds (detailed later on this page). All Medicare enrollees are entitled to the same coverage regardless of income or health status.
How are Social Security and Medicare funded?
There are two Social Security trust funds: Old-Age and Survivors Insurance and Disability Insurance, which are primarily funded through payroll taxes. The chart below, using data from balance sheets maintained by the Office of Management and Budget, shows the balance of the trust funds at the end of every fiscal year. As the US population ages, the 65 and older population grows, the balance between the amount these trust funds take in and the increasing benefits they pay may be worth watching.
There are two Medicare trust funds: Hospital Insurance and Supplementary Medical Insurance. Like the two Social Security trust funds, the Hospital Insurance fund is primarily funded through payroll taxes. The Supplementary Medical Insurance trust fund is mostly funded through a combination of Congress-approved funds and premiums paid by enrollees.
The chart below, using data from balance sheets maintained by the Office of Management and Budget, shows the balance of both Medicare trust funds at the end of every fiscal year.
The trust funds for both Social Security and Medicare receive most funding from taxes taken directly from wages. The Medicare tax applies to all covered wages, while the Social Security tax is limited to a certain amount set every year. Self-employed people must pay the employee and employer share of these taxes: 12.4% for Social Security and 2.9% for Medicare.