| Thu, Aug 16, 2012 @ 09:00 AM

What is a Medicare Medical Savings Account Plan?

Posted by Medicare Made Clear

Medicare Savings Acount MSA planA Medicare Medical Savings Account (MSA) plan is one of the six types of Medicare Advantage (Part C) plans. These plans are offered by private insurance companies approved by Medicare. Medicare MSA plans were first made available to Medicare beneficiaries for enrollment in 2007.

A Medicare MSA plan is made up of two parts:

  • A medical savings account (MSA).

  • A high-deductible health plan.

How does the medical savings account work in an MSA plan?

An MSA is a bank savings account that can be used for qualified health care expenses. Here’s how it works.

  1. You enroll in a Medicare MSA plan.

  2. You set up a special account with a bank selected by the plan. An MSA’s savings account is self-managed like any other bank savings account.

  3. Medicare gives your plan a certain amount of money. The plan deposits that money into your MSA. In most plans, funds in the account earn interest tax-free. Note: You cannot deposit your own money into an MSA.

  4. You can use the account funds to pay for any health care services that qualify under rules set up by the Internal Revenue Service (IRS). These include everything covered by Original Medicare (Part A and Part B) and some non-Medicare health care expenses.

  5. Amounts you pay for health care services covered by Original Medicare count toward your annual deductible.

  6. MSA funds used to pay for qualified medical expenses are not taxed. But if you used the account to pay for non-qualified expenses, you would owe income tax and a 50% penalty on those withdrawals.

  7. If you use all the money in your MSA, you pay additional health care costs out of your own pocket until you reach your annual deductible.

  8. After you reach your deductible, your plan pays 100% of Medicare-covered services.

  9. Funds left in your MSA at the end of the calendar year carry over to the next year. At the start of a new year, a new allowance is deposited into your MSA. (This amount can change from year to year.) The cycle starts all over again.

How does the high-deductible health plan work in an MSA plan?

A deductible is the set amount you have to pay before your plan begins to pay some of your health care costs. MSA plans have high deductibles, compared to other types of Medicare Advantage plans. Those deductibles are generally higher than what Medicare provides to be deposited into the MSA. So if the funds in the MSA run out, then you generally need to pay for costs out of pocket until the deductible is met. Once you’ve met the deductible, regular health plan coverage kicks in.

Also, only MSA funds used to pay for services covered by Original Medicare count toward the health plan deductible. For example: you can pay your Part D plan premium and prescription drug copays from your MSA tax-free. But these amounts are not applied to your deductible

What does an MSA plan cover?

Like all Medicare Advantage plans, an MSA plan must cover all the services that Original Medicare Parts A and B covers. Some MSA plans offer additional coverage as well, and most give plan members the freedom to choose what providers they want to see.

But unlike most other Medicare Advantage plans, Medicare Part D prescription drug benefits are never included in MSA plans. So if you want help with prescription drug costs, you have to join a standalone Medicare Part D plan.

What else is there to know about MSA plans?

  • Anyone with Original Medicare Parts A and B can enroll in an MSA plan.

  • When you have a Medicare MSA plan, you keep paying your monthly Part B premiums to Medicare. But MSA plans do not charge an additional Medicare Advantage plan premium.

For more information, contact the Medicare helpline 24 hours a day, seven days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048. If you have questions about Medicare Made Clear, call 1-877-619-5582, TTY 711, 8 a.m. – 8 p.m. local time, seven days a week.


Medicare Advantage Medicare Savings Account (MSA) Plans – MedicareMadeClear.com

Medicare Made Clear Answer Guide – MedicareMadeClear.com

Medical Savings Account (MSA) Overview – Centers for Medicare and Medicaid Services


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