Is A Medicare MSA Right For You?
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The Medicare MSA…Is It Right For You?

News & Blog

What Is A Medicare MSA?

A Medicare Medical Savings Account plan (MSA) is a special type of Medicare Advantage plan (Part C). This type of plan may offer the freedom of choice for people who want more control over their health care dollars and decisions. Of course, this also entails some more responsibilities.

There are two main components of a Medicare MSA plan:

  • A savings account dedicated for medical expenses
  • A high-deductible health plan

How Does A Medicare MSA Work?

MSA’s work in a very similar fashion as an HSA…it’s just designed to work for Medicare beneficiaries.

The savings account part of a Medicare MSA plan is self-managed like any other bank savings account. One main difference is that the account is funded with money from Medicare, not from your contributions.

Medicare gives Medicare Advantage plan sponsors a set amount of money for each beneficiary covered by the plan. The plan then uses the money to pay the Medicare-covered portion of the plan member’s health care costs.

When you have a Medicare MSA plan, the plan provider deposits the money it receives from Medicare into a savings account that you manage. You then become responsible for paying the Medicare-covered portion of your health care costs, instead of the plan. You are responsible for 100% of the cost for Medicare-covered services up to the plan deductible.

You may withdraw money from this account – tax free – and use it to help pay qualified medical expenses. Qualified expenses are defined by the Internal Revenue Service (IRS). This includes costs for services covered by Medicare Part A and Part B and some other expenses.

The plan deposits funds from Medicare into your account at the beginning of each year. The amount can vary. Funds may earn tax-free interest or investment income, and the balance carries over year to year.

You may not deposit your own money into a Medicare MSA. Funds withdrawn and used to pay non-qualified expenses are taxed and a penalty is also applied.

The MSA High-Deductible Health Plan

In general, Medicare MSA plans:

  • Cover all the services that Original Medicare (Part A and Part B) covers
  • Allow you to see any provider that accepts Medicare
  • Do not charge premiums; you continue to pay your monthly Part B premium to Medicare
  • Do not include prescription drug coverage; you may buy a separate stand-alone prescription drug plan (Part D)

The high deductible is an important feature of Medicare MSA plans. The annual deductible may be more than the amount Medicare provides to deposit into the savings account. You need to be able to cover the difference if you use all the money in the savings account before the deductible is met.

Once the deductible is met, the health plan pays 100 percent of the cost for covered services. In effect, the deductible is the plan’s out-of-pocket maximum. All Medicare Advantage plans are required to set an annual out-of-pocket maximum.

Savings account withdrawals used to pay for services covered by the plan count toward the deductible. You may use the funds for other qualified medical expenses, but those amounts will not apply to the deductible.

Is A Medicare MSA Right For Me?

Medicare MSA plans may offer freedom of choice for people who want more control over their health care dollars and decisions. On the flip side, plan members need to understand how the savings account and deductible work, manage their own medical bills, and keep good records of health care expenses.

In order to enroll in a Medicare MSA plan, beneficiaries must:

  • Be enrolled in both Medicare Parts A & B
  • Live in an area serviced by an MSA carrier
  • Reside in the U.S. for 183 days of the calendar year
  • Not have other coverage such as employer/union/VA benefits
  • Not be eligible for Medicaid
  • Not be currently receiving Medicare hospice benefits

Medicare Beneficiaries who might consider an MSA option:

  • Current HSA holders aging into Medicare
  • People who travel frequently and “snowbirds”
  • Medicare beneficiaries low expected medical expenses
  • People with in-control chronic conditions
  • Healthier Med Supp policy-holders

Do you need help determining if the HSA or MSA would work for you? Call a Savers Health representative today!


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