What is Social Security?
Social Security is primarily a retirement and old age insurance program. Most workers contribute OASDI payroll taxes while they work and collect Social Security benefits when they retire. The current full retirement age is 66 and is slowly being raised to 67. Today, about 167 million people work and pay Social Security taxes and about 59 million people receive monthly Social Security benefits.
Social Security also provides disability insurance for disabled American under its DI program.
What is Medicare?
Medicare is the federal health insurance program for people who are 65 or older. Workers contribute Medicare payroll taxes throughout their working lives and receive Medicare once they reach the retirement age. Medicare covers hospital insurance (Part A), supplementary medical insurance (Part B), and prescription drug coverage (Part D).
What is the difference between Medicare and Medicaid?
While Medicare provides health coverage to a those 65 or over. Medicaid is a state-run and partially federally-funded program that provides health insurance to low-income Americans.
How is Social Security financed?
Social Security is primarily financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up the taxable maximum, while the self-employed pay the combined 12.4 percent.
Payroll tax revenue above required expenditures are put into Social Security’s trust funds, which pay out interest over time. To see the financial operations of the trust funds, click here.
To learn more about Social Security, click here.
How is Medicare financed?
Medicare is financed through a combination of payroll taxes, premiums paid by seniors, and general tax revenue. Part A gets most of its expenditures from payroll taxes, but Parts B and D get most of their expenditures from general tax revenues. Premiums make up around 15-20 percent of Part B and D’s expenditures.
To read the 2017 Medicare Trustees Report, click here.