In a pervious blog we discussed the Social Security trust funds, from which all types of Social Security benefits come from, but besides understanding where the benefits come from and understanding the trust funds, it is also important to understand where the money in the trust funds come from. Of course, as you might expect, the trust funds receive tax dollars from Americans, but it is a bit more complex than that.
How Are Social Security Benefits Funded?
To pay for Retirement, Survivors, Disability Insurance, and Hospital Insurance Benefits, taxes are collected from employers, employees, and the self-employed who are working in jobs and businesses covered by Social Security. Supplemental Security Income (SSI) funding comes from the general revenues of the U.S. and in States which supplement the Federal benefits from State funds. SSI is a needs-based program that provides benefits to people who are disabled and/or retired.
How are hospital insurance benefits funded?
Hospital Insurance Benefits are either paid from the FICA/SECA taxes or by monthly premium payments. Funding depends on the circumstances of eligibility.
How are medical insurance benefits funded?
To pay for Medical Insurance Benefits, the law provides for the collection of monthly premiums. The people enrolled in the program (or in some cases, the State) pay these premiums Since the premiums cover only about one-fourth of the cost of the program, the Government pays the remaining amount from general revenues. Starting in January 2007, people enrolled in Medicare Part B with modified adjusted gross incomes over a set threshold were required to pay a higher percentage of their total Part B premium costs. Increases in Part B premiums for these individuals were phased in from 2007 to 2009.
How are prescription drug benefits funded?
Prescription drug benefits are funded by general revenues of the U.S., monthly beneficiary premiums, and state payments.
