How Social Security and Medicare work

AP News
Posted: Apr 23, 2012 2:11 PM
How Social Security and Medicare work

Social Security and Medicare basics:


Who gets benefits: More than 56 million retirees, disabled workers, spouses and surviving children of deceased workers.

How it's financed: Employers and employees both pay a 6.2 percent tax on the first $110,000 of a worker's wages. Congress temporarily reduced the worker portion of the tax to 4.2 percent for 2011 and 2012, using borrowed money to make Social Security whole.

Average monthly benefit: $1,232 for retirees; $1,111 for disabled workers. Benefits are indexed annually for inflation.


Who's covered: About 50 million beneficiaries, including retirees 65 and older and people under 65 with permanent disabilities.

How it's financed: Employers and employees each pay a 1.45 percent tax on all wages. Medicare beneficiaries pay monthly premiums for outpatient and prescription coverage. The government's general fund also covers an increasing share of the program's cost.

Average spending: About $12,500 a year per beneficiary, but Medicare spending is skewed toward the sickest people. The highest-cost 10 percent of beneficiaries account for about 60 percent of total spending.


Sources: US Government, Kaiser Family Foundation, Associated Press research.