Medicare Savings Account (MSA) is a tax-favored savings account for seniors 65 and older. It is a special type of Medicare Advantage plan. Just like other types of Medicare Advantage plans, MSAs are offered by Medicare-approved private insurance companies. These accounts accrue interest and are tax-free, allowing beneficiaries tax-free withdrawals for medical costs.
Many Americans do not take advantage of this program, according to Gretchen Jacobson, associate director with the Kaiser Family Foundation. Out of the 19 million enrollees in a Medicare Advantage plan, only 5,000 are in the MSA program.
How It Works
An MSA consists of two parts: a savings account, and a high-deductible insurance plan. Medicare funds the account by putting a set amount of money to the insurance company that offers your plan in order to fund the MSA plan. The money is put in at the beginning of every year and can vary depending on the plan.
You do not pay monthly premiums for your MSA plan other than what you owe for Medicare Part B, but you must pay out-of-pocket costs until your annual deductible is met. In other words, you are responsible for your Medicare-covered health care costs 100% until you reach your deductible. For example, if your out-of-pocket payment is a $3,600 deductible, and the government deposits $1,020 into your MSA. After that, everything is paid at 100%. So, the most you have to pay of your own money in a single year is $2,580. The MSA plan covers your Medicare Part A and Part out-of-pocket costs before you reach the Part A and B deductible amounts.
- You can make tax-free withdrawals from the account, as long as it is to pay qualified medical expenses (out-of-pocket expenses).
- You cannot deposit your own money to the MSA.
- Your funds in your savings account earn tax-free interest.
- Any unused amount will carry over from year to year building interest.
- You can see any provider who accepts Medicare assignment.
MSAs are high annual deductible plans, which is why some people deter them. These plans do not include prescription drug plans like other Medicare Advantage plans.
When To Sign Up
If you want to leave your plan, you can do so during the Annual Election Period October 15- December 7. You can also leave if you choose to sign up for a new Medicare Advantage plan at the end of the year. But if you leave during the middle of the year, before the plan is over, you may have to pay a portion of the deposit back to Medicare.
It is important to know that if you have an MSA plan, you cannot buy a Medicare Supplement plan. But, if you had a Medicare Supplement plan before you signed up for an MSA plan, you can keep the Medicare Supplement plan and keep paying the monthly premiums for it.
If you are interested in a Medicare Savings Account plan, EZ.Insure can help compare your options based on deductibles and additional benefits, such as dental or vision care. We will assign you with your own advisor to help you with your needs and successfully sign you up with a plan while saving you money. Contact an agent by emailing firstname.lastname@example.org, call 855-220-1144 , or enter your zip code in the bar above for instant qutoes. We will take the stress of shopping around off your shoulders and make it easy for you.