How Is Medicare Funded? 
Medicare has several parts . Medicare Part A covers Hospital Benefits ; Part B covers physician & outpatient services ; Part D covers prescription drugs . Also , a Medicare Supplement can be purchased to cover gaps in Part A & B. All of that to say that Medicare claims are funding from a combination of resources . The primary source of funding comes from taxes typically withheld from your paycheck -LRB- 1.45 % -RRB- . Part A is covered 100 % by the government ; Parts B & D are subsidized by the government , paying a portion , while premiums collected are supposed to pick up the remaining . Major reductions in claim payments from the Medicare side are currently being implemented in order to help fund the Affordable Care Act -LRB- aka Obama Care -RRB- . Reductions in reimbursements to doctors & hospitals have already begun . Also , the implementation of Accountable Care Organizations -LRB- designed to determine what procedures are necessary ... surgery or a pill -RRB- will also dramatically reduce costs . All this to save the government money on Medicare funding . 