Medicare Tax Definition - Funding Senior Healthcare
Since Medicare's inception, the program has struggled to build its fund. From tax cuts and other actions from governments of past days, the program has always had a black cloud over its head. For this federally funded and managed senior health insurance program to be a success, we all need to continue to contribute to keeping Medicare alive. Most of the money for Medicare doesn't come from the general tax pool because not everyone qualifies for it. Ergo, funding for it must come as an additional tax.
Medicare Tax Definition
The Medicare tax rate is an amount of money that must legally be withheld from your wages or salary to be contributed to the pool. The Medicare tax rate you pay is based on a percentage of your paycheck. The Medicare tax rate is sometimes called the FICA tax rate, which encompasses Medicare and social security tax.
Why You Pay Medicare Tax
The reason you pay Medicare tax is so you will have a safety net for the future. Healthcare is expensive, but the great part about Medicare is that you will have access to subsidized health insurance, which will cover the majority of your medical services completely.
If you did not contribute taxes into the system, these types of subsidies would not be possible. Paying your Medicare tax is crucial to the future of the program, which despite your taxes not going down, is constantly facing budget cuts as well as higher fees.
What Is The Tax Used For?
As mentioned, the Government uses the Medicare tax to fund the Medicare program and help you offset the cost of your healthcare. The taxes also go into a pool to help the disabled and persons with end-stage renal disease (ESRD) who need dialysis treatments. Other funding goes to community awareness and other areas needed to bring success to the program.
Who Is Paying?
Every working aged individual must contribute to the program regardless of their intention to draw on the insurance when eligible to do so. Another important fact to note is that even if an employee is working and receiving Medicare, they still have to contribute taxes to the pool on top of the premiums and other funds they pay. Unfortunately, there are some who get Medicare but have never paid into the system. While we want and should want to help others less fortunate than ourselves, it does require everyone else to offset their costs for the program, and this only serves the need for higher Taxation for such programs which most cannot afford.
Do Employers Pay Medicare Tax?
Yes, Employers must also pay into the Medicare system on top of what you pay. Your employer must pay the same rate of Medicare tax as you do, and pay the combined portion to the Government.
What Is The Current Medicare Tax Rate For 2018
[The current rate](https://www.irs.gov/taxtopics/tc751) of tax is 1.45%, although there are income caps that may cause you to pay differently. For example, as of 2013, if your wages or salary exceed a certain dollar amount, then your employer must withhold another 0.9%. There is no dollar limit on what is paid into Medicare, and you still pay into the system after you have earned your free Medicare Part A.
Medicare is an important aspect of our culture. If we do not continue to fund the program, we may not have such programs to rely on in our golden years. We as a collective must pay Medicare tax to support the program and maintain the dignity of everyone.