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Information About a Medicare Advantage MSA

A Medicare Advantage plan is also known as part C of Medicare. A Medicare Advantage medical savings account (MSA) plan is a type of Medicare Advantage plan offered by private companies that includes a tax-exempt savings account to pay for qualified medical expenses. Individual plans vary depending on the provider and area, but there are some general guidelines that apply to most plans.

  1. Parts of a Medicare Advantage MSA Plan

    • There are two parts of a Medicare Advantage MSA plan--a high-deductible health plan and a savings account. You select an approved high-deductible health plan, which is an insurance plan with a higher annual deductible than typical insurance plans, from a private provider. The annual deductible is the amount of medical expenses you must pay out-of-pocket or with your savings account before coverage begins. You set up a savings account with an approved bank, in which Medicare deposits money to use for qualified medical expenses.

    Eligibility

    • A person must be enrolled in Medicare part A, known as hospital insurance, and part B, known as medical insurance, to sign up for a Medicare Advantage MSA plan. Those who have other insurance coverage that covers the Medicare Advantage MSA plan deductible, such as employment health insurance or federal health benefits, are ineligible to sign up for a Medicare Advantage MSA plan. Someone who is eligible for Medicaid, which is federal health insurance for low-income individuals, is also ineligible.

    Using the Savings Account

    • Medicare deposits a set amount of money at the beginning of each year into your selected savings account, which is the only allowed deposit into that account. Interest earned and money spent on qualified medical expenses is exempt from income tax. Non-qualified expenses are subject to taxes and penalties. Depending on the account, you can pay for expenses using a debit card or check. Qualified medical expenses are expenses considered by the Internal Revenue Service to be tax-deductible, such as doctor and dentist visits and hospital expenses.

    Using the High-Deductible Health Plan

    • The health plan covers Medicare part A and B expenses only after you reach your annual deductible. The plan requires no monthly premium, but you must still pay your Medicare part B premium. Only Medicare-covered part A and B expenses, such as doctor and hospital expenses, count toward the health plan's deductible. These can be paid using the savings account, but must be paid out-of-pocket once the savings account runs out. Once you've paid Medicare-covered expenses equal to the annual deductible, the plan begins to cover your Medicare-covered expenses.

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