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Funding for Medicare Part D

Public Law 108-173 created Medicare Part D, Medicare's Prescription Drug Plan effective in 2006. Since inception, 26 million Medicare beneficiaries have enrolled in plans which are voluntary and require payment of premiums.

  1. Part D Trust

    • Medicare has two trust funds--the Medicare Hospital Insurance Part A fund and the Supplemental Medical Insurance fund. Medicare Part B Medical Insurance and Part D Prescription Drug Plan have separate accounts within the SMI fund. At the end of 2008 the Part D account had assets of $911 million.

    Fund Revenues

    • The Part D account had $49.4 billion income in 2008. Premiums paid by beneficiaries and by states accounted for $12.1 billion income; $37.3 billion, 75.5 percent of revenues, comes from federal general revenues. Unlike the HI trust fund, Part D funds do not depend on payroll taxes or investment interest. Funding is flexible, allowing increases in premiums and transfers of federal revenues as needed.

    Funding Projections

    • The Medicare Board of Trustees estimates that Part D program costs, $49.3 billion in 2008, will increase from $66.2 billion in 2010 to $140.9 billion in 2018. Premiums will have to increase from the current national average of around $47. Federal funding will need to rise from $50.7 billion in 2010 to $107.8 billion in 2018.

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