An MSA plan is a specialized type of Medicare Advantage plan. These plans are a combination of a medical savings account (MSA) and a high-deductible health plan (HDHP). MSA plans are very similar to Health Savings Accounts (HSAs) that can be purchased outside of Medicare.
Here is a closer look at how a Medicare Medical Savings Account operates and whether it is appropriate for your specific goals.
How Medicare Medical Savings Account Plans Work
The concept of the Medicare Medical Savings Account plan is similar to HSAs and HDHPs available to those not covered by Medicare. However, while standard HSA contributions are made by the account owner or employer, your Medicare Advantage plan provider is responsible for depositing money into your MSA. The MSA plan makes use of the funds it receives from Medicare, and members cannot contribute their own funds to the account.
You can use the funds in your Medicare Medical Savings Account whenever you have qualified medical expenses. Withdrawals from the MSA are tax-free when used for qualified medical expenses. However, if you withdraw funds for any other purpose, the amount withdrawn will be subject to both income tax and a 50% penalty. At the end of the year, any remaining funds in your account will roll over to the following year.
Cost of Medicare Medical Savings Account
The primary cost of enrolling in an MSA is the high deductible of the plan before Medicare covers the rest of your healthcare expenses. This cost depends on your individual plan. For the most part, the funds deposited into the savings account will not exceed the amount of the deductible and will typically be less than the deductible. If you can pay for your medical expenses out-of-pocket without using the savings account funds, those funds roll over to the next year, along with the new deposit, increasing your account balance.
Additionally, if you choose an MSA, you will still need to pay your Part B monthly premium, as well as the Part D premium if you require prescription drug coverage.
Is a Medicare Medical Savings Account Right for You?
A Medicare Medical Savings Account plan provides flexibility, allowing you to have more control over your healthcare. Even if they have provider networks, all MSA plans must provide coverage for out-of-network care, though you may pay more in out-of-pocket costs when receiving care outside the network.
These plans offer the same core coverage as other Medicare Advantage plans, including HMO and PPO options. However, you will need to purchase a standalone Medicare Prescription Drug plan if you want coverage for your medications.
Let Us Help You Find the Right Plan
At Simple Retirement Benefits, we believe in providing personalized solutions to Medicare beneficiaries. Reach out to us today to learn more about MSA plans and compare your plan options with an experienced advisor.