Medicare Medical Savings Account Plans

A Medicare Medical Savings Account Plan combines a high-deductible Medicare Advantage plan with a Medical Savings Account, or MSA. It works much like health savings account plans for people with individual or employer-sponsored insurance.

Medical Savings Account Plans

An MSA is a type of Medicare Advantage policy. This coverage is much like a Health Savings account outside of Medicare.

There are two components to a Medical Savings Account Plan:

  1. A high-deductible Medicare Advantage Plan: Medicare Advantage plans are sold as an alternative to traditional Medicare. All Medicare Advantage plans offer Medicare Parts A and B benefits. But with a high deductible plan, you must pay the deductible amount yourself before Medicare begins to pay. Once you reach your deductible, Medicare pays all your covered costs.
  2. A Medical Savings Account: Each year, Medicare will deposit a specified amount of money into your Medical Savings Account. If you use this money for expenses covered by Medicare, the money you spend will count toward your deductible.

How Does a Medical Savings Account Work?

The MSA plan combines a savings plan with high-deductible coverage. The savings can pay for healthcare costs. Medicare gives the plan money to handle your claims; then, the plan deposits some of that money into your MSA.

Beneficiaries can’t add their own funds to the MSA. Most beneficiaries use funds to cover the costs before the deductible is met.

If there are funds in the account at the end of the year, they remain in the account as long as you’re enrollment status remains active the following year. Also, funds from MSA’s grow tax-free and free of interest. These plans are best for those in good health with only a couple of doctor visits annually.

The deductible and deposit amount depend greatly on the policy you select. Also, not all costs count toward the annual deductible. The costs must relate to Part A or Part B. Beneficiaries will need to purchase additional Part D coverage.

Can a Medical Savings Account be Used for Medicare Premiums?

Most enrollees don’t have a premium other than for Part B, which varies by income. The beneficiary is responsible for the Part B premium. If you had a Health Savings Account, while you can’t contribute funds while in Medicare, you can use those funds to pay premiums.

The HSA can pay for Part B premiums, Medicare Advantage premiums, Part D premiums, long-term care insurance, copayments, and deductibles. HSA accounts can’t pay Medicare Supplement Plan premiums.

Eligibility Criteria for a Medical Savings Account Plan

If you’re eligible for Medicare, you can usually sign up for any Medicare Advantage plan, including an MSA plan. Although, those with End-Stage Renal Disease may not be eligible. However, if you’re already enrolled in Medicare or a different Medicare Advantage plan, you may not be able to switch to an MSA plan until the next Annual Election Period, from October 15th – December 7th each year.

Medicare Advantage enrollees can switch back to Original Medicare or a different Medicare Advantage plan. The Medicare Advantage Open Enrollment Period runs annually between January 1st and March 31st. Enrollees who are unhappy with their Medicare Advantage plan can do something about it.

How to Set Up and Use Medical Savings Account

When you enroll in an MSA plan, your plan provider will tell you how to set up your Medical Savings Account at a bank. Medicare will then deposit money into your account for the year. You cannot add your own money to this account. The bank may send you a debit or credit card that you can use to pay expenses directly from your MSA. You can use the MSA for anything you want, including non-healthcare costs; but, there is a big advantage to using the money for healthcare expenses.

  • If you use the MSA to pay medical expenses covered by Medicare, such as hospital bills, tests, or a specialist; then, the money you spend counts toward your annual MSA plan deductible.
  • You use the MSA to pay for healthcare expenses that aren’t covered by Medicare, such as the dentist; then, the money you spend will not count toward your deductible.
  • If you use the MSA to pay for something else, such as a car repair, you’ll pay a penalty plus taxes on the money used.

Costs for a Medical Savings Account Plan

Premiums vary for Medical Savings Account plans; but, you must still pay the monthly Part B premium. Your out-of-pocket costs will vary depending on the plan you’re enrolled in and the way you spend the money in your Medical Savings Account. Different plans will have different deductibles, and the amount of money Medicare deposits in your account will also vary.

For example, you might have an MSA plan with a $4,000 deductible and Medicare depositing $2,500 into your MSA each year. If you spend the entire $2,500 on Medicare-covered medical expenses, you will have met $2,500 of your deductible. If you have additional medical expenses, you can spend $1,500 of your own money before Medicare pays.

Suppose you spent the $2,500 in your MSA differently. $1,500 on the dentist and $1,000 on medical expenses. Only the $1,000 counts toward your deductible; so, you must spend another $3,000 on medical expenses. Then, you satisfy the deductible and Medicare pays. Once you have reached your deductible, however, the MSA plan will pay for all services covered by Medicare.

Advantages and Disadvantages of Medical Savings Account Plans

The biggest advantage of MSA is money not used goes back to the MSA the following year. Money in the plan also earns interest. If you’re healthy and don’t have a lot of medical expenses; you can spend what you need and save the rest to cover your medical costs.

However, MSAs are not for everyone:

  • MSA Plans may not be available in your area. Only about 5,000 Medicare Advantage enrollees are in MSA plans. Only a handful of insurance companies offer them.
  • You must be able to afford the deductible. Medicare plus a Medicare Supplement gives you a predictable premium each month. An MSA plan has lower premiums but can leave you with a big medical bill to pay before you reach your deductible. It’s important to be aware of potential costs.
  • MSAs do not cover prescriptions, but there may be add-on coverage available for vision and dental. You can buy a standalone Part D plan if you choose an MSA plan.
  • You cannot get a Medigap, or Medicare Supplement, plan to cover out of pocket costs. Medigap plans are only available if you have traditional Medicare, not if you have Medicare Advantage.

Is a Health Savings Account the Same as a Medical Savings Account?

No, however, many similarities are present. Both allow you to roll over funds from the previous year.

Also, these policies offer tax benefits and long-term savings options. Although, these plans have many differences.

What’s the Difference Between an HSA and MSA?

An HSA is a Health Savings Account. A health savings account is usually combined with a high deductible policy. HSA plans are similar to MSA plans outside Medicare.

MSA coverage is a Medical Savings plan. This plan can help cover Medicare beneficiary expenses. With an HSA you can contribute to the savings before Medicare. In an MSA, Medicare contributes, not you.

Is a Medical Savings Account the Same as a Flexible Spending Account?

No, an MSA is generally for Medicare beneficiaries and an FSA is mostly given to employees where this coverage is optional.

Is a Flexible Spending Account the Same as a Medical Savings Account?

No, Flexible spending accounts have a “use it or lose it” benefit. So, the funds in the next year, won’t rollover. Although, some plan administrators may offer a small grace period. FSA’s aren’t a great long-term savings strategy; although, you can benefit from tax savings since the money is still tax-free savings. Most people will receive FSA coverage through an employer.

If you change employers, you might lose the FSA. If you don’t qualify for an HSA, an FSA could be a good option. Funds for FSA’s aren’t usually available for non-medical reasons.

Get Your Questions Answered About Medicare and Medical Savings Accounts

When enrolling in Medicare, it’s important to choose the right coverage for your healthcare needs and your budget. MedicareFAQ makes it easy by searching the top insurance companies in your area for the best rates. Let us help you find a plan. Call us at the number above, or fill out our form for an instant quote.

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.


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