Have you ever seen a Medicare Medical Savings Account (MSA) plan and wondered what is an MSA for Medicare? Medicare MSA plans are high-deductible insurance plans offered by private insurance companies. That may sound a lot like some Medicare Advantage plans, and that’s because they are.

There’s one key difference that sets Medicare Advantage MSA plans apart. Much like an HSA, MSAs set up a bank account that you use to pay for your medical costs. This helps offset the high deductible of your Medicare plan.

What Are the Parts of a Medicare MSA Plan?

Each Medical Savings Account plan is made up of two parts: the insurance plan and the medical savings account.

The insurance plan is offered through a private company but approved by Medicare. Compared to traditional Medicare Advantage plans, MSA plans tend to have high deductibles. For example, the maximum deductible allowed by law for Medicare MSA plans in 2022 is $15,050. In 2022, this maximum deductible will increase to $15,050. The actual deductible will vary from plan to plan, however.

This deductible is prorated based on when you enroll in the plan. So, if you start your plan on July 1 and the annual deductible is $8,000, your deductible for the rest of the year may be $4,000. Once you reach your deductible, your plan pays for Medicare-covered services.

The second part of the Medicare Advantage MSA plan is the actual medical savings account. This is a banking account to pay for your medical costs until you reach your deductible. If you use your MSA to pay for services covered by your plan, it will count towards your deductible. Only your plan can deposit money into your account, and once it’s gone, you’re responsible for any fees until you reach your deductible.

What’s the Process of Using a Medicare MSA?

The first step of any Medicare plan is to research and choose the plan that is right for you. Each year, there are new plans to explore, so it’s worth your time to do a bit of digging. You can enroll in an MSA during your Initial Election Period or the Annual Enrollment Period (AEP) each year.

After picking an MSA plan, contact the plan for enrollment forms. Once you’ve enrolled in the plan, you’ll be sent information on setting up your medical savings account. Your plan will select the bank that your account will be with and deposit the money into your account. The plan gets this money from Medicare, and makes a new deposit each year.

You use this money to pay for your health care costs until you reach your plan’s deductible. Any money left over in your account at the end of the year rolls over for the following year.

If you decide to leave your MSA plan, you have until December 15 to cancel. If you cancel before December 7, you have up until December 7 to select a Medicare Advantage plan. If you cancel after December 7, you can only return to Original Medicare.

What’s Covered?

Medicare MSA plans pay for every required service for Medicare Advantage plans. Anything covered by Original Medicare falls under the MSA umbrella. Like other Medicare Advantage plans, MSAs can also cover dental, vision, and some long-term care.

The notable exception to this is prescription drug coverage. Luckily, you’re still eligible for Medicare Part D to have your prescription needs fulfilled.

Who Can’t Enroll in a Medical Savings Account Plan?

There are some circumstances that make you ineligible for Medicare Advantage MSA plans. These include:

  • You’re eligible to enroll in Medicaid.
  • You have End-Stage Renal Disease, unless both of the following conditions apply
    • You’re a former enrollee in a Medicare Advantage plan and left Medicare; and
    • You haven’t joined a different Medicare Advantage plan since.
  • You’re currently receiving hospice care.
  • You’re receiving benefits that would cover the plan deductible, such as health benefits from an employer or a union.
  • You receive benefits from the U.S. Department of Defense or the U.S. Department of Veterans Affairs.
  • You’re enrolled in the Federal Health Benefits Program.
  • You live outside of the U.S. for more than 183 total days out of the year.

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There are plenty of advantages of enrolling in Medicare Medical Savings Account plans. The low premiums can be an attractive option, especially if you don’t use your insurance often. If you think this type of plan may align with your needs, contact an agent to explore your options through the Medicareful Plan Finder tool. You can also begin exploring your Medicare options while you’re there, directly comparing plan details to see which plans fit your unique health care and financial needs.

Further Reading

Forbes — Medicare’s Biggest Little Secret: Seniors Can Have A Medical Savings Account
Lasso Healthcare — Quick MSA Facts