Medicare MSA Plans

Fact Checked
Contributing Expert: Ron Elledge, Medicare consultant and author
Reviewed by: Kelly Blackwell, Certified Senior Advisor®, Caren Lampitoc, Medicare consultant
Updated: September 23, 2021

Is a Medicare MSA plan right for you? Understand your options and plan details.



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Ron Elledge
Medicare Consultant and Author
Ron Elledge
Medicare Consultant and Author

Ron Elledge is a seasoned Medicare consultant and author of “Medicare Made Easy.” As a Medicare expert, he regularly consults beneficiaries on Medicare rules, regulations, and strategies.

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Kelly Blackwell
Certified Senior Advisor (CSA)®
Kelly Blackwell
Certified Senior Advisor (CSA)®

Kelly Blackwell is a Certified Senior Advisor (CSA)®. She has been a healthcare professional for over 30 years, with experience working as a bedside nurse and as a Clinical Manager. She has a passion for educating, assisting and advising seniors throughout the healthcare process.

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Caren Lampitoc
Medicare Consultant
Caren Lampitoc
Medicare Consultant

Caren Lampitoc is an educator and Medicare consultant for Medicare Risk Adjustments and has over 25 years of experience working in the field of Medicine as a surgical coder, educator and consultant.

Medicare Medical Savings Account (MSA) Plans are a type of Medicare Advantage Plan that combines a high-deductible health insurance plan with a Medical Savings Account. These plans are similar to Health Savings Accounts paired with a high-deductible health insurance plan.

While an MSA plan can offer savings, few Medicare enrollees take advantage of it. Medicare MSA plan enrollment is estimated to be just 6,000 out of the 22 million people who enrolled in Medicare Advantage Plans in 2019. MSA plans aren’t available everywhere, and the plans are often not well understood. Read on to find the answers to your questions about an MSA.

What is a Medicare MSA Plan?

Medicare MSAs combine a Medical Savings Account with a high deductible health insurance plan. The plans are offered by private insurers and cover any medical expense that Original Medicare covers once the deductible has been met.

 

Plan structure High-deductible insurance plus MSA
Benefits available All Original Medicare benefits. May offer vision, dental, or hearing for an additional premium.
Qualified medical expenses Inpatient and outpatient services covered by Parts A and B

How MSA plans work

The MSA is funded by Medicare, which pays the private insurer to set up the account and deposit the funds. You’ll pay a Medicare Part B premium and do not contribute to the MSA. The associated Medicare Advantage high-deductible health plan (HDHP) must provide the same benefits, rights, and protections as Original Medicare, though each plan operates under different costs, rules, and restrictions.

The funds deposited into the plan are not taxable as long as you use them to pay for qualified medical expenses. You can roll unused funds to the next year and earn interest. But if you use funds for non-qualified expenses, you’ll pay both income tax and a 50% penalty.

Benefits available with an MSA plan

Medicare MSA plans may offer vision, dental, and hearing services for an additional premium but do not offer prescription drug coverage. You can purchase Medicare Part D coverage.

Reaching your deductible

You can use your Medical Savings Account to pay for any qualified medical expense, but not all expenses count towards the plan’s deductible. Qualified medical expenses include all inpatient and outpatient services covered under Medicare Parts A and B, such as:

  • Doctor visits
  • Hospital stays
  • Home health care
  • Durable medical equipment.

Expenses that don’t towards the deductible include services not covered by Medicare Parts A and B, such as:

  • Dental and vision care
  • Prescription drug coverage and costs

 

Advantages of a Medicare MSA Plan Disadvantages of a Medicare MSA Plan
  • Flexibility and control: You can choose your own medical providers
  • Tax-favored savings that you withdraw without penalty for medical expenses
  • Offers certainty for the maximum out-of-pocket expense
  • High-deductible health plan is required, which can lead to higher out-of-pocket costs
  • Maximum out-of-pocket costs may be much higher than other Medicare Advantage Plans.

Who is Eligible for a Medicare MSA Plan?

Though most Medicare Advantage Plans are eligible to anybody who turns 65 or is under the age of 65 and receives disability payments through Social Security or the Railroad Retirement Board, the eligibility rules for a Medicare MSA plan exclude certain individuals. You are not eligible for a Medicare MSA Plan if you:

  • Are eligible for Medicaid
  • Are currently receiving hospice care
  • Have health coverage that would cover your intended Medicare Advantage MSA plan’s deductible. This includes benefits from a union or employer retirement plan
  • Are a retired employee of the federal government receiving benefits from the Federal Employee Health Benefits Program
  • Live outside of the United States more than 183 days per year
  • Have End-Stage Renal Disease (there are some exceptions)
  • Receive TRICARE or Department of Veterans’ Affairs benefits

How Much Does a Medicare MSA Plan Cost?

Your expenses will vary with an MSA plan. You’ll pay a Medicare Part B premium, but not an MSA plan premium. Instead, you’ll pay out-of-pocket costs until you reach your deductible, which may be higher than the deductible of other Medicare Advantage Plans.

In exchange for these higher expenses, a sum of money will be deposited into your MSA at the beginning of the coverage year. If you do not exhaust these funds on medical expenses by the end of the year, you canroll the funds into the following year.

If you choose a plan that offers vision, dental or hearing care, you will pay a premium for those additional benefits, as well as for a Medicare Part D prescription plan.

How Do I Enroll in a Medicare MSA Plan?

MSA plans are on the Medicare Advantage enrollment schedule and restricted to a specific time period.

  • If you are about to turn 65 years old and are newly eligible for Medicare you can sign up for a Medicare MSA during your Initial Enrollment Period (IEP).
  • If you are already enrolled in a Medicare or Medicare Advantage plan, you can switch to a Medicare MSA plan for the following year between October 15th and December 7th of each year during the Annual Election period. If you are already enrolled in a Medicare Advantage Plan, you can join a MSA plan from January 1st through March 13th during the MA-OEP. Or, you may be able to enroll during certain Special Enrollment Periods (SEP) as allowed by Medicare.

This type of Medicare plan can be more complicated to set up. It’s best to work with a Medicare broker or licensed agent familiar with this type of plan to help you navigate the enrollment.

Who Should Get a Medicare MSA Plan?

A Medicare MSA plan is meant to help you control your medical expenses. It’s a good choice if you don’t anticipate medical expenses that would exceed the amount deposited into your MSA. While there’s a risk you’ll pay more out-of-pocket for health care services compated to other Medicare Advantage Plans, there’s also the potential for savings if you don’t have significant medical expenses.

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