Medicare and Health Savings Accounts (HSA)

There are guidelines and rules you must follow when it comes to Medicare and Health Savings Accounts. A Health Savings Account is a savings account in which money can be set aside for certain medical expenses. As you get close to retiring, it’s essential to understand how Health Savings Accounts work with Medicare.

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How Medicare and Health Savings Accounts Work

Health Savings Accounts help pay for deductibles, coinsurance, copayments, and other medical expenses. Once the money goes into the Health Savings Account account, you can withdraw it for any medical expense, tax-free. Additionally, you can earn interest, your balance carries over each year, and this can become an investment for a retirement fund. Unfortunately, some restrictions come along with having a Health Savings Account with Medicare.

HSA is only for those enrolled in a high-deductible plan. Since Medicare is not considered an HDHP, enrolling makes you ineligible to contribute to an HSA.

Once you enroll in Medicare, it’s illegal to continue to contribute to a Health Savings Account. The only exception to continue contributing to your HSA is to postpone enrolling in Medicare. As long as you have creditable coverage through your employer, you won’t be penalized for delaying your enrollment.

Before you assume your employer coverage is considered creditable coverage, make sure to talk to your benefits administrator. If your employer has less than 20 employees, it won’t be considered creditable coverage.

What is the Penalty for Having an HSA and Medicare?

Once you enroll in Medicare, the IRS sets your contribution limit to your HSA to zero. What this means is, beginning the first month you’re enrolled in Medicare, you’re not allowed to contribute any monies into your HSA.

This limit also pertains to any period of retroactive Medicare coverage. If you continue to contribute, or your Medicare coverage becomes retroactive, you may have to pay a 6% excise tax on those excess contributions. If you happen to have excess contributions, you can withdraw some or all to avoid paying the excise tax.

Can HSA Funds Be Used to Pay Medicare Premiums?

The good news is, even though you can’t continue to contribute to your Health Savings Account once enrolled in Medicare, you can still use your Health Savings Account funds to pay for many medical expenses, including premiums.

Qualified Medicare Expenses:

  • Part A, Part B, and Part D Premiums (Part A is usually premium-free)
  • Medicare Advantage premiums
  • Copays
  • Coinsurance

Can I Use My HSA Funds to Pay My Medicare Advantage Premiums?

Yes, you can use your HSA funds to pay for your Medicare Advantage premiums as well as any copays and coinsurance.

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Can I Use My HSA Funds to Pay My Medigap Premiums?

No, Medigap premiums are not considered a qualified Medical expense. You can not use your HSA funds to pay your Medigap premiums.

Can My Health Savings Account Reimburse Me for Medicare Premiums?

You can take tax-free withdrawals from your Health Savings Account to reimburse the cost of premiums you’ve paid out of pocket. Even if those premiums were an automatic deduction from your Social Security check. If this is something you didn’t know, you can still withdraw money at any time to reimburse yourself for those premiums.

Can You Contribute to an HSA with Medicare Part A?

Once you enroll in Part A, you cannot actively contribute to your HSA. Any contributions made after you’re Part A is active will be considered excess contributions.

If I’m Enrolling in Medicare Later This Year, How Much Can Be Contributed to My HSA?

Health Savings Account beneficiaries can contribute until the first day of the month; Medicare is sufficient. It’s your responsibility to prorate both your regular contribution and the catch-up contribution if applicable.

To determine the prorate maximum contribution, add the IRS maximum plus the catch-up amount. Then, divide that number by 12 months and multiply by the number of months you won’t have Medicare.

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Jagger Esch

Jagger Esch is the Medicare expert for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

81 thoughts on “Medicare and Health Savings Accounts (HSA)

  1. Lindsey – since one can’t use an HSA to pay for Medigap premiums, but they CAN reimburse themselves for out-of-pocket costs for premiums they’ve paid themselves, can’t they then reimburse themselves for Medigap premiums? Wouldn’t this be tax free? I’m a Medicare agent and Certified Senior Advisor (CSA) in the Seattle, WA area but have never come up against an HSA or FSA before now. I have a client turning 65 in Oct, she says she has a medical savings account, wants to pay premiums from that. With her severe chronic medical issues, she needs a Medigap policy, not a MAPD. She’s looking at some very high-cost surgeries in the near future, so Medigap is best for her situation.

    1. Hi Sandy! Yes, you can be reimbursed for the premiums you paid for your Medicare Supplement plan. From my research, it says SOME Medicare Supplement plans you can get reimbursed the cost of the premium you paid out of pocket from your HSA. I’m not able to find much detail or documentation regarding this, unfortunately. I would call the HSA benefits administrator directly to see what the process is to get reimbursed for her supplement premiums.


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