Medicare Medical Savings Account (MSA) Plans

Jun 15th, 2017     Medicare

Medicare MSA plan is a consumer-directed Medicare Advantage plan, which combines a high deductible health plan with a bank account. Medicare deposits money into the account (usually less than the deductible) can be used for your health care services during the year. This plan will only pay for Medicare-covered services once you have reached your deductible. Before you meet the deductible, you’re responsible for paying the bill for any Medicare-covered services. Once you meet the plan’s deductible, the plan pays for all of your Medicare-covered services. You won’t have to pay a monthly premium.

Parts Of Medicare MSA Plans

Medicare MSA plan is a combination of a high-deductible insurance plan and a medical savings account that you can use to pay for your health care costs. The high yearly deductible can vary by plan.

High-deductible Health Plan: The first part is a special type of Medicare Advantage plan (Part C). The plan will only begin to cover your costs once you meet a high yearly deductible, which varies by plan.

Medical Savings Account (MSA): The second part is a special type of savings account. The Medicare MSA plan deposits money into your account. You can choose to use money from this savings account to pay your health care costs before you meet the deductible.

Simple example: Medicare Medical Savings Account (MSA) Plans

Mr. Jones and Mrs. Martinez are interested in joining Medicare MSA plans. Plans ABC and XYZ are available in their area.

Terms Plan ABC Plan XYZ
Yearly deposit $2,500 $1,500
Yearly deductible $4,000 $3,000
What you pay after the deductible $0 $0
Out-of-pocket maximum $4,000 (same as deductible) $3,000 (same as deductible)

If Mr. Jones joins Plan ABC:

  • Plan ABC deposits $2,500 into his account at the beginning of the year.
  • If he uses the money in his account for Medicare-covered Part A and Part B services, he’ll have to spend $1,500 out-of-pocket before he meets his deductible and before the Medicare MSA Plan will begin paying for his health care.
  • Once Mr. Jones has met his deductible, Plan ABC pays all of his Medicare-covered Part A and Part B health care, and he pays nothing.
  • Mr. Jones must continue to pay the monthly Part B premium.

If Mrs. Martinez joins Plan XYZ:

  • Plan XYZ deposits $1,500 into her account at the beginning of the year.
  • If she uses the money in her account for Medicare-covered Part A and Part B services, she will have to spend $1,500 out-of-pocket before she meets her deductible and before the Medicare MSA plan will begin paying for her health care.
  • Once Mrs. Martinez has met her deductible, Plan XYZ pays all of her Medicare-covered Part A and Part B health care costs, and she pays nothing.
  • Mrs. Martinez must continue to pay the monthly Part B premium.

How To Choose A Medicare MSA Plan?

Once you decide which MSA plan you want, contact the plan for enrollment information and to join. The plan will tell you how to set up your account with the bank selected by the plan. You must set up an account before your enrollment can be processed. During the Open Enrollment Period you can join MSA plan. Here are some points that may help you to know more about Medicare MSA plans.

Who Can Join a Medicare MSA Plan?

People with both Part A and Part B can generally join a Medicare MSA Plan.

Can my Medicare MSA plan ever cancel my enrollment?

Your plan can cancel your enrollment if one of these events happen:

  • You get Medicaid.
  • You enroll in a Federal Employee Health Benefits Program (FEHBP) plan.
  • You get health care benefits from the Department of Defense (TRICARE) or the Department of Veterans Affairs (VA).
  • You get benefits (like an employer or union group health plan) that cover all or part of the yearly MSA deductible permanently.
  • You move outside of the service area of the plan, or are temporarily out of the service area for longer than 6 months.

What’s covered in Medicare MSA plan?

In addition to the Medicare services that all Medicare Advantage Plans must cover, some plans may cover extra benefits for an extra cost like dental, vision, long-term care not covered by Medicare and contact plans in your area for extra benefits they cover, if any.

Do MSA Plans cover Medicare Part D prescription drugs?

If you join a Medicare MSA plan and need drug coverage, you’ll have to join a Medicare Prescription Drug plan.

What happens to the money in my account if I leave the plan before the end of the year?

No more money will be added to your account. You’ll need to pay part of the most recent yearly deposit (based on the number of months left in the current calendar year) back to Medicare.

If I die, will my spouse be able to use the money in my account?

Any funds in your account that were deposited before the current calendar year are part of your estate. Part of the most recent deposit (based on the number of months left in the current calendar year) will have to be paid back to Medicare.

What if my beneficiary isn’t my spouse?

If you name a beneficiary for your account who isn’t your spouse, the money in it after your death is counted toward that person’s gross income when he or she files that year’s income tax return. If your estate gets the money in your account, it’s counted as gross income on your final tax return.


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